EXHIBIT 10.1

 

ASSET PURCHASE AGREEMENT

 

This Agreement made this 29th day of February, 2008, by and among Thrifty Drug
Stores, Inc., a Minnesota corporation (“Seller”), and ApothecaryRx, LLC, an
Oklahoma limited liability company (“Buyer”).

 

RECITALS

 

A.                                   Seller owns and operates a retail pharmacy
and drug store business under the name Thrifty White Drug #726 at 417 Potter
Street, Red Wing, Minnesota 55066 (such business is sometimes referred to herein
as the “Business”).

 

B.                                     Seller desires to sell and Buyer desires
to purchase certain assets of Seller used in the Business in accordance with the
terms and conditions contained herein.

 

AGREEMENTS

 

1.             ASSETS TO BE PURCHASED.  Buyer shall purchase and Seller shall
sell the following assets of Seller used in the operation of the Business (the
“Assets”):

 

(a)           All of the in-date, salable pharmacy inventory, including all
rights to pharmaceutical inventory ordered but not yet received on the Valuation
Date (as hereinafter defined in paragraph 2(a)) (the “Inventory”).The Inventory
expressly  excludes the following:

 

(i)            Outdated inventory (inventory within 90 days of expiration date
or older) on the Valuation Date;

 

(ii)           Non-wholesaler repacked or misbranded pharmaceutical inventory;

 

(iii)          Compounding chemicals; and

 

(iv)          Any and all other inventory not transferable due to State Board of
Pharmacy laws or other applicable state or federal laws;

 

(b)           All of the following additional personal property (the “Intangible
Property”):

 

(i)            All customer lists, customer account receivable files, doctor
files, prescription files, customer prescription history, and customer
prescription records used by the Business (together, the “Files”);

 

(ii)           All goodwill, the covenant not to compete and going concern value
associated with the Business as set forth in the Goodwill Protection Agreement
attached hereto as Exhibit B (the “Goodwill Protection Agreement”); and

 

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(iii)          All phone numbers used by the Business will be transferred to
Buyer, including, without limitation, the telephone numbers listed at Exhibit C
attached as a part hereof (the “Phone Numbers”), with Buyer assuming and paying
all roll over costs;

 

all as such assets exist on the Closing Date.  Only such assets set forth above
shall be sold by Seller to Buyer.  Seller shall be responsible for the proper
disposal of any inventory or other assets of Seller not purchased by Buyer
hereunder.  Buyer and Seller specifically agree that the cash, cash equivalents,
investment assets and accounts receivable of Seller relating to the Business are
excluded from the assets being purchased and shall be retained by the Seller.

 

2.             PURCHASE PRICE.  The purchase price for the Assets to be
purchased shall be equal to the sum of:

 

(a)           For the Inventory described in Section 1(a) hereof, the actual
cost thereof paid by Seller.  The actual cost paid by Seller will be determined
by physical inventory on the date agreed to by the parties (the “Valuation
Date”) by Retail Inventory Services (the fees of Retail Inventory Services to be
split equally between Buyer and Seller), on the basis of the cost shown on
Seller’s books and records, and after making allowances for damaged and
out-dated inventory.  Inventory in open bottles or other manufacturer containers
shall be counted in one-tenth increments.  Buyer and Seller have the right to
examine the inventory tapes and reports and, if either of them reasonably
believes that there have been errors or inaccuracies in such inventory, either
party shall have the right to have the inventory reviewed by the inventory
service or another national third-party inventory service mutually agreed upon
by them and, if there were errors or inaccuracies, to have such errors or
inaccuracies corrected; and

 

(b)           For the Intangible Property, an amount equal to $11 times the
number of Annual Prescriptions (as hereinafter defined).  Annual Prescriptions
means the lesser of:

 

(i)            The number of prescriptions sold by the Business and paid for by
customers of the Business during the 12-full-month period from January 1, 2007
through December 31, 2007; or

 

(ii)           The number of prescriptions sold by the Business and paid for by
customers of the Business during the period from October 1, 2007 through
December 31, 2007, multiplied by four.

