Exhibit 10.1

 

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ASSET PURCHASE AGREEMENT

 

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BY AND AMONG

 

ACCREDO HEALTH GROUP, INC.

 

AND

 

PEDIATRIC SERVICES OF AMERICA, INC.

 

AND THE OTHER SELLERS NAMED HEREIN

 

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Dated October 7 2005

 

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ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
October 7, 2005 by and among Accredo Health Group, Inc, a Delaware corporation
(“Buyer”), Pediatric Services of America, Inc., a Delaware corporation
(“Parent”) and certain affiliates of Parent listed on the signature page hereto
(collectively with Parent, the “Sellers”).

 

Preamble

 

The Sellers own and operate the Pharmacy Business; and

 

The Sellers desire to sell to Buyer and Buyer desires to purchase from the
Sellers substantially all of the assets and rights used in or related to the
operation or conduct of the Pharmacy Business on the terms and conditions set
forth in this Agreement (the “Acquisition”).

 

Concurrent with the execution of this Agreement, as a condition and inducement
to Buyer’s willingness to enter into this Agreement, (i) each of the Sellers,
Daniel J. Kohl and James M. McNeill have entered into restrictive covenant
agreements (copies of which are attached hereto as Exhibit A-1 through Exhibit
A-3) that become effective automatically with the Closing and (ii) Sue Harrigan,
Leisha Smith, Nancy Steins and Mary Jane Wiseman have each entered into an
employment agreement with Buyer (copies of which are attached hereto as Exhibit
B-1 through Exhibit B-4) that become effective automatically with the Closing.
References herein to Schedules are references to the applicable section of the
Disclosure Memorandum furnished to Buyer with this Agreement.

 

Certain terms used in this Agreement are defined in Article 10 hereof.

 

NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree as
follows:

 

ARTICLE 1

PURCHASE OF RIGHTS AND ASSETS

 

1.1 Agreement to Purchase and Sell. Subject to the terms and conditions set
forth herein, the Sellers agree to sell, convey, transfer, assign and deliver to
Buyer free and clear of any and all Liens, except Permitted Liens, and Buyer
agrees to purchase, all of the Sellers’ right, title and interest in and to all
of the rights and assets owned by the Sellers and used or held for use in the
operation of the Pharmacy Business (except for the Retained Assets as defined in
Section 1.4 below), including, without limitation, the following (collectively,
the “Assets”):

 

(a) All tangible personal property used or held for use in the operation of the
Pharmacy Business, including all furniture, machinery, office furnishings,
equipment and all office and warehouse supplies existing on the Closing Date,
including, but not limited to all of the capitalized tangible personal property
set forth on Schedule 1.1(a); except for tangible personal property included in
the Retained Shared Assets;

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(b) All authorizations, permits and licenses issued, granted, given or made
available to the Sellers by any Regulatory Authority that are necessary to
operate the Pharmacy Business as currently conducted by the Sellers;

 

(c) All leases set forth on Schedule 1.1(c) including all leasehold improvements
and any and all security and other deposits, advance rents and any other
payments made thereunder prior to the Closing (the “Assigned Leases”);

 

(d) All contracts and agreements relating to the Pharmacy Business set forth on
Schedule 1.1(d) (the “Assigned Contracts”);

 

(e) All guarantees, warranties and rights of the Sellers against suppliers and
manufacturers to the extent applicable to the Pharmacy Business;

 

(f) All intangible assets relating to the operation of the Pharmacy Business
(excluding any such intangible assets included as part of the Retained Shared
Assets), including, but not limited to, all patents, trademarks, service marks
and designs and those trade names and service names set forth on Schedule 1.1(f)
hereto, data, information systems and software, and all telephone numbers
(excluding those telephone numbers specifically identified on Schedule 1.4) and
the goodwill in or arising from the operation of the Pharmacy Business;

 

(g) All prepaid items, to the extent applicable to the Pharmacy Business,
including, without limitation, all equipment, lease and other deposits existing
on the Closing Date (excluding any such prepaid items included as part of the
Retained Shared Assets);

 

(h) All patient lists and patient medical or operating records, employment
records, customer lists, customer contracts and financial records relating to
the Pharmacy Business (copies of the foregoing documents may be provided to
Buyer in lieu of originals where the Sellers are required by Law to retain
original documentation);

 

(i) Except for corporate records and minutes, all books, records and documents
owned by or required for the operation of the Pharmacy Business (copies of the
foregoing documents may be provided to Buyer in lieu of originals where the
Sellers are required by Law to retain original documentation);

 

(j) All inventory as of the close of business on the Closing Date used in the
operation of the Pharmacy Business (the “Inventory”), including, without
limitation, the inventory set forth on Schedule 1.1(j) (which Schedule 1.1(j)
will be updated at Closing to reflect the inventory used in the operation of the
Pharmacy Business as of the close of business on the Closing Date);

 

(k) All accounts receivable arising out of or relating to the Pharmacy Business;

 

(l) Rights to Ordered Inventory and Open Customer Orders;

 

(m) All of the assets set forth on Schedule 1.1(m) which are shared by or used
in both the Pharmacy Business and the other business segments or operations of
the Sellers and which are not a part of the Retained Shared Assets (the
“Acquired Shared Assets”);

 

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(n) All accounts receivable, inventory and patient lists arising from the
Pensacola Pharmacy Business which are not related to the unit dose pharmacy
business portion of the Pensacola Pharmacy Business (the “Pensacola Assumed
Assets”); and

 

(o) Except for the Retained Shared Assets, any and all other assets of whatever
type or description, which are (i) reflected in the books and records of the
Pharmacy Business, except to the extent any such assets have been disposed of in
the ordinary course of business or (ii) used or held for use in the operation of
the Pharmacy Business.

 

Buyer understands and agrees that the Assets will remain at their current
locations at Closing. Parent agrees to deliver or cause to be delivered, at the
written instruction and cost of Buyer, any Assets that are not located at the
premises of the Pharmacy Business to be occupied by Buyer or its affiliates from
and after the Closing.

 

1.2 Consideration.

 

(a) Subject to the adjustment described in Section 1.3, the total consideration
to be paid by Buyer for the Assets and the Restrictive Covenant Agreement shall
be an aggregate of Seventy-Two Million Two Hundred and Fifty Thousand Dollars
($72,250,000) (such aggregate amount referred to herein as the “Aggregate
Consideration” and such amount, as adjusted pursuant to Section 1.3, referred to
herein as the “Purchase Price”), which shall be allocated among the Assets as
provided in Section 1.8, a portion of which shall be allocated to the
Restrictive Covenant Agreement in the aggregate amount set forth in
Section 1.2(b)(iii) below and a portion of which shall be allocated to
satisfying Buyer’s obligations under the Seller’s real property leases as
provided for in the Transition Agreement, excluding the Assigned Leases.

 

(b) At the Closing, the Aggregate Consideration shall be payable as follows:

 

(i) A cash payment by wire transfer of immediately available funds to such
account or accounts as Parent shall designate in the aggregate amount of
Aggregate Consideration Seventy-One Million Dollars ($71,000,000) less any
adjustment calculated and payable in the manner provided in Section 1.3(a).

 

(ii) Cash payments by wire transfer of immediately available funds to such
account or accounts as Parent shall designate in the aggregate amount of One
Million Dollars ($1,000,000) which shall be allocated to the Restrictive
Covenant Agreement as set forth in the Allocation Schedule or Revised Allocation
Schedule, as the case may be. The Parties acknowledge and agree that within a
reasonable time after the Closing Date Buyer may engage a third party evaluation
firm (the “Third Party Evaluator”) to evaluate the amount of Aggregate
Consideration allocated to the Restrictive Covenant Agreement herein; provided,
however, that Parent shall have the right to approve the Third Party Evaluator,
such approval not to be unreasonably withheld or delayed. If Buyer and the Third
Party Evaluator determine that the amount allocated to the Restricted Covenant
Agreement should be adjusted, then such allocation amount shall be adjusted on
the Revised Allocation Schedule (as defined in Section 1.8).

 

(iii) A cash payment by wire transfer of immediately available funds to such
account or accounts as Parent shall designate, in the amount of Two Hundred and
Fifty Thousand Dollars ($250,000), which shall satisfy Buyer’s obligations with
respect to the real property leases as provided for in the Transition Agreement,
excluding the Assigned Leases.

 

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1.3 Asset Value Test.

 

(a) Parent shall prepare and deliver to Buyer five (5) days prior to the Closing
Date a statement which estimates the Asset Value as of the Closing Date (the
“Estimated Asset Value Statement”). Based on the Estimated Asset Value
Statement, the Aggregate Consideration will be adjusted down at the Closing on a
dollar for dollar basis to the extent that the Asset Value is less than Fifteen
Million Five Hundred Thousand Dollars ($15,500,000) with the amount of such
adjustment referred to herein as the “Asset Value Adjustment Amount”.

 

(b) Within twenty (20) days after the Closing Date or as soon as possible
thereafter, Buyer shall update the Estimated Asset Value Statement to reflect
the actual Asset Value as of the Closing Date (the “Actual Asset Value
Statement”), and determine the difference between the Asset Value based on the
Actual Asset Value Statement and the Asset Value based on the Estimated Asset
Value Statement. If the Asset Value on the Actual Asset Value Statement is
greater than the Asset Value on the Estimated Asset Value Statement, the amount
of such difference (the “Buyer Payment”) shall be paid by Buyer to Parent by
wire transfer within ten (10) days of such determination unless disputed in good
faith in accordance with Section 1.3(c) below; provided, however, that in no
event shall the Buyer Payment exceed the Asset Value Adjustment Amount. If the
Asset Value on the Actual Asset Value Statement is less than the Asset Value on
the Estimated Asset Value Statement, the amount of such difference (the “Parent
Payment”) shall be paid by Parent to Buyer by wire transfer within ten (10) days
of such determination unless disputed in good faith in accordance with
Section 1.3(c) below.

 

(c) Parent shall have twenty (20) days after receipt of the Actual Asset Value
Statement to dispute the Asset Value set forth therein by written notice to
Buyer. Buyer shall make the books and records of account of the Pharmacy
Business reasonably available to Parent solely for use in verifying and
calculating the actual Asset Value. Failure to provide Buyer written notice of
such dispute within such twenty (20) days shall be deemed acceptance by Parent
of Buyer’s calculation. If Parent does not dispute Buyer’s calculation or
earlier accepts Buyer’s calculation in writing, then the payments shall be made
in accordance with Section 1.3(b). If Parent disputes the calculation by written
notice to Buyer within such twenty (20) days, then Buyer and Parent shall have
thirty (30) days to negotiate in good faith to resolve the dispute. If such
Parties do not reach a mutual resolution from such negotiations, then the
dispute shall be submitted to a nationally recognized public accounting firm
agreeable to each such Party and with whom neither such Party (or any of its
Affiliates) has had a relationship within the past two (2) years. Such
accounting firm and Parent shall be given reasonable access to all relevant
records to calculate the actual Asset Value, which calculation shall be
submitted by the accounting firm to Buyer and Parent within thirty (30) days.
Each of Buyer and Parent shall have twenty (20) days thereafter to submit to
each other and the independent accountant written comments on such calculation
and an additional fifteen (15) days to similarly submit to each other and the
independent accountant written rebuttal comments to each other’s initial
comments. Within fifteen (15) days after the rebuttal comment period, the
independent accountant shall submit its final calculation to each of Buyer and
Parent, which shall be final and binding on the parties hereto. Buyer and Parent
shall share equally the fees and expenses of such accounting firm.

 

1.4 Retained Assets. The Parties expressly agree that excluded from the Assets
sold or assigned to Buyer hereunder are (i) all assets related to the Pensacola
Pharmacy Business other than the Pensacola Assumed Assets, (ii) all personnel
records and other records that the Seller is required by law to retain in its
possession; (iii) all governmental permits and other governmental authorizations
that the Seller is required by law to retain in its possession (iv) all cash on
hand,

 

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cash equivalents, investments and bank accounts of the Sellers at the Closing
Date, (v) Medicare and Medicaid and similar government provider numbers,
(vi) all claims for the refund of Taxes and other governmental charges of
whatever nature related to the Assets or the Pharmacy Business with respect to
the Taxable Periods ending on or prior to the Closing Date, (vii) the name
“Pharmacy Services of America”; (viii) all of the Retained Shared Assets,
(ix) those manufacturing contracts and other agreements set forth on Schedule
1.4(ix), which Sellers will terminate as soon as reasonably practicable
following the Closing Date, and (x) those assets listed on Schedule 1.4(x)
hereto (collectively, the “Retained Assets”).

 

1.5 Retained Liabilities. Except as specifically set forth in Section 1.6, the
Sellers retain all Liabilities directly or indirectly arising out of or related
to (i) the Retained Assets and (ii) the operation of the Pharmacy Business on
and prior to the Closing Date, whether such Liabilities are disclosed on a
Schedule hereto or any other document provided to Buyer, known or unknown,
disclosed or undisclosed, matured or unmatured, accrued, absolute or contingent
on and as of the Closing Date (collectively, the “Retained Liabilities”).
Without limiting the generality of the first sentence of this Section 1.5, Buyer
shall not assume or become liable for any obligations or Liabilities of any
Seller not specifically described in Section 1.6, including without limitation,
the following Retained Liabilities:

 

(a) Any Liability for any incorrect, erroneous, improper or false billings or
requests for reimbursements made by any Seller or overpayments received by any
Seller under any Medicare, Medicaid, CHAMPUS, TRICARE or other government or
private payor arrangement in respect of goods or services provided on or prior
to the Closing Date or any other violation of Laws or Orders on or prior to the
Closing Date;

 

(b) Any Liability for failure by any Seller to have complied with the terms of
any corporate integrity programs or compliance plans with Regulatory
Authorities;

 

(c) Any Liability arising out of any breach by any Seller prior to or on or as a
result of the Closing of any provision of the Seller Agreements (as defined
herein) or any other contract to which any Seller is a party;

 

(d) Any Liability arising prior to the Closing, to any employee, agent, or
independent contractor of any Seller, whether or not employed by Buyer after the
Closing, or under any benefit arrangement with respect thereto;

 

(e) All wages, commissions, and workers’ compensation obligations of any Seller
with respect to its respective employees, including, but not limited to, the
Business Employees, accrued through the Closing Date and all bonuses and fringe
benefits as to such employees accrued through the Closing Date, and all
severance pay obligations of any Seller to employees resulting from the
consummation of the transactions contemplated by this Agreement arising under
any severance plan, policy or statement adopted by the Sellers, if any;

 

(f) Any Liability arising out of any employee benefit plan maintained by or
covering employees of any Seller, including, but not limited to, the Business
Employees, or to which any Seller has made any contribution or to which any
Seller could be subject to any Liability;

 

(g) Any Liability for any Taxes of any Seller whether disputed or not, including
any Liabilities or obligations of any Seller relating to any transfer, sales,
use, excise, realty transfer, controlling interest, recording, documentary stamp
and other similar non-income Taxes and fees

 

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incurred in connection with the consummation of the transactions contemplated in
this Agreement (“Transfer Taxes”) as set forth in Section 4.11, and including
any Taxes resulting from any gain on the sale of the Assets pursuant to this
Agreement, any Taxes related to the Assets or the Pharmacy Business with respect
to Taxable periods ending on or prior to the Closing Date, and in the case of
Taxable periods ending after the Closing Date (but beginning before the Closing
Date), the portion of such periods ending on or prior to the Closing Date; and

 

(h) Any Liability related to, arising out of, or in connection with the parties’
waiver of compliance with any Bulk Transfer Act or any similar statute as
enacted in any jurisdiction, domestic or foreign (if applicable), including the
defenses thereof and reasonable attorneys’ and other professional fees.

 

1.6 Assumed Liabilities. Buyer shall assume on the Closing Date (i) the Sellers’
obligations to pay for Ordered Inventory, (ii) the Sellers’ obligations to fill
Open Customer Orders (iii) performance of the Assigned Leases and the Assigned
Contracts from and after the Closing Date, except to the extent any such
obligations under such Assigned Leases and the Assigned Contracts relate to a
default occurring on or before the Closing Date, (iv) the obligations and
liabilities of the Sellers under the Hemophilia Product Volume Commitment
Agreement by and between Baxter Healthcare Corporation, through its BioScience
Division, and Parent having an effective date of January 1, 2005 relating to
Sellers’ purchase commitments for the remaining period of calendar year 2005
following the Closing Date and for calendar year 2006; (v) all vacation,
personal and sick pay obligations of any Seller with respect to the Transferring
Employees accrued through the Closing Date and set forth on Schedule 9.1(b)(iv),
and (vi) except as otherwise provided in this Agreement, all liabilities for the
Transferring Employees for periods following the Closing Date, but only to the
extent such liabilities arise due to any event occurring after the Closing Date
(the “Assumed Liabilities”).

 

1.7 Time and Place of Closing. The closing (the “Closing”) will take place no
later than two (2) business days following the date all of the conditions set
forth in Article 6 hereof have been satisfied or waived (the “Closing Date”).
The place of Closing shall be at Buyer’s offices located at 1640 Century Center
Parkway, Suite 101, Memphis, Tennessee, or such other place as may be mutually
agreed upon by the Parties. The Closing shall be effective as of the close of
business on the Closing Date.

 

1.8 Allocation of Consideration. The consideration paid for the Assets and the
Restrictive Covenant Agreement, together with any assumed liabilities and
capitalizable costs (the “Allocable Consideration”), shall be allocated as shown
on an allocation schedule (the “Allocation Schedule”) to be prepared jointly by
Buyer and Seller prior to the Closing Date. If there is an increase or decrease
in the Allocable Consideration, then the adjusted Allocable Consideration shall
be allocated as shown on a revised allocation schedule (the “Revised Allocation
Schedule”) to be jointly prepared by Buyer and Seller in a manner consistent
with the Allocation Schedule, and, to be prepared within 90 days after the
adjustment of the Allocable Consideration occurs. The allocation set forth in
such Allocation Schedule, or the Revised Allocation Schedule if there is an
adjustment to the Allocable Consideration, shall comply with the rules of
Section 1060 of the Code and the treasury regulations promulgated thereunder.
Except to the extent that a contrary position is required by law, Buyer and the
Sellers agree to be bound by the allocation set forth in the Allocation Schedule
(or the Revised Allocation Schedule if there has been an adjustment to the
Aggregate Consideration) for all purposes of Tax reporting, including the filing
of IRS Form 8594 in accordance with the Allocation Schedule, and the filing of
an amended IRS Form 8594 in the event a Revised Allocation Schedule is prepared.
The Parties agree that the Allocation Schedule and the Revised Allocation
Schedule, if applicable, shall include an allocation by state where necessary to
calculate applicable state sales or transfer taxes applicable to the
transaction.

