Execution Copy
 
 
 
ASSET PURCHASE AGREEMENT
 
DATED AS OF FEBRUARY 14, 2007
 
by and among
 
WALGREEN CO.,
 
WALGREEN EASTERN CO., INC.
 
FAMILYMEDS GROUP, INC.,
 
FAMILYMEDS, INC.
 
and
 
ARROW PRESCRIPTION LEASING CORP.
 

 
 

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TABLE OF CONTENTS
ARTICLE I
   
DEFINITIONS
1
1.1.
Definitions
1
1.2.
Additional Definitions
10
1.3.
Interpretation
12
ARTICLE II
 
 
PURCHASE AND SALE
12
2.1.
Purchased Assets - File-Transfer Locations
12
2.2.
Purchased Assets - Operate Location Pharmacies and Worksite Pharmacies
12
2.3.
Excluded Assets
14
2.4.
Assumed Liabilities
15
2.5.
Excluded Liabilities
15
2.6.
Bulk Sales Laws
15
ARTICLE III
 
 
PURCHASE PRICE
15
3.1.
Purchase Price
15
3.2.
Payments; Indemnity Escrow Account
16
3.3.
Inventory Amount
17
3.4.
Indemnity Fund
18
3.5.
Allocation of Purchase Price
18
ARTICLE IV
 
 
CLOSING
18
4.1.
Closing Date
18
4.2.
Closing Date Payment; Buyer’s Closing Deliveries
18
4.3.
Sellers’ Closing Date Deliveries
19
4.4.
Inventory Closing Date Payment; Sellers’ Inventory Closing Deliveries
20
ARTICLE V
   
REPRESENTATIONS AND WARRANTIES OF FMRX, FAMILYMEDS AND ARROW
21
5.1.
Organization and Authority.
21
5.2.
No Conflicts
22
5.3.
Taxes.
22
5.4.
Title and Sufficiency
23

 
 
 
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5.5.
Financial Schedules
24
5.6.
No Undisclosed Liabilities
24
5.7.
Absence of Certain Changes or Events
24
5.8.
SEC Filings
24
5.9.
Assumed Contracts
25
5.10.
Suppliers, Distributors and Third Party Payors
25
5.11.
Prescription Volume
25
5.12.
Owned Real Property
25
5.13.
Leased Real Property.
25
5.14.
Personal Property
26
5.15.
Intellectual Property; Software.
26
5.16.
Employee Matters.
28
5.17.
Employee Relations
29
5.18.
Legal Proceedings.
29
5.19.
Compliance With Law; Permits; Medicare and Medicaid.
29
5.20.
Warranties
31
5.21.
Sale Process
31
5.22.
Fairness Opinion
31
5.23.
Solvency.
31
5.24.
Affiliate Transactions
31
5.25.
Broker
32
ARTICLE VI
 
 
REPRESENTATIONS AND WARRANTIES OF BUYER AND EASTERN
32
6.1.
Organization of Buyer and Eastern
32
6.2.
Authorization
32
6.3.
Non-Contravention
32
6.4.
Sufficient Funds
33
6.5.
No Other Representations or Warranties
33
ARTICLE VII
 
 
ADDITIONAL AGREEMENTS
33
7.1.
Employees.
33
7.2.
Non-competition.
35

 
 
 
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7.3.
Records and Data.
36
7.4.
Patient Letters
37
7.5.
Matters Related to Prescriptions
37
7.6.
Interim Operations.
38
7.7.
Signage
38
7.8.
Telephone Numbers
39
7.9.
Acquisition Proposals; Board Recommendation.
39
7.10.
FMRX Stockholder Meeting; FMRX Proxy Statement.
41
7.11.
Access Through Final Closing Date.
42
7.12.
Taxes.
43
7.13.
Consent of Third Parties; Regulatory and Other Authorizations; HSR Act.
45
7.14.
Avoiding Abandonment.
46
7.15.
Licenses.
47
7.16.
Excluded Pharmacies; Post-Closing Consents.
48
7.17.
Prospective Worksite Pharmacies
49
7.18.
Nonassignable Contracts.
49
7.19.
Remittance
49
7.20.
Further Assurances
49
7.21.
Access to Records and Management After Closing.
50
7.22.
Tupelo Property
50
7.23.
Collection of Patient Charges
51
7.24.
Website Termination
51
ARTICLE VIII
 
 
INDEMNIFICATION
52
8.1.
Indemnification by the Sellers.
52
8.2.
Indemnification by Buyer
53
8.3.
Indemnity Fund; Termination of Indemnity Fund.
53
8.4.
Notice and Determination of Claims.
54
8.5.
Third Person Claims.
54
8.6.
Calculation of Losses and Expenses.
55
8.7.
Tax Treatment of Indemnity Payments
56
8.8.
Indemnification as Sole Remedy
56