 

To the best of Seller’s ability, it has provided reports to Buyer generated from
Seller’s TWRx Pharmacy operating system demonstrating net prescriptions.  The
reports are 35B Reports which demonstrate gross prescriptions and 35A Reports
which demonstrate net prescriptions, showing deletes.  Seller will provide these
reports for the following time periods:  10/01/07 to 12/31/07 and 01/01/07 to
12/31/07.  The purchase price for the Intangible Property will be $11 times the
lesser of: the number of prescriptions shown on the quarterly 35A Report times
4; or the total annual prescription count on the 35A Net Report; times $11.  The
lesser of these two amounts is

 

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the 60,460 prescriptions shown on the annual 35A Report times $11 or $665,060. 
The parties agree that the purchase price for the Intangible Property is this
$665,060, less $2,100 for rebates ($662,960).

 

3.             PAYMENT OF PURCHASE PRICE.  On the Closing Date, Buyer shall pay
Seller, by wire transfer, an amount equal to the sum of:  (i) 100% of the amount
determined under Section 2(a) above as the purchase price for the Inventory; and
(ii) 85% of the amount determined under Section 2(b) above for the Intangible
Property.  The balance of the amount due hereunder (15% of the amount for the
Intangible Property) shall be paid by Buyer to Seller in 60 equal monthly
installments, due on the first day of each month commencing April 1, 2008,
subject to the provisions of Sections 4 and 5 of the Goodwill Protection
Agreement between the parties.

 

4.             REPRESENTATIONS AND WARRANTIES OF SELLER.  Seller hereby
represents and warrants to Buyer as follows:

 

(a)(a)       Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota and has full corporate
power and authority to enter into and perform its obligations under this
Agreement.  All documents executed and to be executed by Seller and delivered in
accordance with the terms of this Agreement have been duly authorized and will
be valid obligations of Seller, enforceable in accordance with their respective
terms;

 

(b)           Seller possesses and has the right to transfer hereunder all of
the Assets, free and clear of all liens, encumbrances and charges whatsoever,
except for the security interests set forth on Exhibit A attached hereto, which
will be released on or before the Closing Date;

 

(c)           The Files are all of the Seller’s records relating to customers of
the Business and the Phone Numbers listed at Exhibit C are all of the telephone
numbers used by the Business;

 

(d)           The number of Annual Prescriptions determined by the Seller and
used to calculate a portion of the Purchase Price is true and correct and based
on the actual number of net prescriptions filled on the TWRx Pharmacy operating
system during the applicable time period;

 

(e)           This Agreement, the transactions contemplated hereby and the
performance hereof by Seller do not and will not result in the violation of any
contract, undertaking or agreement to which Seller is a party or by which Seller
is bound;

 

(f)            There is no litigation or proceeding pending or, to the knowledge
of Seller, threatened against or relating to Seller or its properties or the
Business, nor does Seller know of, or have any reasonable grounds to know of,
any basis for any such action or of any governmental investigation relating to
Seller or to any of its properties or the Business; and

 

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(g)           Seller has properly prepared and filed or caused to be prepared
and filed all federal, state and local tax returns, including payroll tax
returns, relating to the Business, that were due on or before the Closing Date,
and Seller has paid all federal, state and local taxes which were shown on such
returns or which were otherwise due on or before the Closing Date.

 

The foregoing representations and warranties shall be true at the time of
execution of this Agreement and shall survive the execution and delivery of this
Agreement and the Closing for a period of 48 months following the Closing Date. 
Seller hereby agrees to indemnify and hold harmless Buyer from any losses, costs
or expenses (including reasonable attorneys’ fees, whether or not suit is
brought) of any nature that Buyer incurs as a result of a breach of any of the
foregoing representations and warranties.