 

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1.9 Prorations. The following prorations relating to the Assets will be made as
of the Closing Date, with the Sellers liable to the extent such items relate to
any time period on or prior to the Closing Date and Buyer liable to the extent
such items relate to periods after the Closing Date: (i) ad valorem, personal
property, real estate, occupancy and other similar Taxes, if any, on or with
respect to the Assets; (ii) the amount of charges for water, telephone,
electricity and other utilities; and (iii) other similar items. The net amount
of all such prorations will be settled and paid on the Closing Date. In the
event that the amount of any of the items to be prorated pursuant to this
Section 1.9 is not known by the Sellers and Buyer at the Closing, the proration
shall be made based upon the amount of the most recent cost of such item to such
Seller. After Closing, Buyer and the Sellers each shall provide to the other,
promptly after receipt, each third party invoice relating to any items so
estimated. Within ten (10) business days thereafter, Buyer and the Sellers shall
make any payments to the other that are necessary to compensate for any
difference between the proration made at the Closing and the correct proration
based on the third party invoice, and amounts owed by any Seller shall be
considered a Retained Liability of Parent and amounts owed by Buyer shall be
considered an Assumed Liability of Buyer.

 

1.10 Assignment of Contracts and Agreements. The Sellers shall assign to Buyer
all of the Sellers’ rights under the Assigned Leases and the Assigned Contracts.
The Sellers shall use commercially reasonable efforts, and Buyer shall
reasonably cooperate with such efforts, to obtain at the earliest practicable
date and prior to the Closing all Consents of third parties related to the
consummation of the transactions contemplated hereby and will provide to Buyer
copies of each such Consent as such Consents are obtained. The Sellers shall be
responsible for any reasonable out-of-pocket costs required to obtain the
Consents (except for Licenses and software licenses, which reasonable
out-of-pocket costs shall be the responsibility of Buyer) for the contracts and
agreements assigned pursuant to this Agreement. To the extent that the
assignment of any of such contracts and agreements requires the Consent of
another party that is not obtained at the Closing and Buyer waives its right at
the Closing to receive such Consent (if listed on Schedule 6.1(b)) in its sole
discretion, (i) such contracts will not be transferred or assigned at Closing
and shall constitute “Deferred Contracts,” (ii) the Sellers will continue to
undertake commercially reasonable efforts, and Buyer shall reasonably cooperate
with such effort, to obtain any such Consent and/or remove any other impediments
to the transfer or assignment of such Deferred Contracts at the earliest
practicable date and shall transfer or assign such Deferred Contract within
three (3) business days after receipt of such Consent, (iii) to the extent
permitted by Law and the terms and conditions of the Deferred Contract, until
the time of assignment of a Deferred Contract, the Sellers shall cooperate with
Buyer to provide Buyer all benefits under any such contract or agreement and to
allow Buyer to perform its obligations under the Assumed Liabilities, to the
same extent as if the Deferred Contract were transferred or assigned to Buyer at
the Closing, and each Party shall bear its own administrative expenses incurred
in connection with any such arrangement, and (iv) until the time of assignment
or termination of a Deferred Contract, the Sellers shall, at the request and for
the account of Buyer, and subject to Buyer’s direction, enforce, at Buyer’s
expense, the Sellers’ rights thereto or interests therein against other parties.

 

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ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

The Sellers, jointly and severally, represent and warrant the following to
Buyer:

 

2.1 Organization, Authority and Capacity. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and each other Seller is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation, and
each Seller has the full power and authority necessary to (i) execute, deliver
and perform its obligations under the Acquisition Documents to be executed by it
and (ii) carry on its business as it has been and is now being conducted and to
own and lease the properties and assets which it now owns or leases. Each Seller
is duly qualified to do business and is in good standing in every jurisdiction
in which the failure to be so qualified or in good standing would have a Seller
Material Adverse Effect. Set forth on Schedule 2.1 is a list of all
jurisdictions in which each Seller is required to be qualified as a foreign
corporation by reason of its ownership or operation of the Pharmacy Business.

 

2.2 Authorization and Validity. The execution, delivery and performance of the
Acquisition Documents to be executed and delivered by each Seller have been duly
authorized by all necessary corporate action on the part of each Seller. The
Acquisition Documents to be executed and delivered by each Seller have been or
will be, as the case may be, duly executed and delivered by such Seller and
constitute or will constitute the legal, valid and binding obligations of such
Seller, enforceable in accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, or other laws affecting creditors’ rights
generally, or as may be modified by a court of equity.

 

2.3 Absence of Conflicting Agreements or Required Consents. Except as set forth
on Schedule 2.3, the execution, delivery and performance by each Seller of the
Acquisition Documents to be executed and delivered by such Seller: (i) do not
require the Consent of or notice to any Regulatory Authority; (ii) will not
conflict with any provision of the charter and bylaws of such Seller; (iii) will
not conflict with or result in a violation of any Law, ordinance, regulation,
ruling, judgment, order or injunction of any court or Regulatory Authority to
which such Seller is subject or by which such Seller or any of its assets or
properties are bound; (iv) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, require any
notice under, or accelerate or permit the acceleration of any performance
required by the terms of any Seller Agreements or any other material instrument,
license or permit to which such Seller is a party or by which such Seller or any
of its properties are bound; and (v) will not create any Lien upon any of the
Assets.

 

2.4 Governing Documents of the Sellers. True and correct copies of the
certificate or articles of incorporation and all amendments thereto and bylaws
of each Seller have been provided to Buyer. Buyer has previously been provided
with access to the books and records of each Seller related to the Pharmacy
Business, including without limitation, the books of account, which books and
records are correct in all material respects and there have been no material
transactions involving the Pharmacy Business or any Seller which properly should
have been set forth therein and which have not been so set forth. Buyer has
previously been provided with access to all of the minutes of each Seller
related to the Pharmacy Business, which minutes accurately reflect in all
material respects the proceedings of the board of directors (and all committees
thereof) and shareholders of each Seller.

 

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2.5 Subsidiaries and Investments.

 

(a) Except as set forth on Schedule 2.5(a), no Seller has owned or currently
owns, directly or indirectly, of record, beneficially or equitably, any capital
stock or other equity, ownership or proprietary interest in any entity or
Person, which has an ownership interest in the Assets.

 

(b) Except as listed on Schedule 2.5(b), no Seller has, within the last six
(6) months and other than in the ordinary course of its business, sold or
disposed of, by way of asset sale, stock sale, spin-off or otherwise, any assets
or business in any way related to the Pharmacy Business or the Assets.

 

2.6 SEC Filings; Parent Financial Statements.

 

(a) Parent has delivered or made available to Buyer (through reference to
documents filed by EDGAR or otherwise) accurate and complete copies of all
forms, reports and documents filed by Parent with the Securities and Exchange
Commission (“SEC”) since October 1 2004 (the “Parent SEC Reports”), which are
all the forms, reports and documents required to be filed by Parent with the SEC
since such date. As of their respective dates, the Parent SEC Reports (i) were
prepared in accordance and complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the “Securities Act”),
or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such Parent SEC Reports and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
Parent’s Subsidiaries is required to file any forms, reports or other documents
with the SEC.

 

(b) Each of the consolidated financial statements (including, in each case, any
related notes thereto) contained in the Parent SEC Reports (the “Parent
Financial Statements”) (i) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited interim financial statements,
as may be permitted by the SEC on Form 10-Q under the Exchange Act) and
(iii) fairly presented in all material respects the financial position of Parent
as at the respective dates thereof and the results of Parent’s operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements may not contain footnotes and were or are subject to normal
and recurring year-end adjustments.

 

2.7 Financial Information.

 

(a) Income statements for the Pharmacy Business for the twelve-month periods
ended September 30, 2003 and 2004 and the eleven-month period ended August 31,
2005 (the “Income Statements”) and statements of the assets of the Pharmacy
Business, as of September 30, 2003 and 2004 and August 31, 2005 (the “Statements
of Assets,” and together with the Income Statements, the “Business Financial
Statements”) are set forth on Schedule 2.7(a). The Income Statements fairly
present in all material respects the results of operations for the Pharmacy
Business for the periods set forth therein, and have been prepared consistent
with and on the same basis as the Parent Financial Statements, which Parent
Financial Statements, including segment footnote

 

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disclosures, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto or, in the case of unaudited interim
financial statements, as may be permitted by the SEC on Form 10-Q under the
Exchange Act). The Income Statements have been excerpted from the segment
footnotes in the Parent Financial Statements. The Statements of Assets fairly
present in all material respects the assets of the Pharmacy Business set forth
therein, and have been prepared consistent with and on the same basis as the
Parent Financial Statements, which Parent Financial Statements were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited interim financial statements, as may be
permitted by the SEC on Form 10-Q under the Exchange Act). The Business
Financial Statements are subject to the qualification that the Pharmacy Business
has not operated as a separate “stand-alone” entity within Parent. As a result,
the Pharmacy Business received certain allocated charges and credits as
described on Schedule 2.7(a), which are believed by Parent to be reasonable. The
Business Financial Statements for the Pharmacy Business, include a number of
assumptions (regarding allocations, charges and credits), which have been made
by Parent, all of which are believed to be reasonable and are described on
Schedule 2.7(a).

 

(b) Parent and each of its Subsidiaries is able to pay its debts generally as
they become due and is solvent (solvency is defined as its assets exceeding the
fair market value of its liabilities) and will not be rendered insolvent as a
result of the transactions contemplated hereby. None of Parent or any of its
Subsidiaries is in breach or default of any obligation owed to any creditor for
borrowed money or any other creditor who may have a Lien other than a Permitted
Lien on any of its rights or assets, other than any person who is a lienholder
by reason of being a lessor of property under an operating lease with such
party. None of Parent or any of its Subsidiaries has, either voluntarily or
involuntarily, (i) admitted in writing that it is or may become unable to pay
its debts generally as they become due, (ii) filed or consented to the filing
against it of a petition in bankruptcy or a petition to take advantage of an
insolvency act, (iii) made an assignment for the benefit of its creditors,
(iv) consented to the appointment of a receiver for itself or for the whole or
any substantial part of its property, (v) had a petition in bankruptcy filed
against it, (vi) been adjudged a bankrupt or filed a petition or answer seeking
reorganization or arrangement under the federal bankruptcy laws or any Law or
statute of the United States of America or any other jurisdiction, (vii) been
engaged (and is not about to be engaged) in a business or transaction for which
any property remaining with it would be insufficient to continue to operate its
business, or (viii) incurred, or believed or reasonably should have believed it
would incur, debts that are or will be beyond its ability to pay as such debts
mature. The Sellers, on a consolidated basis, are not engaged nor currently
contemplate being engaged in a business or transaction for which any property
remaining with them would be insufficient to continue to operate their
businesses.

 

(c) Set forth on Schedule 2.7(c) is a list of each creditor to which any Seller
has granted a security interest in any of the Assets other than in connection
with personal property leases that are not material to the Pharmacy Business.

 

2.8 Absence of Changes. Except as set forth on Schedule 2.8, and except as
contemplated by this Agreement, since December 31, 2004, the Pharmacy Business
has been operated only in the ordinary course and with respect to the Pharmacy
Business, the Sellers have not:

 

(i) suffered any material adverse change in working capital, financial
condition, assets, liabilities, reserves, business or operations;

 

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(ii) paid, discharged or satisfied any Liability other than in the ordinary
course of business;

 

(iii) written off as uncollectible any account receivable other than in the
ordinary course of business;

 

(iv) compromised any debts, claims or rights or disposed of any of its
properties or assets other than in the ordinary course of business;

 

(v) entered into any commitments or transactions not in the ordinary course of
business involving aggregate value in excess of Seventy-Five Thousand Dollars
($75,000) or made aggregate capital expenditures or commitments in excess of Two
Hundred Fifty Thousand Dollars ($250,000);

 

(vi) made any change in any method of accounting;

 

(vii) sold, assigned or transferred any tangible asset other than in the
ordinary course of business or any patents, trademarks, trade names, copyrights
or other intangible assets;

 

(viii) subjected any of its assets, tangible or intangible, to any Lien (other
than a Permitted Lien);

 

(ix) increased any salaries, wages or employee benefits or made any arrangement
for payment of any bonus or special compensation for any employee who devotes
substantially all of their time to the operation of the Pharmacy Business other
than in the ordinary course of business;

 

(x) hired or committed to hire any employee other than in the ordinary course of
business; or terminated any employee other than in the ordinary course of
business;

 

(xi) terminated or amended any contract, agreement, commitment, instrument or
obligation set forth on Schedule 2.14(a) or suffered any loss or termination or,
to the Knowledge of the Sellers, threatened loss or termination of any existing
material business arrangement or supplier;

 

(xii) sold or otherwise transferred any interest in the Pharmacy Business or the
Assets other than in the ordinary course of business; or

 

(xiii) agreed, whether in writing or otherwise, to take any action described in
this Section 2.8.

 

2.9 No Undisclosed Liabilities. Except as listed on Schedule 2.9 or as accrued
or reserved in the Business Financial Statements, or trade payables incurred in
the ordinary course of business since the date of the Business Financial
Statements, there are no Liabilities or obligations, whether accrued, absolute,
contingent or otherwise, relating to or affecting the Pharmacy Business or the
Assets.

 

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2.10 Litigation, etc. Except as listed on Schedule 2.10, there is no Litigation
pending against any Seller affecting or relating to the Pharmacy Business or
which could have a material adverse effect on the Sellers’ remaining business
after the Acquisition. Except as listed on Schedule 2.10, to the Knowledge of
the Sellers no such matter described in the previous sentence is threatened and,
to the Knowledge of the Sellers, there is no basis for any such action. Except
as listed on Schedule 2.10, there are no judgments against or consent decrees
binding on a Seller relating to or which affect the Pharmacy Business or Assets.

 

2.11 No Violation of Law. Except as listed on Schedule 2.11:

 

(a) No Seller has been or is currently in violation of any applicable local,
state or federal Law, order, injunction or decree, or any other requirement of
any governmental body, agency or Regulatory Authority or court related to the
Pharmacy Business.

 

(b) No Seller is subject to any fine, penalty, Liability or disability as the
result of a failure to comply with any requirement of federal, state or local
Law nor has any Seller received any notice of such noncompliance related to the
Pharmacy Business.

 

2.12 Title to Assets; Sufficiency of Assets and Employees; No Services.

 

(a) Except as set forth on Schedule 2.12(a), each Seller (i) has good and valid
title to all of the personal and mixed, tangible and intangible property, rights
and assets included among the Assets which such Seller purports to own;
(ii) owns such rights, assets and personal property free and clear of all Liens
other than Permitted Liens; and (iii) will, upon the Closing, convey good and
valid title to the Assets to Buyer free and clear of any and all Liens other
than Permitted Liens. All of the Assets, whether owned or leased, are and will
be in the possession and control of and owned by the Sellers at the Closing, and
no other Subsidiary of Parent has any right or interest in or to the Assets.

 

(b) The Assets, in conjunction with the rights under the other Acquisition
Documents, comprise substantially all of the assets currently used or held for
use by the Sellers to operate, and are collectively sufficient to provide Buyer
with the means and capability to operate, the Pharmacy Business, as and in the
manner the Pharmacy Business has been operated by the Sellers prior to the date
of this Agreement.

 

(c) Except as set forth on Schedule 2.12(c) and as contemplated by the
Transition Agreement attached hereto as Exhibit 4.12, there are no services
being provided by any Seller or any Affiliate of any Seller that are necessary
for the operation of the Pharmacy Business by Buyer after the Closing Date in
the manner the Pharmacy Business has been operated by the Sellers prior to the
date of this Agreement.

 

2.13 Real, Personal and Intellectual Property.

 

(a) The Sellers do not own any real property used in the operation of the
Pharmacy Business. Schedule 2.13(a) contains a true and correct description of
all real property leased by the Sellers and used in the Pharmacy Business,
including all tenant improvements located thereon (the “Facilities”). The
Facilities are the only real property and improvements used primarily in the
Pharmacy Business. The Sellers have valid and binding leases for each such
property, true and complete, copies of which have been made available to Buyer,
and (i) the Sellers are current with respect to all payments due under such
leases, (ii) the Sellers have complied in all respects with

 

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their obligations under such leases, and (iii) there are no defaults under any
such lease that remain uncured and no condition exists which, with the lapse of
time or giving of notice, or both, would give rise to a default under any such
lease. No condemnation or similar actions are currently in effect or pending or,
to the Knowledge of the Sellers, threatened against any part of any such real
property leased by the Sellers in connection with the Pharmacy Business. There
are no encroachments, leases, easements, covenants, restrictions, reservations
or other burdens of any nature which could reasonably be expected to impair the
use of any such leased real property in a manner consistent with past practices
nor does any part of any building structure or any other improvement thereon
encroach on any other property.

 

(b) Except as set forth on Schedule 2.13(b), the present zoning, subdivision,
building and other ordinances and regulations applicable to the leased real
property listed on Schedule 2.13(a) permit the continued operation, use,
occupancy and enjoyment of such real property consistent with past practices,
and, with respect to such leased real property, each Seller is in compliance
with, and has received no notices of violations of, any applicable zoning,
subdivision or building regulation, ordinance or other Law, regulation, or
requirement. The Sellers have all rights and easements necessary for public
ingress thereto and egress therefrom and for the provision of all utility
services thereto, including any required curb cut or street opening permits or
licenses for vehicular access over presently existing roads and driveways. No
portion of the leased real property listed on Schedule 2.13(a), or any building,
structure, fixture or improvement thereon, is the subject of, or affected by,
any condemnation, taking, eminent domain or inverse condemnation proceeding
currently instituted or pending, and none of the foregoing are, or, to the
Knowledge of the Sellers will be, the subject of, or affected by, any such
proceedings.

 

(c) The tangible property included in the Assets is in good operating condition
and repair, ordinary wear and tear excepted, and, except as disclosed on
Schedule 2.13(c), includes all rights, properties, interests in properties, and
assets necessary to permit Buyer to continue the Pharmacy Business after the
Closing Date in a manner consistent with past practices, except for tangible
property included in the Retained Shared Assets. Since August 31, 2000, the
Sellers and their predecessors have only conducted the Pharmacy Business under
such names and at such locations as are identified on Schedule 2.13(c), and all
of the Assets are currently located at those locations identified on Schedule
2.13(a).