 
 
 
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ARTICLE IX
 
 
CONDITIONS TO CLOSING
56
9.1.
Sellers’ Condition to Closing
56
9.2.
Buyer’s Conditions to Closing
57
ARTICLE X
 
 
TERMINATION
58
10.1.
Termination
58
10.2.
Extension of Termination Date
59
10.3.
Effect of Termination.
59
ARTICLE XI
   
GENERAL PROVISIONS
61
11.1.
Survival
61
11.2.
No Public Announcement
61
11.3.
Notices
61
11.4.
Successors and Assigns; No Third Party Beneficiaries
62
11.5.
Entire Agreement; Amendments
62
11.6.
Waivers
62
11.7.
Expenses
63
11.8.
Disclaimer Regarding Projections
63
11.9.
Partial Invalidity
63
11.10.
Injunctive Relief; Remedies.
63
11.11.
Counterparts
64
11.12.
Governing Law; Jurisdiction
64

 

 
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ASSET PURCHASE AGREEMENT
 
This ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
February 14, 2007, by and among Walgreen Co., an Illinois corporation (“Buyer”),
Walgreen Eastern Co., Inc., a New York corporation (“Eastern”), Familymeds
Group, Inc., a Nevada corporation (“FMRX”), Familymeds, Inc., a Connecticut
corporation and wholly-owned subsidiary of FMRX (“Familymeds”), and Arrow
Prescription Leasing Corp., a Connecticut corporation (“Arrow”). FMRX,
Familymeds and Arrow are collectively referred to as the “Sellers”.
 
WHEREAS, the Sellers, among other things, own and operate clinic, retail,
apothecary and worksite pharmacies;
 
WHEREAS, the Sellers desire to sell to Buyer and Eastern, and Buyer and Eastern
desire to purchase from the Sellers, upon the terms and subject to the
conditions set forth in this Agreement, (a) certain of the assets of the Sellers
used in the operation of the clinic pharmacies and the apothecary pharmacies
identified as “Operate Location Pharmacies” on Exhibit A (the “Operate Location
Pharmacies”), (b) substantially all of the assets of the Sellers used
exclusively in the operation of the Sellers’ Worksite Business, including the
worksite pharmacies identified on Exhibit A (the “Existing Worksite
Pharmacies”), (c) all prescription files and inventory related to the pharmacies
identified as “File-Transfer Locations” on Exhibit A (the “File-Transfer
Locations”), and (d) the real property located at the intersection of U.S.
Highway No. 45 and Chokoha Trail in Tupelo, MS (the “Tupelo Property”); and
 
WHEREAS, concurrently with the execution and delivery of this Agreement, FMRX
has provided to Buyer a current draft of the Plan of Complete Liquidation and
Dissolution.
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:

ARTICLE I
 
DEFINITIONS
 
1.1. Definitions. In this Agreement, the following terms have the meanings
specified or referred to in this Section 1.1. 
 
“Acquisition Proposal” means any bona fide offer or proposal (whether or not in
writing) (other than an offer or proposal by or on behalf of Buyer or its
Affiliates) for, or any indication of interest in: (a) a transaction pursuant to
which a third party acquires or would acquire Beneficial Ownership of more than
50% of the outstanding capital stock of any Seller, whether from FMRX or
pursuant to a tender offer, exchange offer or otherwise; (b) a merger,
consolidation, business combination, reorganization, share exchange, sale of
substantially all assets, recapitalization, liquidation, dissolution or similar
transaction that would result in a third party acquiring more than 50% of the
fair market value of the consolidated assets of FMRX and its Subsidiaries, taken
as a whole or (c) any transaction that would result in a third party acquiring
more than 50% of the fair market value of the consolidated assets of FMRX and
its Subsidiaries, taken as a whole, immediately prior to such transaction.
Notwithstanding the foregoing, the term “Acquisition Proposal” shall not include
any transaction that would not prevent the Sellers from selling the Purchased
Assets to Buyer pursuant to this Agreement, including at the same price, and
otherwise on the same terms, as contemplated hereby.
 

 
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“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly controls, is controlled by or is under common control with such
Person. For purposes of the foregoing, (a) “control” shall have the meaning
given to it under the rules and regulations promulgated under the Exchange Act,
and (b) except as otherwise expressly set forth herein, no individual officer,
director or employee of a Person shall be deemed to be an Affiliate of such
Person.
 