 

5.             REPRESENTATIONS AND WARRANTIES OF BUYER.  Buyer hereby represents
and warrants to Seller as follows:

 

(a)           Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Oklahoma, duly
qualified to do business in Minnesota, and has full power and authority to enter
into and perform its obligations under this Agreement.  All documents executed
and to be executed by Buyer and delivered in accordance with the terms of this
Agreement have been duly authorized and are and will be the valid obligations of
Buyer enforceable in accordance with their respective terms;

 

(b)           This Agreement, the transactions contemplated hereby and the
performance hereof by Buyer do not and will not result in the violation of any
contract, undertaking or agreement to which Buyer is a party or by which Buyer
is bound;

 

(c)           There is no litigation or proceeding pending or, to the best
knowledge of Buyer, threatened against Buyer which questions the authority of
Buyer to enter into or perform its obligations under this Agreement or which, if
determined adversely to Buyer, would affect its ability to enter into or perform
its obligations under this Agreement; and

 

(d)           Buyer is authorized by law to enter into this transaction and has
all necessary and appropriate federal and state licenses and permits necessary
for it to take possession and control of the assets to be purchased under
Section 1 hereof.

 

The foregoing representations and warranties shall be true at the time of
execution of this Agreement and on the Closing Date and shall survive the
execution and delivery of this Agreement and the Closing for a period of 48
months following the Closing Date.  Buyer hereby agrees to indemnify and hold
harmless Seller from any losses, costs or expenses (including reasonable
attorneys’ fees, whether or not suit is brought) that Seller incurs as a result
of a breach of any of the foregoing representations and warranties.

 

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6.             CONDITIONS TO OBLIGATIONS OF BUYER.  The obligations of Buyer
hereunder shall be subject to the performance or observance of the following
conditions on or before the Closing Date:

 

(a)           The representations and warranties of Seller as set forth in
Section 4 hereof shall be true and correct in all respects on the Closing Date;

 

(b)           Seller shall, pending the Closing Date, use its reasonable best
efforts to preserve the goodwill of the Business and its customers;

 

(c)           The security interests described on Exhibit A attached hereto
shall have been released with respect to the assets described in Section 1
hereof and the documentation of such release shall be reasonably satisfactory to
Buyer;

 

(d)           Seller shall have executed and delivered to Buyer the Goodwill
Protection Agreement attached hereto as Exhibit B and a Bill of Sale conveying
the Assets to Buyer with warranty of title and no other warranties in a form
acceptable to Buyer and Seller;

 

(e)           No preliminary or permanent injunction or other order will have
been issued by any court of competent jurisdiction or any regulatory body
preventing consummation of the transactions contemplated by this Agreement;

 

(f)            No action will have been commenced or threatened against Seller,
Buyer or any of their respective affiliates, associates, officers or directors
seeking damages arising from, to prevent or challenge the transactions
contemplated by this Agreement;

 

(g)           Seller will have performed or satisfied on and as of the Closing
Date, all obligations, covenants, agreements and conditions contained in this
Agreement to be performed or complied with by the Seller; and

 

(h)           There will have been no material adverse change, nor any event
which would result in any material adverse change, so far as can reasonably be
foreseen by the Buyer, in the Business or the Assets.

 

If any of the foregoing conditions are not performed or observed on or before
the Closing Date, Buyer may, at its option and in its discretion, either waive
the performance or observance of any or all of such conditions or terminate this
Agreement by notice to Seller, in which event Buyer shall have no further
obligations or liabilities under this Agreement.

 

7.             CONDITION TO OBLIGATIONS OF SELLER.  The obligations of Seller
hereunder shall be subject to the representations and warranties of Buyer set
forth in Section 5 hereof being true and correct on the Closing Date and the
performance or observance of the conditions set forth in paragraphs 6(e) and
6(f) above.  If the foregoing conditions are not performed or observed on or
before the Closing Date, Seller may, at its option and in its discretion, either
waive the performance or observance of such condition or terminate this
Agreement by notice to Buyer, in which event Seller shall have no further
obligations or liabilities under this Agreement.