 

(d) Schedule 2.13(d) contains a complete and correct list of all trademarks,
trade names, service marks, service names, brand names, copyrights, technology
rights and licenses, know-how, software and patents, registrations thereof and
applications therefor, and any other intellectual property used in the Pharmacy
Business, together with a complete list of all licenses granted by or to the
Sellers with respect to any of the foregoing. No Seller is currently in receipt
of any notice of any violation or infringement of, and has no reason to believe
that the operations of the Pharmacy Business are violating or infringing, the
rights of others with respect to any such matter. No proceedings have been
instituted or are pending or, to the Knowledge of the Sellers, threatened, which
challenge the rights of any Seller with respect to the intellectual property
used, sold or licensed by such Seller in the course of the Pharmacy Business.
Except as set forth on Schedule 2.13(d), no Seller is obligated to pay any
recurring royalties to any Person with respect to intellectual property related
to the Pharmacy Business.

 

(e) The Sellers will cooperate with Buyer to convey to Buyer in an orderly
fashion all software, systems and data used by the Pharmacy Business unless such
items are Retained Assets or Retained Shared Assets.

 

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2.14 Contracts and Commitments.

 

(a) Schedule 2.14(a) contains a complete and accurate list of all contracts,
agreements, commitments, instruments and obligations (whether written or oral,
proposed, contingent or otherwise) of the Sellers (identifying which Seller is a
Party thereto), which have been used by the Sellers in the Pharmacy Business or
relate to the Assets or the Retained Shared Assets (the “Seller Agreements”)
including those concerning the following matters:

 

(i) any lease, as lessee or lessor, or license, as licensee or licensor, of any
real or personal property (tangible or intangible) that requires financial
payments in the aggregate in excess of Fifty Thousand Dollars ($50,000);

 

(ii) the employment or engagement of any officer, director, employee, consultant
or agent, other than those terminable at will without severance obligation, and
any covenant not to compete with any former employees;

 

(iii) any contract or commitment that requires financial payments in the
aggregate in excess of Fifty Thousand Dollars ($50,000) or that can not be
terminated on less than thirty (30) days notice;

 

(iv) any arrangement with any person or entity affiliated with or related to any
Seller or any Affiliate of any Seller or any immediate family member thereof;

 

(v) any arrangement limiting the freedom of any Seller to compete, solicit
customers or solicit employees in any manner in any geographic area or line of
business, or requiring any Seller to share profits;

 

(vi) any arrangement not in the ordinary course of business under which any
Seller has agreed to assume Liabilities of another party or indemnify or hold
harmless another party;

 

(vii) any arrangement that could reasonably be anticipated to have a Seller
Material Adverse Effect;

 

(viii) any material arrangement not in the ordinary course of business;

 

(ix) any power of attorney, whether limited or general, granted by or to any
Seller;

 

(x) any charitable commitment in excess of Ten Thousand Dollars ($10,000)
individually per year;

 

(xi) any arrangement with customers, patients, managed care organizations, third
party payors, pharmacy benefit managers or drug suppliers that requires
financial payments in the aggregate in excess of Fifty Thousand Dollars
($50,000) or that can not be terminated on less than thirty (30) days notice;
and

 

(xii) any other arrangement that requires aggregate payments in excess of Fifty
Thousand Dollars ($50,000) or that can not be terminated on less than thirty
(30) days notice.

 

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(b) The Sellers have delivered to Buyer true and complete copies of all of the
written Seller Agreements. Except as indicated on Schedule 2.14(b), the Seller
Agreements are valid and effective in accordance with their terms, and there is
not under any of such Seller Agreements (i) any existing or claimed default by
any Seller or event which, with the notice or lapse of time, or both, would
constitute a default by any Seller or (ii) to the Knowledge of the Sellers, any
existing or claimed default by any other party or event which with notice or
lapse of time, or both, would constitute a material default by any such party.
Except as indicated on Schedule 2.14(b), the continuation, validity and
effectiveness of the Seller Agreements will not be affected by the Acquisition,
and the Acquisition will not result in a breach of or default under, or require
the Consent of any other party to, any of the Seller Agreements. There is no
actual or threatened termination, cancellation or limitation of any Seller
Agreements identified in Section 2.14(a)(i) or (xi). To the Knowledge of the
Sellers, there is no pending or threatened bankruptcy, insolvency or similar
proceeding with respect to any other party to the Seller Agreements.

 

2.15 Employment and Labor Matters.

 

(a) The Sellers’ employees engaged primarily in the operation of the Pharmacy
Business are listed on Schedule 2.15(a) (the “Business Employees”). Other than
the Business Employees, there are no other employees of the Sellers whose
services are primarily engaged in the Pharmacy Business.

 

(b) With respect to the Business Employees, each Seller has complied at all
times in all material respects with all applicable Laws respecting employment
and employment practices, terms and conditions of employment, wages and hours,
and occupational safety and health, including Laws concerning unfair labor
practices within the meaning of Section 8 of the National Labor Relations Act,
and the employment of non-residents under the Immigration Reform and Control Act
of 1986.

 

(c) Except as disclosed on Schedule 2.15(c), with respect to the Pharmacy
Business:

 

(i) there are no charges, governmental audits, investigations, administrative
proceedings or complaints concerning the employment practices of any Seller
pending or, to the Knowledge of the Sellers, threatened before any federal,
state or local agency or court and, to the Knowledge of the Sellers, no basis
for any such matter exists;

 

(ii) there are no inquiries, investigations or monitoring of activities pending
or, to the Knowledge of the Sellers, threatened by any state professional board
or agency charged with regulating the professional activities of any licensed,
registered, or certified professional personnel employed by, credentialed or
privileged by, or otherwise affiliated with any Seller and who provides services
to the Pharmacy Business;

 

(iii) no Seller is a party to any union or collective bargaining agreement, no
union attempts to organize its employees have been made, nor are any such
attempts now threatened;

 

(iv) no Seller has experienced any organized slowdown, work interruption,
strike, or work stoppage by any of its employees; and

 

(v) no Seller will incur any Liability to any employee or violate any applicable
Laws respecting employment and employment practices as a result of the
Acquisition.

 

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2.16 Employee Benefit Matters.

 

(a) The Business Employees receive benefits or are eligible under only the
employee pension benefit plans, as defined in Section 3(2) of ERISA, as are
listed on Schedule 2.16(a) (the “Pension Plans”). Except as disclosed on
Schedule 2.16(a), no Seller has ever maintained or contributed to any other
employee pension benefit plan, as defined in Section 3(2) of ERISA.

 

(b) The Business Employees receive benefits or are eligible under only the
employee welfare benefit plans, as defined in Section 3(1) of ERISA (including
but not limited to, life insurance, medical, hospitalization, holiday, vacation,
disability dental and vision plans) as are listed on Schedule 2.16(b) (the
“Welfare Plans”).

 

(c) The Business Employees receive benefits or are eligible under only the
compensation programs and/or employment arrangements, (including but not limited
to, any written or unwritten incentive compensation, fringe benefit, payroll or
employment practice, bonus, option, employee stock ownership, stock purchase,
severance, sick pay, salary continuation, deferred compensation, supplemental
executive compensation plans, employment agreements and consulting agreements
for the benefit of their officers, directors, employees, former employees, or
independent contractors) as are listed on Schedule 2.16(c) (the “Compensation
Programs”).

 

(d) To the extent applicable, each Pension Plan, Welfare Plan and Compensation
Program has been operated and administered in material compliance with ERISA,
the Code and all other statutes, rules and regulations, agreements and
instruments by which it is governed. Each Pension Plan which is intended to be
qualified under Section 401(a) of the Code has been determined by the IRS to be
so qualified or a request for such determination has been timely filed with the
IRS (and no Seller has Knowledge that any event has occurred between the date of
the last such determination and the Closing Date that would cause the Internal
Revenue Service to revoke such determination).

 

(e) All amounts required to be paid by any Seller with respect to any Business
Employee under each Pension Plan, Welfare Plan and Compensation Program on or
before the Closing Date have or will be paid.

 

(f) None of the Sellers nor their ERISA Affiliates has at any time sponsored,
contributed to, or been obligated under Title I or Title IV of ERISA to
contribute to a “defined benefit plan” (as defined in ERISA 3(35)). None of the
Sellers nor their ERISA Affiliates have ever had an “obligation to contribute”
(as defined in ERISA Section 4212) to a “multiemployer plan” (as defined in
ERISA Sections 4001(a)(3) and 3(37)(A). The Sellers have no liability under
Title IV of ERISA either directly or through their ERISA Affiliates, including
any liability that could arise as a result of any Seller’s membership in a
“controlled group” as defined in ERISA Section 4001(a)(14) and ERISA
Section 4001(b)(1).

 

2.17 Insurance Policies.

 

(a) All of the Assets and the operations of the Pharmacy Business of an
insurable nature and of a character usually insured by companies of similar size
and in similar businesses are insured by the Sellers in such amounts and against
such losses, casualties or risks as is (i) required by any Law applicable to the
Sellers or (ii) required by any contract or agreement entered into by any
Seller. All such policies are identified in Schedule 2.17 and correct and
complete copies of all

 

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such policies have been furnished to Buyer by the Sellers on or before the date
of this Agreement. All such policies are in full force and effect and
enforceable in accordance with their terms. No Seller is currently in default
regarding the provisions of any such policy, including, without limitation,
failure to make timely payment of all premiums due thereon, and has not failed
to file any notice or present any claim thereunder in due and timely fashion. No
Seller has been refused, or denied renewal of, any insurance coverage by
insurance companies offering such insurance in connection with the ownership or
use of the Assets or the operation of the Pharmacy Business. Each Seller has
provided to Buyer correct and complete copies of all insurance audit reports,
loss prevention reports, all claims made and loss history reports in respect of
any insurance maintained by such Seller or any predecessor of such Seller,
including under any organized plan of self insurance, relating to the Pharmacy
Business during the past five (5) years. All professional and general liability
insurance covering the Pharmacy Business has been “claims made” based insurance.

 

(b) To the Knowledge of the Sellers, the licensed professional employees
included among the Business Employees (i) have not, in the last seven (7) years,
filed a written application for professional malpractice insurance coverage
which has been denied by an insurance agency or carrier; (ii) have been
continuously insured for professional malpractice claims during the same period;
and (iii) are not in default with respect to any provision contained in any such
policy and none of them has failed to give any notice or present any claim under
any such policy in due and timely fashion.

 

2.18 Environmental Matters.

 

(a) Except as set forth on Schedule 2.18(a), the Sellers operations of the
Pharmacy Business and their Facilities are, and have at all times been, in
compliance with all Environmental Laws. Except as disclosed on Schedule 2.18(a),
there is no Litigation pending or, to the Knowledge of the Sellers, threatened
before any Regulatory Authority or other forum in which any Seller or any of its
Facilities has been, or with respect to pending Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) or with
Liability under any Environmental Law or (ii) relating to the release,
discharge, spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site currently or formerly owned, leased, or operated
by any Seller or any of its Facilities, nor, to the Knowledge of the Sellers, is
there any reasonable basis for any Litigation of a type described in this
sentence.

 

(b) Except as disclosed on Schedule 2.18(b), during the period of (i) any
Seller’s ownership or operation of any of its current properties, or (ii) any
Seller’s participation in the management of any Facility, there have been no
releases, discharges, spillages, or disposals of Hazardous Material in, on,
under, adjacent to, or affecting (or potentially affecting) such properties.
Prior to the period of (i) any Seller’s ownership or operation of any of the
properties subject to the Assigned Leases, or (ii) any Seller’s participation in
the management of the properties subject to the Assigned Leases, to the
Knowledge of the Sellers, there were no releases, discharges, spillages, or
disposals of Hazardous Material in, on, under, or affecting any such properties.

 

(c) Schedule 2.18(c) contains a true, complete and accurate listing and
description of each facility or location at which any Seller has been named as
or alleged to be a responsible party or potentially responsible party under any
Environmental Law in connection with the release, disposal, transportation or
arrangement for the release, disposal or transportation of Hazardous Materials.

 

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(d) Each Seller has obtained all permits, licenses, approvals, Consents, Orders,
and authorizations which are required under any Environmental Law in connection
with the ownership, use, or lease of the Assets (“Environmental Permits”).
Schedule 2.18(d) contains a true, complete and accurate listing and description
of, and the Sellers have delivered, or caused to be delivered or made available,
to Buyer true and complete copies of each Environmental Permit. Except as
described on Schedule 2.18(d), each Seller is in compliance with each such
Environmental Permit, and no Environmental Permit restricts such Seller from
operating any equipment covered by such Environmental Permit as currently
conducted.

 

(e) The Sellers have delivered, or caused to be delivered or made available, to
Buyer true and complete copies of each contract or agreement under which any of
the Sellers retained Liability for environmental matters, agreed to indemnify
third parties with respect to environmental matters, or is indemnified by a
third party with respect to environmental matters.

 

2.19 Taxes.

 

(a) Except as set forth on Schedule 2.19(a), each Seller has timely filed with
the appropriate Taxing authorities all Tax Returns in all jurisdictions in which
Tax Returns are required to be filed, and such Tax Returns are correct and
complete in all respects. None of the Sellers is the beneficiary of any
extension of time within which to file any Tax Return. All Taxes of the Sellers
(whether or not shown on any Tax Return) have been fully and timely paid. There
are no Liens for any Taxes (other than a Lien for current real property or ad
valorem Taxes not yet due and payable) on any of the Assets of any of the
Sellers. No claim has ever been made by an authority in a jurisdiction and not
been resolved where any Seller does not file a Tax Return that such entity may
be subject to Taxes by that jurisdiction.

 

(b) Except as set forth on Schedule 2.19(b), none of the Sellers has received
any notice of assessment or proposed assessment in connection with any Taxes,
and there are no threatened or pending disputes, claims, audits or examinations
regarding any Taxes of any Seller or the assets of any Seller. No officer or
employee responsible for Tax matters of any Seller expects any Taxing authority
to assess any additional Taxes for any period for which Tax Returns have been
filed. None of the Sellers has waived any statute of limitations in respect of
any Taxes or agreed to a Tax assessment or deficiency.

 

(c) Except as set forth on Schedule 2.19(c), each Seller has complied with all
applicable Laws, rules and regulations relating to the withholding of Taxes and
the payment thereof to appropriate authorities, including Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee
or independent contractor, and Taxes required to be withheld and paid pursuant
to Sections 1441 and 1442 of the Internal Revenue Code or similar provisions
under foreign Law.

 

(d) Except as set forth on Schedule 2.19(d), the unpaid Taxes of each Seller
(i) did not, as of the most recent fiscal month end, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
most recent balance sheet (rather than in any notes thereto) for such Seller and
(ii) do not exceed that reserve as adjusted for the passage of time through the
Closing Date in accordance with past custom and practice of such Seller in
filing its Tax Returns.

 

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(e) Except as set forth on Schedule 2.19(e), none of the Sellers is a party to
any Tax allocation or sharing agreement and none of the Sellers has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which is Parent) or has any Tax
Liability of any Person under Treasury Regulation Section 1.1502-6 or any
similar provision of state, local or foreign Law (other than the other members
of the consolidated group of which Parent is parent), or as a transferee or
successor, by contract or otherwise.

 

2.20 Licenses, Authorizations and Provider Programs.

 

(a) Except as set forth on Schedule 2.20(a)(i), each Seller holds all valid
licenses, accreditations, permits, certificates, consents, exceptions,
authorizations and other rights required by Law, ordinance, regulation or ruling
of any Regulatory Authority necessary to operate the Pharmacy Business. Except
as disclosed on Schedule 2.20(a)(ii), with respect to the Pharmacy Business each
Seller is certified for participation and reimbursement under Titles XVIII and
XIX of the Social Security Act (the “Medicare and Medicaid programs”) (Medicare
and Medicaid programs and such other similar federal, state or local
reimbursement or governmental programs for which any Seller is eligible are
hereinafter referred to collectively as the “Government Programs”) and has
current provider agreements for such Government Programs and with such private
non-governmental programs, including without limitation any private insurance
program, under which they directly or indirectly are presently receiving
payments (such non-governmental programs herein referred to as “Private
Programs”). Set forth on Schedules 2.20(a)(i) and 2.20(a)(ii) is a correct and
complete list with respect to the Pharmacy Business of all (i) licenses
(excluding individual employee licenses), accreditations, permits and
certificates held by each Seller and (ii) provider agreements under all
Government Programs and Private Programs, complete and correct copies of which
have been provided to Buyer. True, complete and correct copies of all surveys of
each Seller or its predecessors in interest related to the Pharmacy Business and
conducted in connection with any Government Program, Private Program or license
(excluding individual employee licenses), accreditation, permit and certificate
during the past two (2) years have been provided to Buyer.

 

(b) Except as disclosed on Schedule 2.20(b), no violation, default, order or
deficiency exists with respect to any of the items listed on Schedules
2.20(a)(i) and 2.20(a)(ii). No Seller has received any notice of any action,
investigation, inquiry or informational request pending or recommended by any
Regulatory Authority having jurisdiction over the items listed on Schedules
2.20(a)(i) and 2.20(a)(ii), either to revoke, withdraw, limit, discipline or
suspend any license (excluding individual employee licenses), accreditation,
permit or certificate or to suspend, terminate or modify the participation of
any Seller in any Government Program or Private Program. To the Knowledge of
Sellers, no event has occurred which, with the giving of notice, the passage of
time, or both, would constitute grounds for a violation, order or deficiency
with respect to any of the items listed on Schedules 2.20(a)(i) and 2.20(a)(ii)
or to revoke, withdraw, limit or suspend any such license (excluding individual
employee licenses), accreditation, permit or certificate or to suspend,
terminate or modify the participation of any Seller in any Government Program or
Private Program. Except as set forth on Schedule 2.20(b), since October 1, 2002,
there has been no decision not to renew any provider or third-party payor
agreement of any Seller that relates to the Pharmacy Business. Except as listed
on Schedule 2.20(b), no Consent or approval of, prior filing with or notice to,
or any action by, any governmental body or agency or any other third party is
required in connection with any such license, right or authorization, or
Government Program or Private Program, by reason of the assignment thereof to
Buyer at the Closing, and the continued operation of the Pharmacy Business by
Buyer thereafter on a basis consistent with past

 

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practices. No Business Employee or, to the Knowledge of the Sellers, agent or
contractor engaged by any Seller in connection with the Pharmacy Business has
been excluded from or prohibited from providing services under and federal or
state program, including but not limited to any federal or state health care
program such as Medicare and Medicaid.