“Alternative Proposal” means any bona fide offer or proposal (whether or not in
writing) (other than an offer or proposal by or on behalf of Buyer or its
Affiliates) for, or any indication of interest in, a transaction pursuant to
which a third party acquires or would acquire all or a material portion of the
Purchased Assets, other than inventory or obsolete equipment in the ordinary
course of business. Notwithstanding the foregoing, the term “Alternative
Proposal” shall not include any transaction that would not prevent the Sellers
from selling the Purchased Assets to Buyer pursuant to this Agreement, including
at the same price, and otherwise on the same terms, as contemplated hereby.
 
“Antitrust Division” means the Antitrust Division of the United States
Department of Justice.
 
“Assumed Real Estate Leases” means all Real Estate Leases other than Real Estate
Leases related to Operate Location Pharmacies that are designated as Excluded
Operate Location Pharmacies pursuant to Section 7.16.
 
“Assumed Worksite Agreements” means all Worksite Agreements other than Worksite
Agreements related to Worksite Pharmacies that are designated as Excluded
Worksite Pharmacies pursuant to Section 7.16.
 
“Beneficial Ownership” shall have the meaning provided under Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder.
 
“Business” means (i) as of the date hereof, the business of owning and operating
all of the Operate Location Pharmacies, all of the Worksite Pharmacies and all
of the File-Transfer Locations and (ii) as of and following the Closing Date,
the business of owning and operating all of the Purchased Operate Location
Pharmacies, all of the Purchased Worksite Pharmacies and all of the Purchased
File-Transfer Assets.
 
“Buyer Group Members” means Buyer and Eastern and their respective Affiliates,
directors, officers and employees.
 

 
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“Closing” means the completion of the initial transfer of the Purchased
File-Transfer Assets from the Sellers to Buyer and Eastern and “Closing Date”
means the time and date upon which the Closing actually occurs.
 
“Closing Date Shared Expenses” means an amount equal to the aggregate of all
commercially reasonable Expenses (to be determined as of the Closing Date by
mutual agreement of the parties) associated with the Indemnity Agent and any
filing fees related to the HSR Act.
 
“Closing Date Shared Expenses Schedule” means a mutually prepared schedule
setting forth an itemized list of the Closing Date Shared Expenses, including
the amounts thereof.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Confidential Information” means, with respect to any Person, information
regarding such Person that is not previously disclosed to the public or to the
trade and includes information regarding facilities, strategies, methods, Trade
Secrets and other intellectual property, Software, systems, procedures,
operational policies, manuals, confidential reports, product price lists,
pricing and cost policies, customer lists, inventory information, financial
information (including revenue, costs or profits of the disclosing party),
business plans, prospects or opportunities.
 
“Contract” means and includes every agreement or understanding of any kind,
written or oral, enforceable or not.
 
“Copyrights” means all copyrights, whether registered or unregistered, and
pending applications to register.
 
“Disclosure Schedules” means the disclosure schedules delivered by the Sellers
to Buyer and Eastern on the date of the execution of this Agreement.
 
“Encumbrance” means any lien, encumbrance, claim, charge, security interest,
assignment, collateral assignment, mortgage, pledge, easement, conditional sale
or other title retention agreement, defect in title, covenant or other
restrictions of any kind.
 
“Environmental, Health and Safety Requirements” means all Requirements of Law
concerning or relating to public health and safety, worker/occupational health
and safety, and pollution or protection of the environment, including those
relating to the presence, use, manufacturing, refining, production, generation,
handling, transportation, treatment, recycling, transfer, storage, disposal,
distribution, importing, labeling, testing, processing, discharge, release,
threatened release, control, or other action or failure to act involving cleanup
of any Hazardous Substances or wastes, chemical substances or mixtures,
pesticides, pollutants, process waste water, contaminants, toxic chemicals,
petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise, or
radiation, each as amended and as now in effect, including: the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; the
Occupational Safety and Health Act of 1970, as amended; the Federal Water
Pollution Control Act, as amended; the Federal Resource Conservation and
Recovery Act, as amended; the Federal Clean Water Act, as amended; the Toxic
Substances Control Act, as amended; the Federal Clean Air Act, as amended, and
the Superfund Amendments and Reauthorization Act.
 

 
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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“Estimated Aggregate Inventory Amount” means sum of the Estimated Inventory
Amounts.
 
“Estimated Inventory Amount” means, with respect to any File-Transfer Location,
the Sellers’ good faith estimate of the Inventory Amount attributable to such
File-Transfer Location.
 
“Estimated Inventory Certificate” means a certificate delivered by an officer of
FMRX to Buyer no later than three (3) business days prior to the Closing Date
and in form and substance reasonably satisfactory to Buyer setting forth each
Estimated Inventory Amount and the Estimated Aggregate Inventory Amount,
together with such supporting documentation as may be reasonably requested by
Buyer.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Excluded Businesses” means the Sellers’ business of operating the Excluded
Operate Location Pharmacies, the Excluded Worksite Pharmacies, the Sellers’
franchise, medical supplies, internet and mail order businesses and any other
businesses other than the Business.
 