 

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8.             SELLER’S LIABILITIES NOT ASSUMED.  Buyer is acquiring the assets
described in Section 1 hereof, but is not assuming any of Seller’s liabilities.
 Seller shall be and remain responsible for all liabilities and obligations of
Seller or the Business, including without limitation, all federal, state and
local taxes, including payroll taxes, vacation pay and other employee costs and
obligations of any nature whatsoever and any and all secured and unsecured
liabilities of Seller, and Buyer shall have no responsibility therefore.  Seller
agrees that the liabilities and obligations of Seller will be paid as they
become due, and Seller hereby agrees to, and does indemnify, Buyer and hold
Buyer harmless from and against any and all liabilities and obligations of
Seller, along with any losses, costs or expenses (including reasonable
attorneys’ fees, whether or not suit is brought) suffered or incurred by Buyer
in connection therewith.  The provisions of this Section shall survive the
Closing.

 

9.             COVENANTS.  Not fewer than ten (10) days prior to the Closing
Date, Seller will furnish to Buyer a form letter on Seller’s letterhead in a
form reasonably acceptable to Buyer advising the customers of the Business that
the Business is closing and that arrangements have been made for Buyer’s
pharmacy to fill the customers’ prescriptions.  Seller hereby authorizes Buyer
to send Seller’s letter to the customers of the Business, and physicians and
facilities served by the Business.  Beginning on the Closing Date and continuing
to the later of the date of termination of Seller’s lease or March 31, 2008,
Seller will display signs acceptable to or provided by Buyer in the windows or
other areas of the building where the Business was operated advising customers
of the matters contemplated by this Agreement.  The foregoing covenant will
survive closing.

 

10.           CLOSING.  The Closing Date of the purchase and sale contemplated
hereby shall, subject to the conditions hereof, occur on or before February 29,
2008, or such other date agreed by the parties, at such time and such place in
Minnesota, as Seller and Buyer shall mutually agree.  On the Closing Date,
Seller shall deliver to Buyer all of the Files in forms reasonably satisfactory
to Buyer, including, without limitation, hard copies of all paper prescriptions,
telephone prescription orders and other original documentation required by law
to be held by a pharmacy.  Buyer acknowledges and agrees that the foregoing and
all such information therein is confidential, non-public information and is
governed by HIPAA regulations and other regulations with which Buyer will
comply.  In the event that the Closing does not occur, Buyer will return all of
such information, in all formats, to Seller without keeping a copy or copies for
Buyer, and will not use or permit others to use such information obtained
pursuant to this Agreement.  If this sale does not close, Buyer agrees that
Buyer will remain obligated to honor the confidentiality and HIPAA requirements
as they apply to such information.  Seller agrees that following the execution
of this Agreement, Seller will deliver the Files to Buyer’s data conversion
company in electronic format in order to permit Buyer to load such information
in its computers prior to the Closing Date.  In the event that the Closing does
not occur for any reason whatsoever, Buyer will return all of such information
to Seller, and will not use or permit others to use such information obtained
pursuant to this Agreement, and will not keep copies of such information in any
form.  For six (6) months after the Closing Date, upon Buyer’s request, Seller
will furnish to Buyer a read-only computer system including monitor, cpu and
keyboard containing patient prescription files of Seller’s customer records.

 

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11.           DEFAULT.  If a party fails to perform any obligation contained in
this Agreement, the party claiming default will serve written notice to the
other party specifying the nature of such default and demanding performance.  If
such default has not been cured within ten (10) days after receipt of such
default notice, the non-defaulting party will be entitled to exercise all
remedies arising at law or in equity by reason of such default, including,
without limitation, specific performance of this Agreement or any one or more of
the provisions herein contained.

 

12.           NOTICES.  All notices required hereunder shall be in writing and
shall be delivered to the parties as follows:

 

To Seller:

 

Thrifty Drug Stores, Inc.