 

(c) With respect to the Pharmacy Business, each Seller has timely filed all
reports and billings required to be filed by it prior to the date hereof with
respect to the Government Programs and Private Programs, all fiscal
intermediaries and other insurance carriers and all such reports and billings
are complete and accurate in all material respects and have been prepared in
compliance with all applicable Laws and regulations governing reimbursement and
payment claims. True and complete copies of such reports and billings for the
most recent year have heretofore been made available to Buyer. Except as set
forth on Schedule 2.20(c), each Seller has paid or caused to be paid all known
and undisputed refunds, overpayments, discounts or adjustments which have become
due pursuant to such reports and billings and has no Liability under any
Government Program or Private Program for any refund, overpayment, discount or
adjustment. Except as set forth on Schedule 2.20(c), (i) there are no pending
appeals, adjustments, challenges, audits, claims, litigation, or notices of
intent to audit such prior reports or billings, and (ii) during the last two
(2) years no Seller has been audited or otherwise examined by any Government
Program or Private Program. There are no other reports required to be filed by
any Seller in order to be paid under any Government Program or Private Program
for services rendered in connection with the Pharmacy Business, except for cost
reports not yet due.

 

(d) The Sellers are not subject to any corporate integrity agreements or any
other agreements, corporate integrity programs or compliance plans with any
Regulatory Authority. The Sellers have provided Buyer with true, correct and
complete copies of any corporate integrity agreements and any other agreement,
corporate integrity program or compliance plan that is applicable to Parent or
any Subsidiary of Parent.

 

2.21 Inspections and Investigations. Except as set forth and described on
Schedule 2.21, (i) no Seller’s right, nor, to the Knowledge of Sellers, the
right of any licensed professional or other individual affiliated with the
Pharmacy Business to receive reimbursements pursuant to any Government Program
or Private Program has been terminated or otherwise adversely affected as a
result of any investigation or action whether by any Regulatory Authority or
other third party, (ii) no Seller, nor any licensed professional or other
individual who provides services in connection with the operation of the
Pharmacy Business on behalf of any Seller has, during the past three (3) years,
been the subject of any inspection, investigation, survey, audit, monitoring or
other form of review by any Regulatory Authority, trade association,
professional review organization, accrediting organization or certifying agency
based upon any alleged improper activity on the part of such individual, nor has
any Seller received any notice of deficiency during the past three (3) years in
connection with the operations of the Pharmacy Business, (iii) there are not
presently, and at the Closing Date there will not be, any outstanding
deficiencies or work orders of any Regulatory Authority having jurisdiction over
the Pharmacy Business or the Assets, or requiring conformity to any applicable
agreement, statute, regulation, ordinance or bylaw, including but not limited
to, the Government Programs and Private Programs, and (iv) there is not any
notice of any claim, requirement or demand of any licensing or certifying agency
or other third party supervising or having authority over the Pharmacy Business
or the Assets to rework or redesign any part thereof or to provide additional
furniture, fixtures, equipment, appliances or inventory for the Pharmacy
Business so as to conform to or comply with any existing Law, code, rule,
regulation or standard. Attached to Schedule 2.21 are copies of all reports,
correspondence, notices and other documents relating to any matter described or
referenced therein.

 

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2.22 Certain Relationships. Except as set forth on Schedule 2.22, no Seller nor
any of their respective predecessors has with respect to the Pharmacy Business:

 

(a) offered, paid, solicited or received anything of value, paid directly or
indirectly, overtly or covertly, in cash or in kind (“Remuneration”) to or from
any physician, family member of a physician, or an entity in which a physician
or physician family member has an ownership or investment interest, including,
but not limited to:

 

(i) payments for personal or management services pursuant to a medical director
agreement, consulting agreement, management contract, personal services
agreement, or otherwise;

 

(ii) payments for the use of premises leased to or from a physician, a family
member of a physician or an entity in which a physician or family member has an
ownership or investment interest; or

 

(iii) payments for the acquisition or lease of equipment, goods or supplies from
a physician, a family member of a physician or an entity in which a physician or
family member has an ownership or investment interest;

 

(b) offered, paid, solicited or received any Remuneration (excluding fair market
value payments for services, equipment or supplies) to or from any healthcare
provider, pharmacy, drug or equipment supplier, distributor or manufacturer,
including, but not limited to:

 

(i) payments or exchanges of anything of value under a warranty provided by a
manufacturer or supplier of an item to a Seller; or

 

(ii) discounts, rebates, or other reductions in price on a good or service
received by a Seller;

 

(c) offered, paid, solicited or received any Remuneration to or from any person
or entity in order to induce business, including, but not limited to, payments
intended not only to induce referrals of patients, but also to induce the
purchasing, leasing, ordering or arrangement for any good, facility, service or
item;

 

(d) entered into any joint venture, partnership, co-ownership or other
arrangement involving any ownership or investment interest by any physician, or
family member of a physician, or an entity in which physician or physician
family member has an ownership or investment interest, directly or indirectly,
through equity, debt, or other means, including, but not limited to, an interest
in an entity providing goods or services to a Seller;

 

(e) entered into any joint venture, partnership, co-ownership or other
arrangement involving any ownership or investment interest by any person or
entity including, but not limited to, a hospital, pharmacy, drug or equipment
supplier, distributor or manufacturer, that is or was in a position to make or
influence referrals, furnish items or services to, or otherwise generate
business for any Seller; or

 

(f) entered into any agreement providing for the referral of any patient for the
provision of goods or services by a Seller, or payments by a Seller as a result
of any referrals of patients to a Seller (excluding commercial payor contracts
providing for such referrals and payments).

 

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2.23 Stark; Fraud and Abuse; Civil Monetary Penalties; False Claims; HIPAA;
FFDCA. No Seller nor any of their respective predecessors nor any persons and
entities providing professional services on behalf of and in connection with the
Pharmacy Business have engaged in any activities which are prohibited under 42
C.F.R. § 1320a-7a, 42 U.S.C. § 1320a-7b, 42 U.S.C. § 1395nn or 31 U.S.C.
§ 3729-3733 (or other federal or state statutes related to false or fraudulent
claims) or the regulations promulgated thereunder pursuant to such statutes, or
related or similar state or local statutes or regulations, or which are
prohibited by rules of professional conduct, including but not limited to the
following: (a) knowingly and willfully making or causing to be made a false
statement or representation of a fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a fact for use in determining rights to any
benefit or payment; (c) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with intent to
fraudulently secure such benefit or payment; and (d) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate), directly or indirectly, overtly or covertly, in cash or in kind or
offering to pay or receive such remuneration (i) in return for referring an
individual to a person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by Medicare or
Medicaid, or (ii) in return for purchasing, leasing, or ordering or arranging
for or recommending purchasing, leasing, or ordering any good, facility, service
or item for which payment may be made in whole or in part by a federal health
care program such as Medicare or Medicaid. None of the Sellers have engaged in
activities in connection with the Pharmacy Business that are prohibited under
the Health Insurance Portability and Accountability Act of 1996, 42 U.S.C. §
1320d through d-8, as amended, and regulations promulgated thereunder, including
the privacy, transaction standard, and security regulations, (collectively,
“HIPAA”). Each Seller in connection with the Pharmacy Business is in compliance
in all material respects with HIPAA and other applicable federal and state
privacy Laws. None of the Sellers, nor persons and entities providing
professional services to the Sellers on behalf of and in connection with the
Pharmacy Business, have violated or engaged in any activities which are
prohibited under the Prescription Drug Marketing Act and the other relevant
provisions of the Federal Food Drug and Cosmetic Act and the regulations
implementing those drug distribution provisions. The Sellers and their agents in
connection with the Pharmacy Business have fully complied with the provisions of
the Federal Food Drug and Cosmetic Act in maintaining required records,
obtaining state licensing and inspection of all warehouse facilities, as
required, and otherwise complying with the distribution, storage, marketing,
promotion and other relevant provisions of the Federal Food Drug and Cosmetic
Act.

 

2.24 Rates and Reimbursement Policies. With respect to the Pharmacy Business, no
Seller has a rate appeal currently pending before any Regulatory Authority or
any administrator of any Private Programs. With respect to the Pharmacy
Business, none of the Sellers have Knowledge of any applicable Law, which has
been enacted, promulgated or issued within the eighteen (18) months preceding
the date of this Agreement of any such legal requirement proposed or currently
pending in the jurisdictions in which the Sellers do business, which would have
a Seller Material Adverse Effect or may result in the imposition of additional
Medicaid, Medicare, charity, free care, welfare, or other discounted or
government assisted patients or require the Sellers to obtain any necessary
authorization which they do not currently possess.

 

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2.25 Patients and Orders. The Sellers have provided Buyer a list of all patients
of the Pharmacy Business who, within the six (6) month period prior to the date
hereof, have submitted an order or had a prescription filled by the Pharmacy
Business and a list of all outstanding orders or prescriptions from such
customers or patients as of the date hereof.

 

2.26 Controlled Substances. No Seller, or any officer, director or employee of a
Seller, or, to the Knowledge of the Sellers, any independent contractor or other
person who provides professional services on behalf of and in connection with
the Pharmacy Business has, in connection with their activities related to the
Pharmacy Business, whether directly or indirectly related to a Seller, engaged
in any activities which are prohibited under the Federal Controlled Substances
Act, 21 U.S.C. § 801 et seq. or the regulations promulgated pursuant to such
statute or any related state or local statutes or regulations concerning the
dispensing and sale of controlled substances.

 

2.27 Accounts Receivable; Inventories.

 

(a) Except as set forth on Schedule 2.27(a), the accounts receivable reflected
in the Business Financial Statements, and all accounts receivable related to the
Pharmacy Business arising since August 31, 2005, arose from bona fide
transactions in the ordinary course of business. Except as set forth on Schedule
2.27(a), the accounts receivable reflected in the Business Financial Statements
have been properly recorded and reserved against consistent with past practice
and have been prepared consistent with and on the same basis as the accounts
receivable and the allowance for doubtful accounts included in the Parent
Financial Statements, which Parent Financial Statements have been prepared in
accordance with GAAP. No such account receivable has been assigned or pledged to
any other person, firm or corporation or is subject to any right of set-off.
Reasonable provision has been made in the Business Financial Statements for
collection losses, contractual discounts and other adjustments from third party
payers.

 

(b) All items of Inventory of the Sellers related to the Pharmacy Business will,
at the Closing, consist of items of a quality and quantity usable and saleable
in the ordinary course of business and conform to generally accepted standards
in the industry in which the Pharmacy Business is a part. Such Inventory does
not include patient returns of any kind and this Inventory has a verifiable
pedigree which conforms with applicable law and regulations that govern
generally accepted pharmacy practice standards. Except as set forth on Schedule
2.27(b), since August 31, 2005, no Inventory has been sold or disposed of,
except through sales in the ordinary course of business, and in no event at
prices less than the book value of such Inventory as of August 31, 2005.

 

2.28 Business Relationships.

 

(a) Except as disclosed on Schedule 2.28(a), the relationships between the
Sellers and all customers, clients, third party payors, patients, Employees and
vendors who receive goods and services from or provide goods and services to a
Seller in connection with the Pharmacy Business are satisfactory, and the
Sellers have no Knowledge of (i) any facts or circumstances which might
materially alter, negate, impair or in any way adversely affect the continuity
of any such relationships or (ii) any unresolved complaints, claims, threats,
plans or intentions to discontinue or curtail relations under any such
relationships. No Seller is under any obligation with respect to the return of
goods in the possession of customers or patients related to the Pharmacy
Business.

 

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(b) Except as disclosed on Schedule 2.28(b), the Sellers have no Knowledge of
any present or future condition or state of facts or circumstances which would
prevent the Pharmacy Business from being carried on by Buyer after the Closing
Date in the same manner as it is presently being carried on.

 

2.29 Absence of Certain Business Practices. Except as disclosed on Schedule
2.29, no Seller, nor any officer or director of a Seller, nor, to the Knowledge
of the Sellers, any employee of a Seller, any independent contractor of a Seller
or other person or entity acting on behalf of a Seller in connection with the
Pharmacy Business, acting alone or together, has in connection with the Pharmacy
Business (i) received, directly or indirectly, any rebates, payments,
commissions, promotional allowances or any other economic benefits, regardless
of their nature or type, from any customer, governmental employee or other
person or entity with whom a Seller has done business directly or indirectly, or
(ii) directly or indirectly, given or agreed to give any gift or similar benefit
to any customer, governmental employee or other person or entity who is or may
be in a position to help or hinder the Pharmacy Business (or assist any Seller
in connection with any actual or proposed transaction) which, in the case of
either clause (i) or clause (ii) above, would reasonably be expected to subject
a Seller to any damage or penalty in any civil, criminal or governmental
Litigation. No Seller, nor any officer or director of a Seller, nor, to the
Knowledge of the Sellers, any employees of the Sellers or any independent
contractor of a Seller, has used any funds for unlawful contributions, gifts,
entertainment or other expenses relating to political activity or otherwise, or
has made any direct or indirect unlawful payment to governmental officials or
employees from a Seller’s funds or been reimbursed from a Seller’s funds for any
such payment, or is aware that any other person associated with or acting on
behalf of a Seller has engaged in any such activities.

 

2.30 No Implied Representations. Notwithstanding anything to the contrary
herein, the parties acknowledge and agree that Sellers have not made and are not
making any representation or warranty, express or implied, except for those
representations and warranties set forth in the Acquisition Documents.

 

2.31 No Material Weaknesses. To the Knowledge of the Sellers, (i) Parent does
not suffer from any material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect
Parent’s ability to record, process, summarize and report financial information
relating to the Pharmacy Business and (ii) there exists no fraud, whether or not
material, that involves management or other employees of Parent who have a
significant role in Parent’s internal control over financial reporting relating
to the Pharmacy Business.

 

2.32 Statements True and Correct. No representation or warranty made herein by
the Sellers, nor in any Acquisition Document to be furnished to Buyer by any
Seller pursuant to this Agreement, contains or will contain any untrue statement
of material fact or omits or will omit to state a material fact necessary to
make these statements contained herein and therein not misleading.

 

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer hereby represents and warrants to the Sellers as follows:

 

3.1 Organization, Authority and Capacity. Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Tennessee. Buyer has the full power and authority necessary to (i) execute,
deliver and perform its obligations under the Acquisition Documents to be
executed and delivered by it, and (ii) carry on its business as it has been and
is now being conducted and to own and lease the properties and assets which it
now owns or leases. Buyer is duly qualified to do business and is in good
standing in each jurisdiction in which a failure to be so qualified or in good
standing would have a material adverse effect on Buyer.

 

3.2 Authorization and Validity. The execution, delivery and performance of the
Acquisition Documents to be executed and delivered by Buyer have been duly
authorized by all necessary action by Buyer. The Acquisition Documents to be
executed and delivered by Buyer have been or will be, as the case may be, duly
executed and delivered by Buyer and constitute or will constitute the legal,
valid and binding obligations of Buyer, enforceable in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency, or other
laws affecting creditors’ rights generally, or as may be modified by a court of
equity.

 

3.3 Absence of Conflicting Agreements or Required Consents. The execution,
delivery and performance by Buyer of the Acquisition Documents to be executed
and delivered by it: (i) do not require the Consent of or notice to any
Regulatory Authority; (ii) will not conflict with any provision of Buyer’s
charter or bylaws; (iii) will not conflict with or result in a violation of any
Law, ordinance, regulation, ruling, judgment, order or injunction of any court
or Regulatory Authority to which Buyer is subject or by which Buyer or any of
its assets or properties is bound; and (iv) will not conflict with, constitute
grounds for termination of, result in a breach of, constitute a default under,
require any notice under, or accelerate or permit the acceleration of any
performance required by the terms of any material agreement, instrument, license
or permit to which Buyer is a party or by which any of Buyer’s properties are
bound.

 

3.4 Statements True and Correct. No representation or warranty made herein by
Buyer, nor in any Acquisition Document to be furnished to the Sellers by Buyer
pursuant to this Agreement, contains or will contain any untrue statement of
material fact or omits or will omit to state a material fact necessary to make
these statements contained therein not misleading.

 

ARTICLE 4

ADDITIONAL AGREEMENTS

 

4.1 Antitrust Notification; Consents of Regulatory Authorities.

 

(a) To the extent required by the HSR Act, each of the Parties shall, within
seven (7) business days of the date hereof, file with the United States Federal
Trade Commission (“FTC”) and the United States Department of Justice (“DOJ”) the
notification and report form required for the transactions contemplated hereby,
shall promptly file any supplemental or additional information which may
reasonably be requested in connection therewith pursuant to the HSR Act, and
shall comply in all material respects with the requirements of the HSR Act. Each
Party shall use its reasonable efforts to resolve objections, if any, which may
be asserted with respect to the Acquisition under the HSR Act, the Sherman Act,
as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as
amended, and any other federal, state or foreign Law or, regulation or decree
designed to prohibit, restrict or regulate actions for the purpose or effect of

 

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monopolization or restraint of trade (collectively “Antitrust Laws”). Each Party
shall use its reasonable efforts to take such action as may be required by:
(i) the DOJ and/or the FTC in order to resolve such objections as either of them
may have to the Acquisition under the Antitrust Laws, or (ii) any federal or
state court of the United States, or similar court of competent jurisdiction in
any foreign jurisdiction, in any suit brought by any Regulatory Authority or any
other Person challenging the Acquisition as violative of the Antitrust Laws, in
order to avoid the entry of any Order (whether temporary, preliminary or
permanent) which has the effect of preventing the consummation of the
Acquisition and to have vacated, lifted, reversed or overturned any such Order.
Reasonable efforts shall not include the willingness of Buyer to accept an Order
agreeing to the divestiture, or the holding separate, of any assets of Buyer or
any of its Subsidiaries or any Assets of the Sellers. Buyer shall be entitled to
direct any proceedings or negotiations with any Regulatory Authority relating to
any of the foregoing, provided that it shall afford Parent a reasonable
opportunity to participate therein. Notwithstanding anything to the contrary in
this Section, Buyer shall not be required to divest any of its businesses,
product lines or assets, or to take or agree to take any other action or agree
to any limitation, that Buyer deems not to be in its best interest.

 

(b) The Parties hereto shall cooperate with each other and use their reasonable
efforts to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings (which shall include the filings
pursuant to subsection (a) above), and to obtain as promptly as practicable all
Consents of all Regulatory Authorities and other Persons which are necessary or
advisable to consummate the Acquisition and the other transactions contemplated
by this Agreement. The Parties agree that they shall consult with each other
with respect to the obtaining of all Consents of all Regulatory Authorities and
other Persons necessary or advisable to consummate the transactions contemplated
by this Agreement and each Party shall keep the other apprised of the status of
matters relating to consummation of the transactions contemplated herein. Each
Party also shall promptly advise the other upon receiving any communication from
any Regulatory Authority or other Person whose Consent is required for
consummation of the transactions contemplated by this Agreement which causes
such Party to believe that there is a reasonable likelihood that any requisite
Consent shall not be obtained or that the receipt of any such Consent will be
materially delayed.