“Excluded Operate Location Pharmacies” means those Operate Location Pharmacies
designated as Excluded Operate Location Pharmacies pursuant to Section 7.16. 
 
“Excluded Worksite Pharmacies” means those Worksite Pharmacies designated as
Excluded Worksite Pharmacies pursuant to Section 7.16.
 
“Expenses” means any and all reasonable expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including court filing
fees, court costs, arbitration fees or costs, witness fees, and reasonable fees
and disbursements of legal counsel, investigators, expert witnesses, accountants
and other professionals).
 
“Final Closing Date” means the date upon which the final Inventory Closing Date
has occurred.
 
“FMRX SEC Reports” means all forms, reports, schedules, statements and other
documents filed by FMRX with the SEC since January 1, 2005.
 
“FTC” means the United States Federal Trade Commission.
 
“Governmental Body” means any foreign, federal, state, local or other
governmental authority or regulatory body.
 

 
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“Hazardous Substances” has the meaning set forth in Section 101(14) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and will also expressly include petroleum, crude oil and any fraction
thereof.
 
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996,
P. L. 104-191, and its implementing rules and regulations.
 
“HSR Act” means the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
 
“Indemnity Escrow Agreement” means an Indemnity Escrow Agreement to be entered
into at or prior to Closing among Buyer, Eastern, the Sellers and the Indemnity
Agent, in form and substance to be mutually agreed upon.
 
“Installation” means, with respect to each Purchased Operate Location Pharmacy
and each Purchased Worksite Pharmacy, the completion of the installation of
wiring and equipment for data and communication devices and other store systems
required for Buyer or Eastern to integrate the Business with Buyer’s own
business and to operate such Purchased Operate Location Pharmacy or Purchased
Worksite Pharmacy in a manner consistent with the operation of Buyer’s existing
pharmacies.
 
“Instrument of Assignment and Assumption” means an Instrument of Assignment and
Assumption, to be delivered by Buyer and Eastern and the Sellers pursuant to
which the Sellers will convey the applicable Purchased Assets to Buyer and
Eastern, and Buyer and Eastern will assume the applicable Assumed Liabilities,
in each case, in accordance with the terms hereof, in a form reasonably
acceptable to the parties.
 
“Intellectual Property” means Copyrights, Patent Rights, Trademarks and Trade
Secrets owned or licensed by the Sellers and primarily used in or primarily
related to the ownership or operation of the Business.
 
“Inventory Closing Date” means, with respect to each Location, the date on which
the Inventory Audit for such Location is conducted.
 
“Inventory Closing Shared Expense Amount” means the aggregate amount (to be
determined as of the Closing Date by mutual agreement of the parties) estimating
the total commercially reasonable Expenses associated with all of the Inventory
Closing Dates for all of the Locations, including the Independent Valuator and
the Data Converter.
 
“IRS” means the United States Internal Revenue Service.
 
“Knowledge” means the actual knowledge, after due inquiry appropriate for a
person of such position, of the persons listed on Schedule 1.1(i).
 
“Lease Adjustment Amount” means the amount set forth on Schedule 7.2(c).
 

 
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“Licensed Rights” means any Intellectual Property or Software primarily used in
or related to the ownership or operation of the Business owned by a third party
to which any of the Sellers hold a license pursuant to a valid and enforceable
license agreement.
 
“Location” means any Purchased Operate Location Pharmacy, Purchased Worksite
Pharmacy or File-Transfer Location.
 
“Loss” means any and all losses, costs, obligations, liabilities, settlement
payments, awards, judgments, fines, penalties, damages, Expenses, deficiencies
or other charges, including any amount payable with respect to Taxes (including
any amounts relating to Taxes payable pursuant to a Contract or otherwise).
 
“Material Adverse Effect” means any change, effect, event, occurrence or
development that is or would reasonably be expected to be materially adverse to
the assets, liabilities, financial condition or results of operations of the
Business, taken as a whole, excluding any such change, effect, event, occurrence
or development (a) relating to or resulting from economic conditions in general,
(b) relating to or resulting from changes in legal or regulatory conditions, (c)
relating to the pharmacy industry in general, (d) resulting from the execution
or announcement of this Agreement and the Plan of Complete Liquidation and
Dissolution, but only to the extent that any such change, effect, event,
occurrence or development would not materially adversely affect the ability of
Buyer and Eastern to operate the Business as of and following the Closing or the
value of the Business as of and following the Closing Date, (e) resulting from
any actions taken, or the failure to act, by Buyer or its Affiliates after the
date hereof and prior to the Closing Date in violation of this Agreement or (f)
resulting from compliance by the Sellers with the terms of this Agreement (other
than Section 7.6), which, in the case of clauses (a), (b) and (c) above, does
not have a disproportionate impact on the Business relative to other businesses
of similar size and scope operating in the same line of business.
 