 

 

Attention: Robert J. Narveson, President and CEO

 

 

6901 East Fish Lake Road, Suite 118

 

 

Maple Grove, MN 55369

 

 

Fax: (763) 513-4347

 

 

 

With a copy to:

 

Fredrikson & Byron, P.A.

 

 

Attention: Neil A. Weikart, Esq.

 

 

200 South Sixth Street, Suite 4000

 

 

Minneapolis, MN 55402

 

 

Fax: (612) 492-7077

 

 

 

To Buyer:

 

ApothecaryRx, LLC

 

 

Attention: Lewis P. Zeidner, President

 

 

5500 Wayzata Boulevard, Suite 210

 

 

Golden Valley, MN 55416

 

 

Fax: (763) 647-1137

 

 

 

With a copy to:

 

Commercial Law Group, P.C.

 

 

Attention: Michael Meleen, Esq.

 

 

700 Oklahoma Tower

 

 

210 Park Avenue

 

 

Oklahoma City, OK 73102

 

 

Fax: (405) 232-5553

 

Such addresses may be changed by written notice to the other party.  Such
notices shall be effective upon receipt (if delivered personally or by facsimile
transmission, with confirmation of transmission); three business days after
mailing (if delivered by registered or certified mail); or one business day
after mailing (if delivered by overnight courier service).

 

13.           AGREEMENT.  This Agreement contains the entire agreement of the
parties concerning the subject matter hereof, and supersedes all prior
communications, understandings and agreements.  No representations, promises or
agreements, oral or otherwise, not contained herein shall be of any force or
effect.

 

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14.           GOVERNING LAW.  This Agreement shall be governed by and construed
and enforced under the laws of the State of Minnesota and shall be binding upon
and inure to the benefit of Seller and Buyer and their respective successors and
assigns.

 

15.           PRESS RELEASE.  Buyer will prepare and issue all press releases
relating to this Agreement and the sale of the Business.  Seller will not issue
any press releases and will refer all inquiries concerning any transaction
contemplated by this Agreement to Buyer.  Seller must consent to the form of
such press releases, which consent will not be unreasonably withheld.

 

16.           MISCELLANEOUS.  Time is of the essence of this Agreement.  Prior
to and at all times following the termination or closing of this Agreement the
parties agree to execute and deliver, or cause to be executed and delivered,
such documents and do, or cause to be done, such other acts and things as might
reasonably be requested by any party to this Agreement to assure that the
benefits of this Agreement are realized by the parties.  It is agreed that the
parties may not assign such party’s rights nor delegate such party’s duties
under this Agreement without the express written consent of the other parties to
this Agreement which consent will not be unreasonably denied.  Neither this
Agreement, nor any of the provisions hereof can be changed, waived, discharged
or terminated, except by an instrument in writing signed by the party against
whom enforcement of the change, waiver, discharge or termination is sought.  If
any party institutes an action or proceeding against any other party relating to
the provisions of this Agreement, the party to such action or proceeding which
does not prevail will reimburse the prevailing party therein for the reasonable
expenses of attorneys’ fees and disbursements incurred by the prevailing party. 
Seller represents to Buyer that Seller has dealt with no broker in connection
herewith and agrees to hold Buyer harmless from any claim for brokerage
commissions asserted by any other party as a result of dealings with Seller. 
Buyer represents to Seller that Buyer has dealt with no broker in connection
herewith agrees to indemnify and hold Seller harmless from any claim for
brokerage commissions asserted by any party as a result of dealings with Buyer. 
This Agreement may be executed in counterparts, including by telefacsimile, each
of which will be deemed an original document but all of which will constitute a
single document.

 

IN WITNESS WHEREOF, this Agreement has been executed by the parties effective
the date first above written.

 

 

THRIFTY DRUG STORES, INC.

 

 

 

By:/S/ROBERT J. NARVESON

 

Its:

President

 

 

 

 

 

APOTHECARYRX, LLC

 

 

 

By:/S/LEWIS P. ZEIDNER

 

Its:

President

 

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