 

(c) The Sellers and Buyer will coordinate causing the Sellers’ licenses,
permits, supply agreements, agreements with customers and other material
contracts related to the Pharmacy Business to be transferred to Buyer and where
appropriate Buyer shall apply, at Buyer’s expense, for any change of ownership
required for government licenses or permits or for new licenses or permits to
enable Buyer to operate the Pharmacy Business from and after the Closing Date.
In the event that any license or contract cannot be transferred and such failure
is material to Buyer, the Sellers will reasonably cooperate in making alternate
arrangements acceptable to Buyer in order to facilitate Buyer’s ability to
conduct the Pharmacy Business in the same manner as conducted by the Sellers
prior to the Closing.

 

4.2 Subleases. To the extent Buyer is unable to obtain the necessary Consents in
connection with the assignment of the leases set forth on Schedule 4.2, at the
Closing, Buyer shall enter into subleases with Parent for the use of the
buildings set forth on Schedule 4.2 used by the Sellers in the Pharmacy Business
substantially in the form of Exhibit 4.2.

 

4.3 Agreement as to Efforts to Consummate. Subject to the terms and conditions
of this Agreement, each Party agrees to use, and to cause its Subsidiaries to
use, its reasonable efforts

 

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to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper, or advisable under applicable Laws to consummate and
make effective, as soon as reasonably practicable after the date of this
Agreement, the transactions contemplated by this Agreement, including using its
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 6; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Buyer and
the Sellers agree, on or prior to the Closing Date, to execute those documents
listed in Article 6 hereof to which they are a party and to cause their
Affiliates to execute any such documents to which they are to become a party.

 

4.4 Press Releases. Prior to the Closing Date, Parent and Buyer shall consult
with each other as to the form and substance of any press release or other
public disclosure materially related to this Agreement or any other transaction
contemplated hereby and each of Parent and Buyer shall have the right to approve
each other’s press releases prior to issuance, such approval not to be
unreasonably withheld or delayed; provided, that nothing in this Section 4.4
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party’s disclosure
obligations imposed by Law.

 

4.5 Confidentiality Agreements.

 

(a) The Parties acknowledge and affirm the Mutual Confidentiality Agreement
between them and their Affiliates, dated July 14, 2005 (the “Confidentiality
Agreement”).

 

(b) The Sellers shall take all reasonable commercial actions to maintain the
confidentiality of the confidential information and trade secrets relating to
the Pharmacy Business and to enforce the provisions of its confidentiality
agreements (including any standstill provisions contained therein) with other
Persons, including such reasonable commercial actions as requested by Buyer.

 

4.6 Bulk Transfer Act. The parties hereby waive compliance with any state “Bulk
Transfer Act,” to the extent applicable to the transactions contemplated hereby.
The Sellers shall indemnify Buyer with respect to such waiver as a Retained
Liability as provided in Section 8.1.

 

4.7 Retained Liabilities. The Sellers covenant and agree to pay or otherwise
satisfy all Retained Liabilities, as and when due. Each Seller further covenants
and agrees that it will not take or fail to take any action which is likely to
affect Buyer’s relationship with any suppliers or representatives related to the
Pharmacy Business between the date hereof and the Closing Date.

 

4.8 Risk of Loss. The Sellers shall maintain all risk of condemnation,
destruction, loss or damage due to fire or other casualty from the date of this
Agreement until the Closing. If the condemnation, destruction, loss or damage is
such that the operation of the Pharmacy Business is materially interrupted or
curtailed or has a Seller Material Adverse Effect, then Buyer shall have the
right to terminate this Agreement. If Buyer nonetheless elects to close, the
Sellers shall remit all net condemnation proceeds or third party insurance
proceeds to Buyer and the Aggregate Consideration shall be adjusted at Closing
to reflect such condemnation, destruction, loss or damage to the extent that
insurance or condemnation proceeds are not sufficient to cover such destruction,
loss or damage.

 

4.9 Certain Tax Matters. Buyer, on the one hand, and the Sellers, on the other
hand, shall provide each other with any such assistance as may reasonably be
requested by any of them

 

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in connection with (i) the preparation or filing of any Tax Return, (ii) any
audit or other examination by any Regulatory Authority, or (iii) any judicial or
administrative proceedings relating to Liability for Taxes, and each party will
retain for the applicable statute of limitations or the required period of time
under state or local law for the retention of documents related to Taxes,
whichever is greater, and to provide the requesting party, any records or
information that may be relevant to any of the foregoing.

 

4.10 Title Search; Discharge of Liens. As soon as practicable after the date
hereof, but in no event later than the Closing, the Sellers shall (i) use
commercially reasonable efforts to ascertain all Liens, if any, to which any of
the Assets is subject, whether in the name of a Seller, Parent or any
predecessor of a Seller or Parent (which may include reviewing Lien searches
obtained by Buyer and provided to the Sellers), (ii) notify Buyer in writing of
the nature and extent thereof, and (iii) discharge all such Liens other than
Permitted Liens.

 

4.11 Transfer Taxes. All Transfer Taxes shall be borne by the Sellers. Buyer and
the Sellers shall cooperate with one another in promptly making any filings in
connection with any such taxes. Buyer or the Sellers, as the case may be, shall
execute and deliver to each other, at Closing any certificates or other
documents as the other may reasonably request to perfect any exemption from any
such Transfer Taxes.

 

4.12 Transition Agreement. The Parties shall enter into a Transition Agreement,
substantially in the form of Exhibit 4.12 (the “Transition Agreement”), pursuant
to which the Sellers agree to provide for an orderly transfer to Buyer of the
Pharmacy Business, its patients and payor relationships (but only as such payor
relationships relate to the Pharmacy Business) and the use of the Sellers’
names, licenses and provider numbers all in a manner that maintains the
integrity of the Pharmacy Business and minimizes disruption to the operations of
the Pharmacy Business or such relationships following the transfer to Buyer.

 

4.13 [Intentionally Blank]

 

4.14 Tail Insurance. The Sellers agree to provide to Buyer evidence of customary
extended reporting endorsements, or “tail binders,” on any “claims made”
insurance covering professional and general liability of the Pharmacy Business.

 

4.15 Collection of Receivables. In the event that any of the receivables that
are part of the Assets include governmental or other receivables that may not be
assigned as provided hereunder, the Parties agree to implement commercially
reasonable procedures for the continued collection by the Sellers of such
receivables and the payment to Buyer of the proceeds of such receivables, all of
which procedures shall be reflected in the Transition Agreement.

 

4.16 No Shop.

 

(a) From the date of this Agreement until the completion of the Closing on the
Closing Date, Parent agrees that neither it nor any of its Subsidiaries nor any
of the officers and directors of it or its Subsidiaries shall, and that it shall
cause its and its Subsidiaries’ employees, agents and representatives not to
(and shall not authorize any of them to) directly or indirectly: (i) solicit,
initiate, encourage, knowingly facilitate or induce any inquiry with respect to,
or the making, submission or announcement of, any Acquisition Proposal (as
defined in Section 4.16(c)), (ii) participate in any discussions or negotiations
regarding, or furnish to any Person any information with respect to, or take any
other action to knowingly facilitate any inquiries or the

 

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making of any proposal that constitutes or may reasonably be expected to lead
to, any Acquisition Proposal, (iii) approve, endorse or recommend any
Acquisition Proposal, or (iv) enter into any letter of intent or similar
document or any contract, agreement or commitment contemplating or otherwise
relating to any Acquisition Proposal or transaction contemplated thereby. Parent
and its Subsidiaries and their respective officers, directors, employees, agents
and representatives shall immediately cease any and all existing activities,
discussions or negotiations with any third parties conducted heretofore with
respect to any Acquisition Proposal.

 

(b) Within one (1) business day after receipt of any Acquisition Proposal or any
request for nonpublic information or inquiry which it reasonably believes could
lead to an Acquisition Proposal, Parent shall provide Buyer with oral and
written notice of the material terms and conditions of such Acquisition
Proposal, request or inquiry, and, with respect to any Acquisition Proposed that
is not Permitted Acquisition Proposal, the identity of the Person or Group
making any such Acquisition Proposal, request or inquiry and a copy of all
written materials provided in connection with such Acquisition Proposal, request
or inquiry. Upon receipt of the Acquisition Proposal, request or inquiry, Parent
shall provide Buyer as promptly as practicable oral and written notice setting
forth all such information as is reasonably necessary to keep Buyer informed in
all material respects of the status and details (including material amendments
or proposed material amendments) of any such Acquisition Proposal, request or
inquiry and shall promptly provide to Buyer a copy of all written materials
subsequently provided in connection with such Acquisition Proposal, request or
inquiry.

 

(c) For purposes of this Agreement, the following terms shall have the following
meanings:

 

(i) “Acquisition Proposal” shall mean any offer or proposal, relating to any
transaction or series of related transactions involving: (A) any purchase from
Parent or acquisition by any Person or “Group” (as defined under Section 13(d)
of the Exchange Act and the rules and regulations thereunder) of more than a ten
percent (10%) interest in the total outstanding voting securities of Parent or
any Seller which owns any of the Assets or any tender offer or exchange offer
that if consummated would result in any Person or Group beneficially owning ten
percent (10%) or more of the total outstanding voting securities of Parent or
any Seller which owns any of the Assets, or any acquisition, consolidation,
business combination or similar transaction involving Parent or any Seller which
owns any of the Assets, (B) any sale, lease (other than in the ordinary course
of business), exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than ten percent (10%) of the
assets of Parent and its Subsidiaries, (C) any sale of all or a substantial
portion of the Assets, or (D) any liquidation, spin-off or dissolution of the
Assets or any Seller which owns any of the Assets; provided, however, that an
offer or proposal shall not be deemed to be an Acquisition Proposal if upon
receipt of an unsolicited Acquisition Proposal and prior to any additional
discussions, Parent informs such party of the requirements for a Permitted
Acquisition Proposal, and such party agrees to pursue such transaction solely in
accordance with the criteria set forth in (A) or (B) of a Permitted Acquisition
Proposal, as applicable.

 

(ii) “Permitted Acquisition Proposal” shall mean (A) a proposed asset
acquisition solely for the Retained Assets if Parent and its Subsidiaries comply
with the provisions of Section 8.8 hereof, or (B) an acquisition for ten percent
(10%) or more of the total outstanding voting securities of Parent if the
potential acquiror has agreed in writing to be bound by the provisions of this
Agreement and the other agreements required to be entered into in connection
herewith and, if necessary, to vote any shares of Parent common stock it holds
in favor of this Agreement, and, in

 

29

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the event of either (A) or (B), such proposed transaction does not (i) have any
adverse impact on the timing or probability of the consummation of the
Acquisition and the transactions contemplated hereby, including, without
limitation, the filings made under the HSR Act or the other closing conditions
contained in Article VI hereof, or (ii) result in Parent being required to
obtain the approval of its stockholders in order to complete the Acquisition.

 

4.17 Tax Clearance Certificates. Sellers shall use commercially reasonable
efforts to obtain tax clearance certificates or similar documents from each
state in which the Pharmacy Business operates or files Tax Returns, or where the
Assets being sold pursuant to this Agreement are located, where such clearance
certificates or similar documents may be required by any state Tax authority in
order to relieve Buyer of any obligation to withhold any portion of the
consideration payable for the Assets. Sellers’ obligation to assist in obtaining
such certificates shall not be a condition to the Closing.

 

4.18 Schedule Supplements. From time to time prior to the Closing, the Sellers
may supplement the following schedules: (a) Schedule 1.1(a) only to include
additional items of capitalized tangible personal property which were not known
to the Sellers as of the date hereof, (b) Schedule 1.1(d) hereto only to include
personal property leases that are being assigned to Buyer at Closing,
(c) Schedule 2.14(a) hereto only to include (i) personal property leases which
have been used by the Sellers in the Pharmacy Business or relate to the Assets
or the Retained Shared Assets and which require the financial payment in the
aggregate in excess of Fifty Thousand Dollars ($50,000) and (ii) additional
contracts or agreements that may not be terminated on less than thirty (30) days
notice, (d) Schedule 10.1(b) only to amend the list of Retained Shared Assets,
and (e) Schedules 1.1(j) and 9.12(b)(iv) to update the information contained
therein as of the Closing Date. Before any such supplement shall be effective,
Buyer must first consent in writing to the Sellers’ request to supplement such
schedule(s), which consent shall not be unreasonably withheld. If the Closing
shall occur, such supplement shall not be deemed to be, or to evidence, a breach
of any representation or warranty related thereto and shall not give rise to a
right of indemnification in connection therewith.

 

ARTICLE 5

CONDUCT OF BUSINESS

 

5.1 Access to Information. At all times prior to the Closing, the Sellers will
afford the officers and authorized representatives of Buyer reasonable access
upon reasonable notice to all of the properties, books and records that relate
to or concern the Pharmacy Business and will furnish such parties with such
additional financial, operating and other information as to the business and
properties of the Pharmacy Business as such parties may from time to time
reasonably request. Buyer shall also be allowed reasonable access, upon
reasonable notice, to consult with the officers, employees, accountants, counsel
and agents of the Sellers in connection with such investigation of the Pharmacy
Business. No such investigation shall diminish or otherwise affect any of the
representations, warranties, covenants or agreements of any party under this
Agreement. At all times following the Closing, (i) the Sellers will afford the
officers and authorized representatives of Buyer reasonable access upon
reasonable notice to all of the books and records that are retained as part of
the Retained Assets as such parties may from time to time reasonably request and
(ii) Buyer will afford the officers and authorized representatives of the
Sellers reasonable access, after reasonable notice, to the books and records of
the Pharmacy Business as the Sellers may from time to time reasonably request,
but solely as necessary to complete tax returns or handle tax disputes,

 

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to administer the Retained Assets and Retained Liabilities and to perform the
Sellers’ indemnification obligations under Article 8 hereof. Prior to the
Closing Date, each Party shall keep the other Party advised of all material
developments relevant to its business and to consummation of the Acquisition.

 

5.2 Affirmative Covenants of the Sellers.

 

(a) From the date hereof until the earlier of the Closing Date or the
termination of this Agreement, unless the prior written consent of Buyer shall
have been obtained, such consent not to be unreasonably withheld or denied, and
except as otherwise expressly contemplated herein, the Sellers shall to the
extent any of the following relates directly to the Pharmacy Business or in any
way would reasonably be expected to affect the Acquisition, the Pharmacy
Business or the Assets:

 

(i) operate the Pharmacy Business in the ordinary course of business, consistent
with past practices;

 

(ii) use reasonable commercial efforts to preserve intact their business
organization, licenses, permits, government programs, private programs and
customers;

 

(iii) use reasonable commercial efforts to retain the services of their
employees, agents and consultants on terms and conditions not less favorable
than those existing prior to the date hereof and to ensure that there are no
material or adverse changes to employee relations;

 

(iv) keep and maintain their assets in their present condition, repair and
working order, except for normal depreciation and wear and tear, and maintain
the insurance, rights and licenses of the Pharmacy Business;

 

(v) pay all accounts payable of the Sellers in accordance with past practice and
collect all accounts receivable in accordance with past practice, but not less
than in accordance with reasonably prudent business practices;

 

(vi) confer on a regular and frequent basis with one or more designated
representatives of Buyer to report material operational matters and to report
the general status of ongoing Pharmacy Business operations;

 

(vii) make available to Buyer true and correct copies of all internal management
and control reports (including aging of accounts receivable, listings of
accounts payable, and inventory control reports) and available financial
statements related to the Pharmacy Business;

 

(viii) cause all Tax Returns relating to the Pharmacy Business or the Assets
that are due and have not been filed prior to the date hereof or which become
due prior to the Closing Date (taking into account valid extensions), to be
prepared and filed on or before the date such Tax Return is required to be filed
; provided, however, that any such Tax Return shall be prepared in accordance
with past practice and custom unless Parent reasonably determines that changes
are required by changes in facts or applicable Law;

 

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(ix) perform in all material respects all obligations under agreements relating
to or affecting its assets, properties or rights, except for the failure of
which performance would not have a material adverse effect on the Business taken
as a whole, financial or otherwise;

 

(x) keep in full force and effect present insurance policies or other comparable
insurance coverage; and

 

(xi) notify Buyer of (i) any event or circumstance which is reasonably likely to
have a Seller Material Adverse Effect or would cause or constitute a breach of
any representations, warranties or covenants of the Sellers contained herein;
(ii) any material change in the normal course of business or in the operation of
the assets of the Pharmacy Business, or (iii) of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), any adjudicatory proceedings, any budget meetings or any
submissions involving the Assets. The Sellers shall keep Buyer fully informed of
such events and permit Buyer’s representatives reasonable access to all
materials prepared in connection therewith.

 

(b) Parent shall provide Buyer such information and supporting documentation as
reasonably requested by Buyer to support the representations and warranties made
by the Sellers pursuant to Sections 2.7(b) and 2.7(c) hereof.