“NCPDP” means the National Council for Prescription Drug Programs, Inc.
 
“NRS” means the Nevada Revised Statutes, as amended.
 
“Other Lease Amendments” means the amendments to, or the extensions of, the
existing term of the Real Estate Leases as set forth in the “Lease Amendment”
form on Exhibit B.
 
“Patent Rights” means all patents, provisional patent applications, patent
applications, continuations, continuations-in-part, divisions, reissues,
reexaminations, extensions, industrial designs, patent disclosures, inventions
(whether or not patentable or reduced to practice) and improvements thereto.
 
“Patient Charges” means all accounts receivable related to the Purchased Operate
Location Pharmacies and the File-Transfer Locations represented by the “charge
accounts” corresponding to patients of the Purchased Operate Location Pharmacies
and the File-Transfer Locations.
 

 
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“Patient Charges Aggregate Amount” means the sum of the Patient Charges Amount
with respect to each of the Purchased Operate Location Pharmacies and
File-Transfer Locations.
 
“Patient Charges Amount” means, with respect to each of the Purchased Operate
Location Pharmacies and File-Transfer Locations, the amount of Patient Charges
included in the Patient Charges Certificate that relates to products sold on or
after the 90th day prior to the applicable Inventory Closing Date.
 
“Patient Charges Certificate” means a certificate, with respect to each of the
Purchased Operate Location Pharmacies and File-Transfer Locations, signed by an
officer of FMRX setting forth the Patient Charges Amount and all Patient Charges
related to such Purchased Operate Location Pharmacy or File-Transfer Location.
 
“Permitted Encumbrances” means (a) all statutory liens for current Taxes,
assessments or other charge of a Governmental Body not yet delinquent or the
amount or validity of which is being in contested in good faith by appropriate
proceedings provided an appropriate reserve is established therefor; (b)
mechanics’, carriers’, workers’, repairers’ and similar Encumbrances arising or
incurred in the ordinary course of the business which are not yet due or
payable; (c) zoning, entitlement and other land use and environmental
regulations by any Governmental Body provided, that such regulations have not
been violated; (d) title of a lessor under a capital or operating lease; (e) any
other imperfections in title, charges, easements, restrictions and Encumbrances
that do not materially affect the value or use of, or the ability to sell or
market, the affected asset; and (f) Encumbrances disclosed in Schedule 5.4.
 
“Person” means any individual, corporation, partnership, joint venture, trust,
Governmental Body or other organization or entity.
 
“Plan of Complete Liquidation and Dissolution” means the draft Plan of Complete
Liquidation and Dissolution, as of the date hereof, providing for the
liquidation, dissolution and winding-down of FMRX and all of its Subsidiaries
and their respective businesses, provided, that such plan may be adjusted by
FMRX as necessary after the date hereof.
 
“Premises” means the premises upon which any of the Operate Location Pharmacies
or Worksite Pharmacies conducts its business.
 
“Prospective Worksite Pharmacies” means those pharmacies which are currently
being developed or contemplated (or which will be developed or contemplated
prior to Closing) by the Sellers in the Worksite Business, including those
Prospective Worksite Pharmacies identified on Exhibit A.
 
“Purchased Operate Location Pharmacies” means all of the Operate Location
Pharmacies other than the Excluded Operate Location Pharmacies.
 
“Purchased Worksite Pharmacies” means all of the Worksite Pharmacies other than
the Excluded Worksite Pharmacies.
 

 
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“Real Estate Leases” means the real estate leases, set forth on Schedule 5.9,
together with all modifications and supplements thereto, and all subleases and
estoppels related thereto, associated with the Operate Location Pharmacies.
 
“Required Lease Consents” means the consents to the transfer of the respective
Real Estate Leases to Buyer or Eastern or their respective Affiliates, the
extension of the existing term or the other amendments from the third parties to
the respective Real Estate Leases, set forth as “Required Lease Consents” on
Exhibit B, with such modifications as may be reasonably acceptable to the
parties.
 
“Required Worksite Consents” means the consents from the third parties with
respect to the transfer of the respective Worksite Agreement to Buyer or Eastern
or their respective Affiliates, set forth as “Required Worksite Consents” on
Exhibit B, with such modifications as may be reasonably acceptable to the
parties.
 
“Requirements of Law” means any foreign, federal, state and local laws,
statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any Governmental Body, including any Environmental, Health and
Safety Requirements.
 
“Sale Process” means the background of the decision of FMRX to enter into this
Agreement to the extent disclosure thereof is required by the rules and
regulations promulgated under the Exchange Act.
 
“SEC” means the United States Securities and Exchange Commission.
 
“Security Deposits” means all security deposits paid by the Sellers to any
Person prior to the Closing related to the Business (other than with respect to
the File-Transfer Locations), if such deposits are retained by the party
currently holding them after the Closing for the benefit of Buyer or Eastern.
 
“Software” means computer software programs and software systems, including all
databases, compilations, tool sets, compiles, decompilers, higher level or
“proprietary” languages, related documentation and materials, whether in source
code, object code or human readable form.
 
“Solvent” means with regard to each of the Sellers and on a particular date
that, at fair valuation, such Seller’s assets are equal to or greater than the
sum of all of such Seller’s debts and liabilities, subordinated, probable,
contingent or otherwise, on such date, and that such Seller is generally paying
its debts and liabilities, subordinated, contingent or otherwise, as such debts
become absolute and mature unless such debts or liabilities are the subject of a
bona fide dispute, and “Insolvent” means that the foregoing is not true with
regard to such Seller on the particular date.
 
“Straddle Period” means any taxable year or period beginning on or before and
ending after the Closing Date or the applicable Inventory Closing Date.
 

 
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“Subsidiary” means any corporation, limited liability company or other entity of
which FMRX (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, 50% or more of the capital stock, membership interests
or other equity interests.
 
“Superior Proposal” means any written Acquisition Proposal that a majority of
the members of the Board of Directors of FMRX determines in good faith, after
consultation with its outside legal counsel and financial advisors: (a) provides
consideration to FMRX or the stockholders of FMRX that is directly attributable
to the Purchased Assets with a value that exceeds the value of the consideration
provided for in this Agreement; (b) would result in a transaction, if
consummated, that would be more favorable to the stockholders of FMRX with
respect to the Purchased Assets (taking into account all facts and
circumstances, including all legal, financial, regulatory and other aspects of
the proposal and the identity of the offeror and the other transactions that
FMRX is or may be contemplating including any transactions contemplated in
connection with its Plan of Complete Liquidation and Dissolution) than the
transactions contemplated hereby; (c) is reasonably capable of being consummated
in a timely manner (taking into account all regulatory and other relevant
considerations including any financing contingencies and due diligence
conditions); and (d) is made by a Person or a group of Persons who have provided
FMRX with reasonable evidence that such Person or group of Persons has or will
have sufficient funds to complete such Acquisition Proposal.
 
“Tax” means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs, ad valorem, duties, capital stock,
franchise, profits, prescription tax or fee, withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto.
 
“Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes required to be filed with any
Governmental Body, including any schedule or attachment thereto, and including
any amendment thereof.
 
“Trade Secrets” means trade secrets, confidential ideas, know-how, concepts,
methods, processes, formulae, reports, data, customer lists, mailing lists,
business plans and other proprietary information, all of which derive value,
monetary or otherwise, from being maintained in confidence.
 
“Trademarks” means all service marks, Internet domain names, logos, designs,
slogans, trade dress, trade names, corporate names and general intangibles of
like nature whether registered or reregistered, and registrations and pending
applications to register the foregoing.
 
“Worksite Agreements” means those agreements set forth on Schedule 5.9
associated with Worksite Pharmacies, together with all modifications or
supplements thereto.
 
“Worksite Business” means the business of owning and operating pharmacies for
the employee population of a specified employer, including the ownership and
operation of the Worksite Pharmacies.
 

 
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“Worksite Pharmacies” means the Existing Worksite Pharmacies and Prospective
Worksite Pharmacies.
 
1.2. Additional Definitions. The following terms are defined in the Sections set
forth across from such term in the following table:
 
Aggregate Inventory Amount
3.3
Agreement
Preamble
Allocation Schedule
3.5
Alternative Agreement
7.9(c)
Arrow
Preamble
Assumed Contracts
5.9
Assumed Liabilities
2.4
Balance Sheet Date
5.5
Business Employees
5.16(a)
Buyer
Preamble
Buyer Applications
7.14(a)
Change of Recommendation
7.9(c)
Claim Notice
8.4(a)
Closing Date Payment
3.2(a)
Collection Period
7.23
Collections Deficiency
7.23
Collections Excess
7.23
Competing Business
7.2(a)
Confidentiality Agreement
7.9(a)
Current Prescription Volume
5.11
Data Converter
7.3(a)
Eastern
Preamble
Employee Plans
5.16(b)
Event of Loss
7.16(b)
Excluded Assets
2.3
Excluded Contracts
2.3(b)
Excluded Liabilities
2.5
Existing Worksite Pharmacies
Preamble
Fairness Opinion
5.22
Familymeds
Preamble
File-Transfer Amount
3.1(a)
File-Transfer Inventory
2.1(b)
File-Transfer Locations
Preamble
File-Transfer Records
2.1(a)
FMRX
Preamble
FMRX Proxy Statement
7.10(b)
FMRX Recommendation
7.9(c)
FMRX Stockholder Approval
5.1(a)
FMRX Stockholder Meeting
7.10(a)