 

5.3 Negative Covenants of the Sellers.

 

(a) From the date hereof until the earlier of the Closing Date or the
termination of this Agreement, no Seller will, other than as contemplated hereby
or as disclosed on Schedule 5.3, do any of the following without the prior
written consent of Buyer, which consent shall not be unreasonably withheld or
delayed, to the extent any of the following relates directly to the Pharmacy
Business or in any way would reasonably be expected to affect the Acquisition,
the Pharmacy Business or the Assets:

 

(i) take any action which would (a) adversely affect the ability of any party to
the Acquisition Documents to obtain any Consents required for the transactions
contemplated thereby, or (b) adversely affect the ability of any party hereto to
perform its covenants and agreements under the Acquisition Documents;

 

(ii) amend any of its organizational or governing documents, except for the
purpose of accomplishing the transactions contemplated by this Agreement;

 

(iii) impose, or suffer the imposition, on any material asset of the Pharmacy
Business of any Lien or permit any such Lien to exist;

 

(iv) other than pursuant to the Acquisition Documents, sell, pledge or encumber,
or enter into any contract to sell, pledge or encumber, any interest in the
assets of the Pharmacy Business except in the ordinary course of business and
consistent with past practice and if not material;

 

(v) purchase or acquire any assets or properties related to the Pharmacy
Business, whether real or personal, tangible or intangible, or sell or dispose
of any assets or properties, whether real or personal, tangible or intangible,
except in the ordinary course of business and consistent with past practices;

 

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(vi) grant any increase in compensation or benefits to any Business Employee,
except in accordance with past practice; pay any severance or termination pay or
any bonus other than pursuant to written policies or written contracts in effect
as of the date hereof and disclosed on Schedule 5.3(a)(vi); enter into or amend
any severance agreements with any Business Employee;

 

(vii) enter into or amend any employment contract between any Seller and any
Business Employee (unless such amendment is required by law) that such Seller
does not have the unconditional right to terminate without Liability (other than
compensation for services already rendered), at any time on or after the Closing
Date;

 

(viii) except as disclosed in Schedule 5.3(a)(viii), adopt any new employee
benefit plan or make any material change in or to any existing Business Employee
benefit plans other than any such change that is required by law or that, in the
opinion of counsel, is necessary or advisable to maintain the tax qualified
status of any such plan;

 

(ix) make any material change in any Tax or accounting methods or systems of
internal accounting controls, except as may be appropriate to conform to changes
in Tax Laws or regulatory accounting requirements or generally accepted
accounting principles;

 

(x) commence any Litigation other than in accordance with past practice, settle
any Litigation involving any Liability of the Pharmacy Business for material
money damages or restrictions upon the operations of the Pharmacy Business;

 

(xi) except in the ordinary course of business and which is not material,
modify, amend or terminate any material contract or waive, release, compromise
or assign any material rights or claims;

 

(xii) except in the ordinary course of business and, even if in the ordinary
course of business, then not in an amount to exceed One Hundred Thousand Dollars
($100,000) in the aggregate, make or commit to make any capital expenditure, or
enter into any lease of capital equipment as lessee or lessor, related to the
Pharmacy Business;

 

(xiii) take any actions, or omit to take any actions, which would cause any of
the representations and warranties contained in Article 2 to be untrue or
incorrect;

 

(xiv) make any loan to any person or increase the aggregate amount of any loan
currently outstanding to any person; or

 

(xv) take any action, or omit to take any action, that would adversely impact
the ability of Parent or the Sellers to complete the Acquisition upon the terms
and conditions set forth herein, including, without limitation, any action or
inaction that would require Parent to seek the approval of its stockholders in
order to consummate the Acquisition.

 

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ARTICLE 6

CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE

 

6.1 Conditions to Obligations of Each Party.

 

The respective obligations of each Party to perform this Agreement and
consummate the Acquisition and the other transactions contemplated hereby are
subject to the satisfaction of the following conditions, unless waived by both
Parties pursuant to Section 11.3:

 

(a) Regulatory Approvals. All Consents of Regulatory Authorities set forth on
Schedule 6.1(a), shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
set forth on Schedule 6.1(a) shall be conditioned or restricted in a manner
(including requirements relating to the raising of additional capital or the
disposition of Assets) which Buyer reasonably determines would reasonably likely
have a material adverse impact on the Pharmacy Business if the Acquisition were
consummated notwithstanding such conditions or restrictions.

 

(b) Consents and Approvals. The Sellers shall have obtained the Consents listed
on Schedule 6.1(b). Buyer shall have obtained the Consents referenced in
Section 3.3 of this Agreement, if any. No Consent so obtained which is necessary
to consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner which Buyer determines would reasonably likely have an
adverse impact on the Pharmacy Business if the Acquisition were consummated
notwithstanding such conditions or restrictions.

 

(c) Legal Proceedings. No court or governmental or Regulatory Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law or Order (whether temporary, preliminary or permanent) or taken
any other action which prohibits, restricts or makes illegal consummation of the
transactions contemplated by this Agreement and no such Law, Order or action
shall be pending or overtly threatened.

 

(d) HSR Clearance. The applicable waiting period under the HSR Act shall have
expired or been terminated.

 

6.2 Conditions to Obligations of Buyer.

 

The obligations of Buyer to perform this Agreement and consummate the
Acquisition and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by Buyer pursuant to
Section 11.3:

 

(a) Representations and Warranties. For purposes of this Section 6.2(a), the
accuracy of the representations and warranties of the Sellers set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made on and as of the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of the Sellers
contained herein shall be true and correct in all material respects as of the
Closing Date, provided that any representation or warranty that is qualified as
to materiality shall be true and correct in all respects as of the Closing Date
after giving effect to such qualification as to materiality.

 

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(b) Performance of Agreements and Covenants. Each and all of the agreements and
covenants of the Sellers to be performed and complied with pursuant to this
Agreement and the other agreements contemplated hereby prior to the Closing Date
shall have been duly performed and complied with in all material respects.

 

(c) Material Adverse Effect. No Seller Material Adverse Effect shall have
occurred and be continuing.

 

(d) Certificates. Each Seller shall have duly executed and delivered to Buyer
(i) a certificate, dated as of the Closing Date and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 6.1 as relates to such Seller and in Sections
6.2(a), 6.2(b) and 6.2(c) have been satisfied, and (ii) certified copies of
resolutions duly adopted by such Seller’s Board of Directors evidencing the
taking of all corporate action necessary to authorize the execution, delivery
and performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Buyer and its counsel
shall request.

 

(e) Delivery of Documents at Closing. Delivery of the following documents, duly
executed by authorized officers of each Seller:

 

(i) Bills of sale in favor of Buyer and, at the direction of Buyer in such form
as shall be mutually agreed to by the Parties for the transfer of the Assets,
and all such other endorsements, assignments and other instruments as Buyer may
reasonably request and are reasonably necessary to transfer to Buyer good and
marketable title to the Assets (the “Conveyance Documents”);

 

(ii) Assignment and assumption agreements in favor of Buyer in such form as
shall be mutually agreed to by the Parties, for the Assumed Liabilities (the
“Assignment and Assumption Agreements”);

 

(iii) The Transition Agreement substantially in the form attached hereto as
Exhibit 4.12; and

 

(iv) An affidavit, substantially in the form specified in Treas. Reg. Sec.
1.445-2, stating under penalty of perjury, each Seller’s United States taxpayer
identification number and that the transferor is not a foreign person, pursuant
to Section 1445(b)(2) of the Internal Revenue Code and any certificates,
affidavits, or other documents that may required stating that Seller is exempt
from state withholding in connection with the transactions contemplated by this
Agreement.

 

(f) Sublease Agreements. Buyer and Parent shall have entered into sublease
agreements substantially in the form of Exhibit 4.2.

 

(g) Lien Releases. Buyer shall have received evidence, satisfactory to it, that
the Sellers have identified the Liens on the Assets and discharged all such
Liens, including, but not limited to, those Liens set forth on Schedule 2.7(c),
other than the Permitted Liens, on or prior to the Closing Date.

 

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(h) Legal Opinion. Buyer shall have received an opinion of counsel(s) to the
Sellers in substantially the form of Exhibit 6.2(h).

 

(i) Insurance Policy. As required by Section 4.14 hereof, Buyer shall have
received evidence in form and substance reasonably satisfactory to Buyer of
customary extended reporting endorsements, or “tail binders,” on any “claims
made” insurance covering professional and general liability of the Pharmacy
Business.

 

6.3 Conditions to Obligations of the Sellers.

 

The obligations of the Sellers to perform this Agreement and consummate the
Acquisition and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by the Sellers pursuant
to Section 11.3:

 

(a) Representations and Warranties. For purposes of this Section 6.3(a), the
accuracy of the representations and warranties of Buyer set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made on and as of the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of Buyer
contained herein shall be true and correct in all material respects as of the
Closing Date, provided that any representation or warranty that is qualified as
to materiality shall be true and correct in all respects as of the Closing Date
after giving effect to such qualification as to materiality.

 

(b) Performance of Agreements and Covenants. Each and all of the agreements and
covenants of Buyer to be performed and complied with pursuant to this Agreement
and the other agreements contemplated hereby prior to the Closing Date shall
have been duly performed and complied with in all material respects.

 

(c) Certificates. Buyer shall have delivered to the Sellers (i) a certificate,
dated as of the Closing Date and signed on its behalf by its chief executive
officer and its chief financial officer, to the effect that the conditions set
forth in Section 6.1 as relates to Buyer and in Sections 6.3(a), 6.3(b) and
6.3(c) have been satisfied, and (ii) certified copies of resolutions duly
adopted by Buyer’s Board of Directors evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as the Sellers and their counsel shall request.

 

(d) Delivery of Documents at Closing. Delivery of the following documents, duly
executed by authorized officers of Buyer:

 

(i) The Assignment and Assumption Agreements; and

 

(ii) The Transition Agreement substantially in the form attached hereto as
Exhibit 4.12.

 

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ARTICLE 7

TERMINATION

 

7.1 Termination.

 

Notwithstanding any other provision of this Agreement, this Agreement may be
terminated and the Acquisition abandoned at any time prior to the Closing Date
as follows:

 

(a) By mutual written consent duly authorized by the Boards of Directors of
Buyer and Parent; or

 

(b) By either Buyer or Parent in the event that the Acquisition shall not have
been consummated by December 31, 2005 (which date shall be extended to
January 31, 2005, if the Acquisition shall not have been consummated as a result
of the failure to satisfy the conditions set forth in Section 6.1(a)) (the “End
Date”), if the failure to consummate the transactions contemplated hereby on or
before such date is not caused by any breach of this Agreement by the Party
electing to terminate pursuant to this Section 7.1(b); or

 

(c) By either Buyer or Parent (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event of a breach by the other Party of any
representation, warranty, covenant or agreement contained in this Agreement
which breach is reasonably likely, in the opinion of the non-breaching Party, to
permit such Party to refuse to consummate the transactions contemplated by this
Agreement pursuant to the standards set forth in Section 6.2 (a) or (b) or
6.3(a) or (b), as applicable; provided that if such breach in the
representations, warranties, covenants or agreements is curable prior to the End
Date through the exercise of reasonable efforts and the breaching Party
exercises reasonable efforts to cure such breach, then the non-breaching Party
may not terminate this Agreement under this Section 7.1(c) prior to thirty
(30) days following the receipt of written notice of such breach; or

 

(d) By either Buyer or Parent in the event (i) any Consent of any Regulatory
Authority required for consummation of the Acquisition and the other
transactions contemplated hereby shall have been denied by final nonappealable
action of such authority or if any action taken by such authority is not
appealed within the time limit for appeal, or (ii) any Law or Order permanently
restraining, enjoining or otherwise prohibiting the consummation of the
Acquisition shall have become final and nonappealable; or

 

(e) By either Buyer or Parent (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event that any of the conditions precedent
to the obligations of such Party (as contained in Sections 6.2 and 6.3, as
applicable) to consummate the Acquisition cannot be satisfied or fulfilled by
the date specified in Section 7.1(b).

 

7.2 Effect of Termination.

 

In the event of the termination and abandonment of this Agreement pursuant to
Section 7.1, this Agreement shall become void and have no effect, except that
(i) the provisions of Sections 4.5(a), 7.2, 7.3 and Article 11, shall survive
any such termination and abandonment, and (ii) no such termination shall relieve
the breaching Party from Liability resulting from any breach by that Party of
this Agreement.

 

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7.3 Expenses.

 

(a) Except as otherwise provided in Section 4.11 and this Section 7.3, each of
the Parties shall bear and pay all direct costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel. Buyer shall pay the filing fee for the Notification
and Report Forms filed by Buyer and Parent with the FTC and DOJ under the HSR
Act.

 

(b) Nothing contained in this Section 7.3 shall constitute or shall be deemed to
constitute liquidated damages for the willful breach by a Seller of the terms of
this Agreement or otherwise limit the rights of Buyer.

 

ARTICLE 8

INDEMNIFICATION

 

8.1 Indemnification by the Sellers. The Sellers, jointly and severally, shall
indemnify and hold harmless Buyer and the respective officers, directors, agents
or Affiliates of Buyer (the “Buyer Indemnified Parties”), from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages (including special and consequential damages), Liabilities, costs and
expenses, including but not limited to reasonable attorneys’ fees (“Losses”),
suffered or incurred by any such party by reason of or arising out of any of the
following:

 

(a) the Retained Liabilities and the Retained Assets;

 

(b) the breach of any representation or warranty of a Seller contained herein or
in any other document or instrument delivered by a Seller pursuant to Sections
6.2(d) and (e) hereto;

 

(c) the non-fulfillment of any covenant or agreement of a Seller contained
herein or any other document or instrument delivered by a Seller pursuant to
Sections 6.2(d) and (e) hereto; and

 

(d) the failure to deliver good, valid and marketable title to any of the
Assets.

 

8.2 Indemnification by Buyer. Buyer shall indemnify and hold harmless the
Sellers, and any of their officers, directors, agents and Affiliates (the
“Seller Indemnified Parties”), at all times after the date hereof from and
against any and all Losses suffered or incurred by any such party by reason of,
or arising out of any of the following:

 

(a) the Assumed Liabilities and the operation by Buyer of the Pharmacy Business
after the Closing;

 

(b) the breach of any representation or warranty contained herein or in any
other document or instrument delivered by Buyer pursuant to Sections 6.3(c) and
(d) hereto in connection herewith ; and

 

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(c) the non-fulfillment of any covenant or agreement of Buyer contained herein
or in any other document or instrument delivered by Buyer pursuant to Sections
6.3(c) and (d) hereto.

 

8.3 Notice and Opportunity to Defend; Third Party Claims.

 

(a) The Buyer Indemnified Party or the Seller Indemnified Party, as applicable
(the “Indemnified Party”), shall promptly notify in writing the indemnifying
party (the “Indemnifying Party”) of any matter giving rise to an obligation to
indemnify, specifying the basis on which indemnification is sought.

 

(b) If the claim for indemnification does not involve a Third Party Claim, the
Indemnifying Party shall have twenty (20) days to object to such claim by
delivery of a written notice of such objection to the Indemnified Party
specifying the basis for such objection. Failure to timely so object shall
constitute a final and binding acceptance by the Indemnifying Party of the claim
and the Indemnifying Party shall pay such claim by wire transfer of immediately
available funds within ten (10) days after such twenty (20) day period or, if
later, the date the amount of such claim is determined.

 

(c) If the claim for indemnification involves a Third Party Claim, such Third
Party Claim shall be subject to the following terms and conditions:

 

(i) The Indemnifying Party shall have thirty (30) days (or such lesser time as
may be necessary to comply with statutory response requirements for litigation
claims) from receipt of the claim (the “Notice Period”) to notify the
Indemnified Party, (x) whether or not the Indemnifying Party disputes its
Liability to the Indemnified Party with respect to such Third Party Claim, and
(y) notwithstanding any such dispute, whether or not the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim.

 

(ii) In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that it desires to defend the Indemnified Party against
such Third Party Claim then, except as hereinafter provided, the Indemnifying
Party shall have the right to defend the Indemnified Party by appropriate
proceedings, which proceedings shall be promptly settled or prosecuted by the
Indemnifying Party to a final conclusion in such a manner as to minimize the
risk of the Indemnified Party becoming subject to Liability for any significant
matter. If the Indemnified Party desires to participate in, but not control, any
such defense or settlement, it may do so at its sole cost and expense. If in the
reasonable opinion of this Indemnified Party, any such Third Party Claim or the
litigation or resolution of any such Third Party Claim involves an issue or
matter which could have a material adverse effect on the Indemnified Party,
including, without limitation, the administration of the Tax Returns of the
Indemnified Party or a dispute with a significant customer or supplier of the
Business, then the Indemnified Party shall have the right to control the defense
or settlement of any such claim or demand and its reasonable costs and expenses
shall be included as part of the indemnification obligation of the Indemnifying
Party. If the Indemnified Party should elect to exercise such right, the
Indemnifying Party shall have the right to participate in, but not control, the
defense or settlement of such claim at its sole cost and expense.

 

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(iii) Except where the Indemnifying Party disputes its Liability in a timely
manner under this Section 8.3(c), the Indemnifying Party shall be conclusively
liable for the amount of any Loss resulting from such claim or defense which is
unsuccessful.

 

(iv) The Indemnified Party and the Indemnifying Party shall cooperate with each
other in all reasonable respects in connection with the defense of any Third
Party Claim, including making available records relating to such claim and
management employees as may be reasonably necessary for the preparation of the
defense of any such claim or for testimony as witness in any proceeding relating
to such Third Party Claim.

 

(v) No settlement of a Third Party Claim shall be made without the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed.

 

8.4 Survival of Representations and Warranties. The representations and
warranties of the Parties hereto contained herein shall survive the Closing and
shall remain in full force and effect until the first (1st) anniversary of the
Closing Date; except that (i) each representation or warranty set forth in
Sections 2.1, 2.2, 2.16 and 2.19 shall remain in full force and effect until the
expiration of the applicable statute of limitations period for any claim related
thereto, (ii) each representation or warranty set forth in Sections 2.12, 2.20,
2.21, 2.22, 2.23, 2.26 and 2.29 shall remain in full force and effect until the
third (3rd) anniversary of the Closing Date and (iii) the representations and
warranties set forth in Sections 2.6(b), 2.7 and 2.30 shall remain in full force
and effect until the earlier of (i) March 31, 2007, or (ii) the completion and
delivery of the Medco Health Solutions, Inc. audited financial statements as of
and for the year ended December 31, 2006. Any right of indemnification pursuant
to this Article 8 with respect to a claimed breach of a representation or
warranty shall expire at the date of termination of the representation or
warranty claimed to be breached except that the Indemnifying Party shall
continue to be responsible after such date for those specific claims and losses
of which they have received notice required by this Section prior to the end of
the survival periods referred to herein. The representations, warranties,
covenants and agreements herein shall not be affected or deemed waived by reason
of the fact that the other Party or its representatives should have known that
any such representations, warranties, covenants or agreements are or might be
inaccurate in any respect. Except as set forth in this Agreement, any furnishing
of information to a Party by the other Party, pursuant to, or otherwise in
connection with, this Agreement shall not waive a Party’s right to rely on any
representation, warranty, covenant or agreement made by the other Party.