 
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IOU Prescriptions
7.5
Indemnified Event
8.6(b)
Indemnified Person
8.4(a)
Indemnitor
8.4(a)
Indemnity Agent
3.4
Indemnity Amount
3.2(d)
Indemnity Escrow Account
3.2(d)
Indemnity Fund
3.4
Indemnity Termination Date
8.1(b)
Independent Valuator
3.3(a)
Inventory
2.2(c)
Inventory Amount
3.3
Inventory Audit
3.3
Inventory Closing Date Payment
3.2(b)
Management Consulting Period
7.20(c)
Notice of Superior Proposal
7.9(c)
Operate Amount
3.1(c)
Operate Location Pharmacies
Preamble
Payment Program
5.19(c)(i)
Pending Proposal
7.9(c)
Permits
5.19(a)
Personal Property
2.2(a)
PHI
7.3(c)
Power of Attorney
7.14(c)
Purchase Price
3.1
Purchased Assets
2.2
Purchased File-Transfer Assets
2.1
Record Data
7.3(a)
Records
2.2(b)
Representatives
7.9(a)
Revenue, SG&A and Balance Sheet Data
5.5
Revised Buyer Proposal
7.9(c)
Rx Operations Data
5.5
Sellers
Preamble
Shortfall
3.2(c)(ii)
Termination Date
10.1(e)
Title Commitment
7.22
Third Party Distributor
7.4
Third Person Claim
8.4(a)
Transferable Permits
7.14(a)
Transferred Employee
7.1(b)
Tupelo Amount
3.1(d)
Tupelo Property
Preamble
Worksite Amount
3.1(b)

 
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1.3. Interpretation. Article titles and headings to sections herein are inserted
for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement. The Schedules and
Exhibits referred to herein shall be construed with and as an integral part of
this Agreement to the same extent as if they were set forth verbatim herein. Any
agreement referred to herein shall mean such agreement as amended, supplemented
and modified from time to time to the extent permitted by the applicable
provisions thereof and by this Agreement. As used herein, the word “including”
means “including without limitation.”
 
ARTICLE II
 
PURCHASE AND SALE
 
2.1. Purchased Assets - File-Transfer Locations. Upon the terms and subject to
the conditions of this Agreement, the Sellers shall sell, transfer, assign,
convey and deliver to Buyer or Eastern (as determined by Buyer and Eastern and
as set forth on Schedule 2.1), and Buyer or Eastern shall purchase from the
Sellers, free and clear of all Encumbrances (except Permitted Encumbrances), all
right, title and interest of the Sellers in, to and under the following assets
and properties of the Sellers associated with each of the File-Transfer
Locations, as the same shall exist on the Closing Date for each such
File-Transfer Location (collectively, the “Purchased File-Transfer Assets”):
 
(a) Any and all prescriptions, prescription files and records, customer lists
and patient profiles, including refill status reports and insurance coverages,
any files or records maintained electronically, any files or records added
between the date of this Agreement and the Closing Date, in each case related to
the File-Transfer Locations (collectively, the “File-Transfer Records”); and
 
(b) The inventory utilized in connection with, or located on the premises of,
any of the File-Transfer Locations (the “File-Transfer Inventory”).
 
2.2. Purchased Assets - Operate Location Pharmacies and Worksite Pharmacies.
Upon the terms and subject to the conditions of this Agreement, the Sellers
shall sell, transfer, assign, convey and deliver to Buyer or Eastern (as
determined by Buyer and Eastern and as set forth on Schedule 2.1), and Buyer or
Eastern shall purchase from the Sellers, free and clear of all Encumbrances
(except Permitted Encumbrances), all right, title and interest of the Sellers
in, to and under the following assets and properties of the Sellers associated
with each of the Purchased Operate Location Pharmacies and Purchased Worksite
Pharmacies (not including Excluded Assets), as the same shall exist on the
applicable Inventory Closing Date with respect to each of the Purchased Operate
Location Pharmacies and Purchased Worksite Pharmacies (collectively, and
together with the Purchased File-Transfer Assets, the “Purchased Assets”):
 
(a) Any and all personal property owned by any of the Sellers and located at the
Purchased Operate Location Pharmacies and Purchased Worksite Pharmacies,
including all furniture, fixtures, equipment, vehicles, leasehold improvements
and signage, except computer and telecommunications equipment that the parties
mutually agree in writing to exclude (collectively, the “Personal Property”);
 