 

8.5 Indemnification Limitations. Buyer on the one hand and the Sellers on the
other hand may recover under indemnification claims under Sections 8.1(b) and
8.2(b), respectively, (a) only to the extent such Party’s claims in the
aggregate have exceeded Seven Hundred and Fifty Thousand Dollars ($750,000) (the
“Threshold Amount”) and (b) only up to (i) an aggregate indemnified amount of
Fifteen Million Dollars ($15,000,000) (the “Buyer Cap”) for claims under
Section 8.2(b), (ii) an aggregate amount of Twenty Million Dollars ($20,000,000)
(the “Healthcare Cap”) for claims arising under Section 8.1(b) with respect to
breaches by the Sellers of Sections 2.20, 2.21, 2.22. 2.23, 2.26 and 2.29 (the
“Healthcare Claims”) and (iii) an aggregate amount of Fifteen Million Dollars
($15,000,000) (the “General Sellers Cap”) with respect to all other claims
arising under Section 8.1(b) (the “General Buyer Claims”). After the aggregate
of all such Losses suffered or incurred by the Indemnified Party exceeds the
Threshold Amount, the Indemnifying Party shall be obligated to indemnify the
Indemnified Party for all such Losses that are in excess of the Threshold
Amount; provided that the Threshold Amount shall not be counted as a claim
applying against the Buyer Cap, the General Sellers Cap or the Healthcare Cap,
as applicable.

 

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Any indemnity amounts paid by the Sellers for the General Buyer Claims shall
reduce the amount of the Healthcare Cap on a dollar-for-dollar basis and any
indemnity amounts paid by the Sellers for Healthcare Claims shall reduce the
amount of the General Sellers Cap on a dollar-for-dollar basis. This Section 8.5
shall not apply to fraud or to any intentional breach of any representation or
warranty. No adjustment to the Purchase Price in accordance with Section 1.3
shall apply towards the Threshold Amount, the General Sellers Cap or the
Healthcare Cap.

 

8.6 [Intentionally Blank]

 

8.7 Exclusive Remedy. From and after the Closing, the rights of the Sellers on
the one hand, and Buyer on the other hand, under the indemnification rights
provided in this Section 8 shall be the exclusive remedy of these parties
pursuant to this Agreement with respect to any dispute arising out of or related
to this Agreement, except for (a) the right to seek specific performance of any
of the agreements contained herein, or (b) in any case where one Party has been
guilty of fraud in connection with this transaction, or (c) as set forth in
Section 8.5 hereof. No provision contained in this Article 8 shall apply to a
breach of the terms of any Acquisition Document other than this Agreement, and
the parties to the Acquisition Documents other than this Agreement shall have
all rights and remedies provided to them by Law or equity without limitation.
The provisions of this Section 8.7 shall not in any way limit (i) the rights of
the Parties to take any actions permitted by this Agreement prior to Closing
(including, without limitation, rights of termination and payment of fees and
expenses), or (ii) the right of any Indemnified Party to support its claim for
indemnification under this Article 8 based on more than one provision of this
Agreement.

 

8.8 Indemnification Security. The indemnification obligations of the Sellers
under this Article 8 shall be binding on successors and assigns of Parent and
its Subsidiaries. In the event that Parent or its Subsidiaries enter into a
transaction or series of transactions at any time after the date of this
Agreement but prior to the expiration of all indemnification obligations under
this Agreement to sell a material portion of Parent’s and its Subsidiaries’
remaining business other than in the ordinary course of business, then, as a
condition to the closing of such transaction or transactions, the buyer shall
agree to be subject to and bound by the Sellers’ indemnification obligations
contained in this Article 8.

 

ARTICLE 9

EMPLOYEE MATTERS

 

9.1(a) Employees. The Sellers shall be responsible for the payment of all earned
but unpaid salaries, bonus, commissions, severance pay and other like
obligations and payments to the Business Employees for all periods ending on and
prior to the Closing Date. Buyer shall be responsible for the payment of all
earned but unpaid personal, holiday and sick pay obligations of any Seller with
respect to the Transferring Employees for all periods ending on and prior to the
Closing Date and set forth on Schedule 9.1(b)(iv). The Sellers shall be
responsible for the payment of any amounts due to its employees pursuant to the
employee benefit plans of the Sellers. In determining bonuses and other similar
payments due to such employees for any period ended on or prior to the Closing,
the Sellers shall, if payment thereof will occur after the Closing, waive any
requirement that such employees be employees of a Seller on the date such
bonuses or other similar payments are paid. The Sellers shall be responsible for
all incurred but unreported or

 

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unpaid medical claims occurring prior to the Closing and for the cost associated
with confinement in any medical care, nursing, rehabilitation or similar
facility which commences prior to the Closing. The Sellers shall be responsible
for (a) all Liabilities arising under the employee benefit plans of the Sellers
or ERISA Affiliate of a Seller or (b) Liabilities associated with any leaves
taken prior to the Closing Date in connection with the Family and Medical Leave
Act of 1993. Effective at the Closing, the Sellers (i) shall assign to Buyer any
confidentiality agreement previously entered into between the Sellers and such
employees related to the Pharmacy Business, and (ii) hereby do, release all
employees of the Pharmacy Business from any employment and, to the extent such
confidentiality agreement is not assignable, confidentiality agreement
previously entered into between the Sellers and such employees relating to the
Pharmacy Business to the extent (but only to the extent) necessary for Buyer to
operate the Pharmacy Business in the same manner as operated by the Sellers
prior to the Closing Date. No Seller shall release any employee from any
confidentiality agreement executed by such employee in favor of third parties
relating to receipt of confidential information in connection with potential
business acquisitions.

 

(b) Employee Transition. (i) Effective as of the Closing, each of the Business
Employees (other than those pharmacists specifically referenced in the
Transition Services Agreement who shall remain employed by Sellers during the
term of the Transition Services Agreement and shall upon termination of the
Transition Services Agreement or the earlier request of Buyer become employees
of Buyer with all rights of the Transferring Employees under this Agreement)
shall cease to be an employee of the Sellers and Buyer shall offer employment to
each such Business Employee. The Sellers hereby consent to the hiring of such
employees by Buyer and waive, with respect to the employment by Buyer of such
employees, any claims or rights the Sellers may have against Buyer or any such
employee under any non-competition, or employment agreement to the extent those
agreements would preclude such employment by Buyer or limit the ability of such
employee to perform services on Buyer’s behalf. All such employees who accept
Buyer’s offer of employment and actually perform services for Buyer on or after
the Closing Date are hereinafter referred to as the “Transferring Employees.”

 

(ii) Buyer shall use its commercially reasonable efforts to provide compensation
and benefits to the Transferring Employees comparable in the aggregate to those
of similarly situated employees of Buyer. With respect to Buyer’s employee
benefit plans, Buyer shall use its commercially reasonable efforts to cause the
Transferring Employees to receive credit for their service with the Sellers as
of the Closing Date for purposes of eligibility, vesting, contributions, and
entitlement to benefits, but shall receive no service credit earned with respect
to any severance plan, policy or arrangement adopted by Sellers, if any.

 

(iii) With respect to each welfare plan of Buyer in which the Transferring
Employees become participants, Buyer shall make commercially reasonable efforts
to: give effect, in determining any deductible and maximum out-of-pocket
limitations for the current year, to claims incurred and amounts paid by the
Transferring Employees under similar plans maintained by the Sellers immediately
prior to the Closing.

 

(iv) Buyer shall assume and provide to the Transferring Employees the equivalent
number of vacation, personal and sick days accrued by the Transferring Employees
pursuant to Sellers’ policies but remaining unused as of the Closing Date set
forth on Schedule 9.1(b)(iv), and shall communicate to the Transferring
Employees that such vacation, personal and sick days will be provided.

 

9.2 Sellers’ Benefit Plans. Buyer shall assume no Liability with respect to and
Buyer shall not become the sponsor of any employee benefit plan or arrangement
of any type whatsoever

 

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maintained by or contributed to by any Seller or any ERISA Affiliate of any
Seller. The Sellers shall be responsible for complying with the requirements of
Code Section 4980B and Part 6 of Title 1 of ERISA for Business Employees
(whether or not such employees are hired by Buyer) and their “qualified
beneficiaries” who experience a “qualifying event” prior to or on the Closing
Date or as a result of the Closing (as such terms are defined in Code
Section 4980B) and lose coverage under a Seller Welfare Plan. Each Seller will,
at its or one of its Affiliate’s expense, cause all applicable employer matching
contributions to be made to the accounts of all Business Employees under the
Sellers’ Code Section 401(k) plan for that portion of the plan year during which
such Business Employee was eligible to receive an employer matching
contribution, without regard to any requirement that such employee be employed
on any particular date or earn any minimum number of hours of service to receive
such contribution. The Sellers shall cause all Business Employees to become
fully vested as of the Closing Date in their accounts under the Sellers’ Code
401(k) plan. To the extent permitted by, and in accordance with, the provisions
of the Sellers’ Code Section 401(k) plan, the Code and ERISA, the Sellers will
provide for distribution under such plan to each Business Employee by reason of
the termination of employment of such employee from any Seller. Notwithstanding
anything to the contrary in this Agreement, Buyer shall assume no responsibility
or liability for any severance obligations arising under any severance policy,
plan, guidelines or statements that were adopted, written, prepared by or
otherwise implemented by Parent or Sellers.

 

9.3 Employee Files. To the extent permitted by Law, on the Closing Date, or as
soon as practicable thereafter, the Sellers shall deliver to a designee of Buyer
a copy of all historical personnel and medical records of each of the Business
Employees hired by Buyer, including, but not limited to, employment agreements,
confidentiality and noncompete agreements, employment applications, corrective
action reports, disciplinary reports, notices of transfer, notices of rate
changes, other similar documents and all medical records. Buyer shall be
responsible for any unlawful use or disclosure by it of any such personal or
medical records,

 

9.4 Non-Solicitation. The Sellers shall terminate effective as of the Closing
all employment agreements they have with any of the Business Employees. Until
the expiration of two (2) years after the Closing, no Seller shall directly or
indirectly solicit or offer employment to any Business Employee who is then an
employee of Buyer, or who has terminated such employment without the consent of
Buyer within one (1) year of such solicitation or offer.

 

9.5 WARN Act. To the extent that any obligations under the WARN Act or any
similar provision of Law (“WARN Obligations”) arise as a consequence of the
transactions contemplated by this Agreement, it is agreed that the Sellers shall
be responsible for any WARN Obligations arising as a result of any employment
losses from the Sellers occurring prior to the Closing Date, except to the
extent that such WARN Obligations are the result of the offers of employment
made by Buyer to the Business Employees which WARN Obligations shall be the
responsibility of Buyer, and Buyer shall be responsible for any WARN Obligations
arising as a result of any employment losses occurring upon or following the
Closing Date.

 

9.6 Retained Liabilities and Assumed Liabilities. All amounts under this Article
9 which the Sellers are specifically responsible for shall constitute Retained
Liabilities, and all amounts under this Article 9 which Buyer is specifically
responsible for shall constitute Assumed Liabilities.

 

9.7 Termination Bonus Plan. Buyer shall establish and maintain a termination
bonus plan (the “Termination Plan”) with respect to the Exhibit 9.7 Employees
(hereinafter defined) for the period beginning on the Closing Date and ending on
the six (6)-month anniversary thereof (the

 

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“Termination Period”). The Termination Plan shall provide each Transferring
Employee identified on Exhibit 9.7 (as such exhibit is updated through the
Closing Date and a final such exhibit is delivered at the Closing (“Closing
Exhibit 9.7”)) whose employment with Buyer and its affiliates is terminated
(other than as a result of an employee’s voluntary termination of employment)
during the Termination Period with termination bonus pay. Those Transferring
Employees so identified on Closing Exhibit 9.7 are referred to as the “Exhibit
9.7 Employees”. Parent represents that the Exhibit 9.7 Employees will be all
Transferring Employees other than those identified as “Casual” or “Part-time”
and other than those management employees who executed agreements in the form of
Exhibits B-1 through B-4. Payments under the Termination Plan shall be in the
amounts provided on Closing Exhibit 9.7 which have been calculated using the
payment calculation formula set forth on Exhibit 9.7. Payments under the
Termination Plan shall be conditioned upon the execution by the Transferring
Employee of a general release of claims in a form determined by Buyer. Parent
has agreed to reimburse Buyer for payments made by Buyer and its affiliates
under the Termination Plan to Exhibit 9.7 Employees terminated during the
Termination Period. No later than twenty (20) days after each of the ninety
(90) day anniversary of the Closing Date (the “First 90-Day Period”) and the
period beginning ninety-one (91) days after the Closing Date and ending on the
six (6)-month anniversary thereof (the “Second 90-Day Period”), Buyer shall
provide Parent written notice of the termination of Exhibit 9.7 Employees whose
employment terminated during the First 90-Day Period and the Second 90-Day
Period, as applicable (other than as a result of the Employee’s voluntary
termination of Employment) (the “Termination Notices”). The Termination Notices
shall include the aggregate amount of termination payments under the Termination
Plan to the terminated Exhibit 9.7 Employees during the First 90-Day Period and
the Second 90-Day Period, as applicable. Parent covenants and agrees that,
within five (5) business days of its receipt of each of the Termination Notices,
it shall make a cash payment by wire transfer of immediately available funds to
such account as Buyer shall designate in the Termination Notices in the amount
of the termination payments set forth in the Termination Notices. No amounts
shall be payable under the Termination Plan to any Exhibit 9.7 Employee whose
employment terminates after the end of the Termination Period. Parent and Buyer
each acknowledge and agree that Buyer’s only responsibilities under this
Section 9.7 are for the establishment and administration of the Termination
Plan. Parent shall be liable for all amounts paid under the Termination Plan
during the Termination Period. Neither Parent’s obligations nor Buyer’s payments
under this Section 9.7 shall be included in the Threshold Amount provided for in
Section 8.5 hereof.

 

ARTICLE 10

CERTAIN DEFINITIONS

 

10.1 Definitions.

 

(a) Except as otherwise provided herein, the capitalized terms set forth below
shall have the following meanings:

 

“Acquisition Documents” shall mean this Agreement the Schedules to this
Agreement and the other documents required to be delivered pursuant to Article 6
of this Agreement.

 

“Affiliate” of a party shall mean: (i) any other Person directly, or indirectly
through one or more intermediaries, controlling, controlled by or under common
control with such party; (ii) any officer, director, partner, employer or direct
or indirect beneficial owner of any ten

 

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percent (10%) or greater equity or voting interest of such party; or (iii) any
other Person for which a Person described in clause (ii) above acts in any such
capacity. For purposes of the foregoing, “control” shall have the meaning
provided by Rule 405 of the Securities Act, or any successor rule thereto.

 

“Agreement” shall mean this Asset Purchase Agreement, including the Exhibits and
Schedules delivered pursuant hereto and incorporated herein by reference.

 

“Asset Value” shall mean the book value of the acquired accounts receivable (net
of allowance for doubtful accounts), inventory and property, plant and equipment
(net of accumulated depreciation and amortization) for the Pharmacy Business as
shown on the Estimated Asset Value Statement and Actual Asset Value Statement,
as applicable, determined in accordance with generally accepted accounting
principles.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.

 

“Consent” shall mean any consent, approval, authorization, clearance, exemption,
waiver of or similar affirmation by any Person pursuant to any contract or
agreement, Law, Order or permit.

 

“DGCL” shall mean the Delaware General Corporation Law.

 

“Environmental Laws” means all Laws relating to pollution or protection of human
health or the environment (including ambient air, surface water, groundwater,
land surface, or subsurface strata), including, without limitation (i) the
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
§§9601 et seq. (“CERCLA”); (ii) the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. §§6901 et seq.,
(“RCRA”); (iii) the Emergency Planning and Community Right to Know Act (42
U.S.C. §§11001 et seq.); (iv) the Clean Air Act (42 U.S.C. §§ 7401 et seq.);
(v) the Clean Water Act (33 U.S.C. §§1251 et seq.); (vi) the Toxic Substances
Control Act (15 U.S.C. §§2601 et seq.); (vii) the Hazardous Materials
Transportation Act (49 U.S.C. §§ 5101 et seq.); (viii) the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. §§136 et seq.); (ix) the Safe Drinking
Water Act (41 U.S.C. §§300f et seq.); (x) any state, county, municipal or local
statutes, laws or ordinances similar or analogous to the federal statutes listed
in parts (i) - (ix) of this subparagraph; (xi) any amendments to the statutes,
laws or ordinances listed in parts (i) - (x) of this subparagraph, regardless of
whether in existence on the date hereof; (xii) any rules, regulations,
guidelines, directives, orders or the like adopted pursuant to or implementing
the statutes, laws, ordinances and amendments listed in parts (i) - (xi) of this
subparagraph; and (xiii) any other law, statute, ordinance, amendment, rule,
regulation, guideline, directive, order or the like in effect now or in the
future relating to environmental, health or safety matters.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

 

“ERISA Affiliate” shall mean, with respect to any entity, any other entity,
which, together with such entity, would be treated as a single employer
(i) under Section 414(b) or (c) of the Code or (ii) for purposes of any Benefit
Plan subject to Title IV of ERISA, under Section 414(b), (c), (m) or (o) of the
Code.

 

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“Exhibits” shall mean the Exhibits so marked, copies of which are attached to
this Agreement. Such Exhibits are hereby incorporated by reference herein and
made a part hereof, and may be referred to in this Agreement and any other
related instrument or document without being attached hereto.

 

“Hazardous Material” means any chemical, substance, waste, material, pollutant,
contaminant, equipment or fixture defined as or deemed hazardous or toxic or
otherwise regulated under any Environmental Law, including, without limitation,
RCRA hazardous wastes, CERCLA hazardous substances, pesticides and other
agricultural chemicals, oil and petroleum products or byproducts and any
constituents thereof, asbestos and asbestos-containing materials, and
polychlorinated biphenyls (PCBs).

 

“HSR Act” means Section 7A of the Clayton Act, as added by Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder.

 

“IRS” means the Internal Revenue Service.

 

“Knowledge” as used with respect to a Person (including references to such
Person being aware of a particular matter) shall mean those facts which are
known or should reasonably have been known after due inquiry by the chairman,
president, chief financial officer, chief accounting officer, chief operating
officer, general counsel, any assistant or deputy general counsel, compliance
officer, any senior or executive or other vice president of such Person.
“Knowledge” of the Sellers shall mean Knowledge of any one Seller.

 

“Law” shall mean any code, law, ordinance, regulation, reporting or licensing
requirement, rule, or statute applicable to a person or its assets, Liabilities
or business, including those promulgated, interpreted or enforced by any
Regulatory Authority.

 

“Liability” shall mean any direct or indirect, primary or secondary, liability,
indebtedness, obligation, penalty, cost or expense (including costs of
investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.

 

“Lien” means any lien, mortgage, pledge, reservation, option, right of first
refusal, restriction, security interest, title retention, or other security
arrangement, conditional sale agreement, default of title, easement,
encroachment, encumbrance, hypothecation, infringement or any adverse right or
interest, charge, or claim of any nature whatsoever of, on, or with respect to
any property or property interest, other than Liens for current property Taxes
not yet due and payable.

 

“Litigation” means any action, arbitration, cause of action, lawsuit, claim,
complaint, criminal prosecution, governmental or other examination,
investigation or inquiry (whether formal or informal), audit (other than regular
audits of financial statements by outside auditors), compliance review,
inspection, hearing, administrative or other proceeding relating to or affecting
a Party, its business, its records, its policies, its practices, its compliance
with Law, its actions, its assets (including contracts related to it), or the
transactions contemplated by this Agreement.

 

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“Open Customer Orders” shall mean prescription orders from patients served by
the Pharmacy Business that have been received by a Seller but not filled by a
Seller prior to the Closing Date, a list of which shall be provided to Buyer at
the Closing, and which shall be limited to orders (i) received by a Seller in
the ordinary course of business consistent with past practices (with prices no
less favorable than customarily obtained for similar prescriptions), (ii) comply
with Buyer’s credit policies and procedures and (iii) are otherwise acceptable
to Buyer.

 

“Order” shall mean any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling or writ of any
federal, state, local or foreign or other court, arbitrator, mediator, tribunal,
administrative agency, or Regulatory Authority.

 

“Ordered Inventory” shall mean purchase orders by a Seller made prior to the
Closing Date to acquire prescription drugs for resale in the Pharmacy Business
(and which are therefore not included among the Inventory), a list of which
shall be provided to Buyer at Closing and which shall be limited to orders in
the ordinary course of business consistent with past practices and not in excess
of normal, ordinary and usual requirements of the Pharmacy Business, and not at
prices in excess of prices normally and customarily paid by a Seller for similar
prescription drugs, and which shall not in any event exceed One Million Dollars
($1,000,000) in the aggregate.

 

“Party” means Buyer, on the one hand, and the Sellers, on the other hand, and
“Parties” means the Sellers and Buyer.

 

“Pensacola Pharmacy Business” shall mean the pharmacy business operated by the
Sellers prior to the date hereof which is located at 1300 N. Palafox Street,
Suite 105, Pensacola, Florida 32501-2641.

 

“Permitted Liens” shall mean (i) Liens for current taxes or assessment that are
not yet due and payable and that were incurred in the ordinary course of
business; (ii) builder, mechanic, warehouseman, materialmen, contractor liens
and other similar Liens imposed by law arising in the ordinary course of
business, in each case for obligations which are not yet due and payable; and
(iii) all Liens set forth on Schedule 10.1(a).

 

“Person” shall mean a natural person or any legal, commercial or governmental
entity, such as, but not limited to, a corporation, general partnership, joint
venture, limited partnership, limited liability company, trust, business
association, group acting in concert, or any person acting in a representative
capacity.

 

“Pharmacy Business” or “Business” shall mean the business of the Sellers that is
identified as Parent’s pharmacy segment in the Parent’s Form 10-Q filed with the
SEC for the quarterly period ended June 30, 2005, excluding the Pensacola
Pharmacy Business, but including the accounts receivable, inventory and patient
lists of the Pensacola Pharmacy Business which are not related to the unit dose
pharmacy business portion of the Pensacola Pharmacy Business.

 

“Regulatory Authorities” shall mean, collectively, all federal and state
regulatory agencies having jurisdiction over the Parties and their respective
Subsidiaries.

 

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“Restrictive Covenant Agreement” shall mean the restrictive covenant agreement
by and between Buyer and each of the Sellers.

 

“Retained Shared Assets” shall mean (i) all tangible personal property which is
currently used or held for use jointly by the Pharmacy Business and the other
business segments of the Sellers, including all furniture, machinery, office
furnishings, equipment and all office and warehouse supplies existing on the
Closing Date and (ii) all of the other assets set forth on Schedule 10.1(b)
which are currently used or held for use jointly by the Pharmacy Business and
the other business segments of the Sellers.

 

“Seller Material Adverse Effect” shall mean an event, change or occurrence
which, individually or together with any other event, change or occurrence, has
had or is reasonably likely to have a material adverse impact on (i) the Assets
or on the financial position, business, or results of operations of the Pharmacy
Business, or (ii) the ability of any Seller to perform its obligations under
this Agreement or to consummate the Acquisition or the other transactions
contemplated by this Agreement.

 

“Subsidiaries” shall mean all those corporations, associations, or other
business entities of which the entity in question either (i) owns or controls
fifty percent (50%) or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which fifty percent
(50%) or more of the outstanding equity securities is owned directly or
indirectly by its parent (provided, there shall not be included any such entity
the equity securities of which are owned or controlled in a fiduciary capacity),
(ii) in the case of partnerships, serves as a general partner, (iii) in the case
of limited liability companies, serves as a managing member, or (iv) otherwise
has the ability to elect a majority of the directors, trustees, managing members
or managers thereof.

 

“Taxes” shall mean any federal, state, county, local, or foreign tax, charge,
fee, levy, impost, duty, or other assessment, including income, gross receipts,
excise, employment, sales, use, transfer, recording, license, payroll,
franchise, severance, documentary, stamp, occupation, windfall profits,
environmental, highway use, commercial rent, customs duty, capital stock,
paid-up capital, profits, withholding, Social Security, single business,
unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
any governmental authority, including any estimated payments relating thereto,
any interest, penalties, and additions imposed thereon or with respect thereto,
and including liability for taxes of another person under Treas. Reg.
Section 1.1502-6 or similar provision of state, local or foreign law, as a
transferee or successor, by contract or otherwise.

 

“Tax Return” means any return, filing, questionnaire, information return or
other document required to be filed, including requests for extensions of time,
filings made with estimated tax payments, claims for refund and amended returns
that may be filed, for any period with any taxing authority (whether domestic or
foreign) in connection with any Tax (whether or not a payment is required to be
made with respect to such filing).

 

“Third Party Claim” shall mean any Litigation threatened or instituted against
an Indemnified Party by anyone not a Party to this Agreement which would be a
matter for which the Indemnified Party is entitled to indemnification under
Article 8 of this Agreement.

 

“WARN Act” shall mean the Worker Adjustment and Retraining Notification Act, as
amended.

 

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(b) In addition to the terms defined in Section 10.1(a) above, the terms set
forth below shall have the meanings ascribed thereto in the referenced sections:

 

Acquired Shared Assets – Section 1.1(m)

Acquisition – Preamble

Acquisition Proposal – Section 4.16(c)(i)

Actual Asset Value Statement - Section 1.3(b)

Aggregate Consideration — Section 1.2(a)

Agreement – Preamble

Allocable Consideration - Section 1.8

Allocation Schedule - Section 1.8

Antitrust Laws - Section 4.1(a)

Assets – Section 1.1

Asset Value Adjustment Amount – Section 1.3(a)

Assigned Contracts – Section 1.1(d)

Assigned Leases - Section 1.1(c)

Assumed Liabilities - Section 1.6

Assignment and Assumption Agreements - Section 6.2(e)(ii)

Business Employees - Section 2.15(a)

Business Financial Statements - Section 2.7(a)

Buyer – Preamble

Buyer Cap- Section 8.5

Buyer Indemnified Parties - Section 8.1

Buyer Payment – Section 1.3(b)

Closing – Section 1.7

Closing Date – Section 1.7

Closing Exhibit 9.7 – Section 9.7

Compensation Programs - Section 2.16(c)

Confidentiality Agreement - Section 4.5(a)

Conveyance Documents - Section 6.2(e)(i)

Deferred Contracts - Section 1.10

DOJ - Section 4.1(a)

End Date - Section 7.1(b)

Environmental Permits – Section 2.18(d)

Estimated Asset Value Statement - Section 1.3(a)

Exchange Act - Section 2.6(a)

Exhibit 9.7 Employees – Section 9.7

Facilities - Section 2.13(a)

First 90-Day Period – Section 9.7

FTC - Section 4.1(a)

General Sellers Cap- Section 8.5

General Buyer Claims- Section 8.5

Government Programs - Section 2.20(a)

Group- Section 4.16(c)(i)

  

Healthcare Cap- Section 8.5

Healthcare Claims- Section 8.5

HIPAA – Section 2.23

Indemnified Party – Section 8.3(a)

Indemnifying Party - Section 8.3(a)

Income Statements - Section 2.7(a)

Inventory - Section 1.1(j)

Losses - Section 8.1

Medicare and Medicaid programs – Section 2.20(a)

Notice Period – Section 8.3(c)(i)

Parent – Preamble

Parent Financial Statements - Section 2.6(b)

Parent Payment - Section 1.3(b)

Parent SEC Reports - Section 2.6(a)

Pensacola Assumed Assets – Section 1.1(n)

Pension Plans – Section 2.16(a)

Permitted Acquisition Proposal – Section 4.16(c)(ii)

Private Programs – Section 2.20(a)

Purchase Price – Section 1.2(a)

Remuneration – Section 2.22(a)

Retained Assets – Section 1.4

Retained Liabilities – Section 1.5

Revised Allocation Schedule - Section 1.8

SEC - Section 2.6(a)

Second 90-Day Period – Section 9.7

Securities Act - Section 2.6(a)

Sellers – Preamble

Seller Agreements – Section 2.14(a)

Seller Indemnified Parties – Section 8.2

Statements of Assets - Section 2.7(a)

Termination Notices – Section 9.7

Termination Period – Section 9.7

Termination Plan – Section 9.7

Third Party Evaluator – Section 1.2(b)(ii)

Threshold Amount - Section 8.5

Transferring Employees- Section 9.1(b)

Transition Agreement – Section 4.12

Transfer Taxes – Section 1.5(g)

WARN Obligations – Section 9.5

Welfare Plans – Section 2.16(b)

 

(c) Any singular term in this Agreement shall be deemed to include the plural,
and any plural term the singular. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed followed by the
words “without limitation.” The terms Parent, Buyer and the Sellers shall be
deemed to include their respective Subsidiaries where the context requires but
such term is not provided.

 

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ARTICLE 11

MISCELLANEOUS PROVISIONS

 

11.1 Notices.

 

(a) Any notice sent in accordance with the provisions of this Section 11.1 shall
be deemed to have been received (even if delivery is refused or unclaimed) on
the date which is: (i) the third day following the date of proper posting, if
sent by certified U.S. mail or by Express U.S. mail or private overnight
courier; or (ii) the date on which sent, if sent by facsimile transmission, with
confirmation and with the original to be sent by certified U.S. mail, addressed
as follows:

 

If to the Sellers:    Pediatric Services of America, Inc.      310 Technology
Parkway      Norcross, Georgia 30092-2929      Attention: James M. McNeill     
Telecopy Number: (770) 248-8192 Copy to Counsel:    McKenna Long & Aldridge LLP
     303 Peachtree Street, Suite 5300      Atlanta, Georgia 30308     
Attention: Thomas Wardell, Esq.      Telecopy Number: (404) 527-4198 If to
Buyer:    Accredo Health Group, Inc.      1640 Century Center Parkway     
Memphis, Tennessee 38134      Attention: David D. Stevens      Telecopy Number:
(901) 385-3689 Copy to Counsel:    Alston & Bird LLP      One Atlantic Center  
   1201 W. Peachtree Street      Atlanta, Georgia 30309      Attention: Steven
L. Pottle, Esq.      Telecopy Number: (404) 881-7777

 

(b) Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 11.1.

 

11.2 Further Assurances. Each party covenants that at any time, and from time to
time, after the Closing, it will execute such additional instruments and take
such actions as may be reasonably requested by the other parties to confirm or
perfect or otherwise to carry out the intent and purposes of this Agreement.

 

11.3 Waiver. Each Party has the right to waive any default in the performance of
any term of this Agreement by the other Party, to waive or extend the time for
compliance or fulfillment by the other Party of any of its obligations under
this Agreement, and to waive any of the conditions precedent to the obligations
of such Party under this Agreement except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of Buyer or the Sellers,
as applicable.

 

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11.4 Assignment. This Agreement shall not be assignable by either of the Parties
hereto without the written consent of the other Party; provided, however, that
Buyer may assign its rights and obligations under this Agreement, in whole or in
part, without the consent of the Sellers to any direct or indirect subsidiary or
affiliate of Buyer or to any party that acquires substantially all of the assets
or stock of Buyer or any successor entity resulting from a merger or
consolidation of or with Buyer. No such assignment shall relieve Buyer of its
obligations hereunder.

 

11.5 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
executors, administrators, successors and assigns. This Agreement shall survive
the Closing and not be merged therein.

 

11.6 Headings. The section and other headings in this Agreement are inserted
solely as a matter of convenience and for reference, and are not a part of this
Agreement.

 

11.7 Entire Agreement. All Schedules and Exhibits attached to this Agreement are
by reference made a part hereof. This Agreement and the Exhibits, Schedules,
certificates and other documents delivered pursuant hereto or incorporated
herein by reference, contain and constitute the entire agreement among the
parties and supersede and cancel any prior agreements, representations,
warranties, or communications, whether oral or written, among the parties
relating to the transactions contemplated by this Agreement. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought.

 

11.8 Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Delaware, without regard
to any applicable conflicts of Laws. The provisions of this Agreement are
severable and the invalidity of one or more of the provisions herein shall not
have any effect upon the validity or enforceability of any other provision.

 

11.9 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

11.10 Brokers. The Sellers shall indemnify, hold harmless and defend Buyer and
its Affiliates, and Buyer shall indemnify, hold harmless and defend the Sellers
and their Affiliates from and against the payment of any and all broker’s and
finder’s expenses, commissions, fees or other forms of compensation which may be
due or payable from or by the indemnifying party, or which may have been earned
by any third party acting on behalf of the indemnifying party in connection with
the negotiation, execution and consummation of the transactions contemplated
hereby. For the avoidance of doubt, the Parties acknowledge and agree that the
indemnification limitations set forth in Section 8.5 shall not apply to a breach
of this Section 11.10.

 

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11.11 No Intention to Benefit Third Parties. Nothing in this Agreement is
intended to and shall not benefit any Person other than the parties hereto
create any third party beneficiary right in any such other Person.

 

[Signatures Begin on Next Page]

 

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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
on its behalf and its corporate seal to be hereunto affixed and attested by
officers thereunto as of the day and year first above written.

 

BUYER:  

ACCREDO HEALTH GROUP, INC.,

a Delaware corporation

   

By:

 

/s/ Thomas M. Moriarty

--------------------------------------------------------------------------------

   

Name:

 

Thomas M. Moriarty

--------------------------------------------------------------------------------

   

Title:

 

Senior Vice President

--------------------------------------------------------------------------------

PARENT:  

PEDIATRIC SERVICES OF AMERICA, INC.,

a Delaware corporation

   

By:

 

/s/ Daniel J. Kohl

--------------------------------------------------------------------------------

   

Name:

 

Daniel J. Kohl

--------------------------------------------------------------------------------

   

Title:

 

Chief Executive Officer

--------------------------------------------------------------------------------

SELLERS:  

PEDIATRIC SERVICES OF AMERICA, INC.,

a Georgia corporation

   

By:

 

/s/ Daniel J. Kohl

--------------------------------------------------------------------------------

   

Name:

 

Daniel J. Kohl

--------------------------------------------------------------------------------

   

Title:

 

Chief Executive Officer

--------------------------------------------------------------------------------

   

PSA CAPITAL CORPORATION,

a Delaware corporation

   

By:

 

/s/ Daniel J. Kohl

--------------------------------------------------------------------------------

   

Name:

 

Daniel J. Kohl

--------------------------------------------------------------------------------

   

Title:

 

Chief Executive Officer

--------------------------------------------------------------------------------

 

[Signature Page to Asset Purchase Agreement]

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SCHEDULES

 

1.1(a)  

Tangible Personal Property

1.1(c)  

Leases

1.1(d)  

Assigned Contracts

1.1(f)  

Intangible Assets

1.1(j)  

Inventory

1.1(m)  

Acquired Shared Assets

1.4(ix)  

Manufacturing and Miscellaneous Contracts

1.4(x)  

Other Retained Assets

2.1  

Organization, Authority and Capacity

2.3  

Absence of Conflicting Agreements or Required Consents

2.5(a)  

Ownership Interest

2.5(b)  

Recent Dispositions

2.7(a)  

Financial Statements

2.7(c)  

Creditors

2.8  

Absence of Changes

2.9  

Liabilities

2.10  

Litigation

2.11  

No Violation of Law

2.12(a)  

Title to Assets

2.12(c)  

Necessary Services

2.13(a)  

Leased Real Property

2.13(b)  

Ordinances and Regulations

2.13(c)  

Continuation of Business by Buyer

2.13(d)  

Intellectual Property

2.14(a)  

Seller Agreements

2.14(b)  

Validity of Seller Agreements

2.15(a)  

Business Employees

2.16(a)  

Pension Plans

2.16(b)  

Welfare Plans

2.16(c)  

Compensation Programs

2.17  

Insurance

2.18(a)  

Environmental Matters

2.18(b)  

Hazardous Material

2.18(c)  

Claims Regarding Hazardous Material

2.18(d)  

Environmental Permits

2.19(a)  

Tax Returns

2.19(b)  

Tax Audits

2.19(c)  

Withholding

2.19(d)  

Tax Reserve

2.19(e)  

Tax Allocation

2.20(a)(i)  

Licenses, Accreditations, Permits and Certificates

2.20(a)(ii)  

Provider Agreements – Government Programs and Private Programs

2.20(b)  

Regulatory Consents, Approvals or Notices

2.20(c)  

Regulatory Appeals, Adjustments, Challenges, Audits

2.21  

Inspections and Investigations

2.22  

Certain Relationships

2.25  

Patients and Orders

2.27(a)  

Accounts Receivable

2.27(b)  

Inventory

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SCHEDULES (cont.)

 

2.28(a)  

Business Relationships

2.28(b)  

Continuation of Business by Buyer

2.29  

Absence of Certain Business Practices

4.2  

Subleases

5.3  

Negative Covenants of the Sellers

5.3(a)(vi)  

Termination Pay and Bonuses

5.3(a)(viii)  

Adoption of Benefit Plans

6.1(a)  

Regulatory Consents and Approvals

6.1(b)  

Non-Regulatory Consents and Approvals

9.1(b)(iv)  

Vacation, Personal and Sick Days of the Transferring Employees

10.1(a)  

Permitted Liens

10.1(b)  

Retained Shared Assets

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EXHIBITS

 

A-1 through A-3

  

Restrictive Covenant Agreements

B-1 through B-4

  

Employment Agreements

4.2

  

Form of Sublease

4.12

  

Form of Transition Agreement

6.2(h)

  

Form of Legal Opinion

9.7

  

Termination Bonus Plan Participants and Payment Calculation Formula