 
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(b) Any and all prescriptions, prescription files and records, customer lists
and patient profiles, including refill status reports and insurance coverages,
any files or records maintained electronically, any files or records added
between the date of this Agreement and Closing Date or the applicable Inventory
Closing Date, in each case exclusively related to the Purchased Operate Location
Pharmacies and Purchased Worksite Pharmacies (collectively, and together with
the File-Transfer Records, the “Records”);
 
(c) The inventory located at any Purchased Operate Location Pharmacies or
Purchased Worksite Pharmacies (together with the File-Transfer Inventory, the
“Inventory”);
 
(d) All improvements, fixtures, and fittings thereon, and other appurtenants
located at any Purchased Operate Location Pharmacies or Purchased Worksite
Pharmacies (such as appurtenant rights in and to public streets) including any
Security Deposits, rent credits and tenant improvement credits and allowances
paid or made with respect to the Premises;
 
(e) All rights and interests in, and assets related to, the long-term care
business at any Purchased Operate Location Pharmacies;
 
(f) All rights and interests in, and assets primarily used in or primarily
related to, the Prospective Worksite Pharmacies, unless excluded pursuant to
Section 7.17;
 
(g) All of the other assets and properties primarily used in or primarily
related to the ownership or operation of the Worksite Business, unless the
Prospective Worksite Pharmacies are excluded pursuant to Section 7.17;
 
(h) To the extent transferable, all Permits and similar rights obtained from
Governmental Bodies related exclusively to the ownership or operation of any
Purchased Operate Location Pharmacies, Purchased Worksite Pharmacies or (unless
excluded pursuant to Section 7.22) the Tupelo Property;
 
(i) Copies of all other books and records of the Sellers relating primarily to
the assets, properties and operations of the Purchased Operate Location
Pharmacies and Purchased Worksite Pharmacies or (unless excluded pursuant to
Section 7.22) the Tupelo Property;
 
(j) All Intellectual Property and any web sites, including the URL addresses and
related domain names, in each case, related primarily to the ownership or
primarily to the operation of the Worksite Business, including (i) the name
“Worksite Pharmacy” and any other trade names, Trademarks and Trade Secrets
primarily associated with the Worksite Business and the website
“www.worksitepharmacy.com” and (ii) all goodwill associated with the foregoing;
provided, that for the avoidance of doubt, the names “FamilyMeds”, “Arrow” and
any derivations thereof shall not be Purchased Assets;
 

 
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(k) Any guarantees, warranties, indemnities and similar rights to the extent
relating to Purchased Assets;
 
(l) All rights in, to and under the Assumed Contracts;
 
(m) All rights in, to and under the Patient Charges;
 
(n) Unless the Tupelo Property is excluded pursuant to Section 7.22, all rights,
title and interests in, to and under the Tupelo Property; and
 
(l)  Any other mutually agreeable assets related to the Purchased Operate
Location Pharmacies and Purchased Worksite Pharmacies.
 
2.3. Excluded Assets. Notwithstanding the provisions of Sections 2.1 and 2.2 the
Purchased Assets shall not include the following (collectively, the “Excluded
Assets”):
 
(a) All cash and cash deposits and accounts receivable (other than the Patient
Charges), including insurance receivables and pre-paid Expenses related to
pre-Closing periods, of the Sellers or the Business;
 
(b) All agreements, Contracts and understandings of the Sellers (including
equipment leases and underlying equipment) other than the Assumed Contracts
(collectively, the “Excluded Contracts”);
 
(c) All employee benefit plans, programs or arrangements and all Contracts of
insurance of the Sellers;
 
(d) All of the Sellers’ Software and any web sites, including the URL addresses
and related domain names (except as set forth in Section 2.2(j));
 
(e) All corporate minute books and the respective corporate seals of the
Sellers;
 
(f) All assets primarily used in or related to the ownership or operation of the
Excluded Businesses;
 
(g) All Real Estate Leases, Worksite Agreements, and other assets, including
inventory, primarily used in or related to the ownership or operation of the (i)
Operate Location Pharmacies designated as Excluded Operate Location Pharmacies
pursuant to Section 7.16 and (ii) Worksite Pharmacies designated as Excluded
Worksite Pharmacies pursuant to Section 7.16;
 
(h) Except to the extent set forth in Section 2.2, all Intellectual Property
owned by the Sellers;
 
(i) The Excluded Inventory (as defined in Exhibit C); and
 

 
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(j) All refunds or credits of any Tax for which the Sellers are liable or to
which the Sellers are entitled pursuant to Section 7.12.
 
2.4. Assumed Liabilities. As additional consideration for the Purchased Assets,
Buyer or Eastern, as applicable, shall assume the obligations of the Sellers
under the Assumed Contracts arising on or after the applicable Inventory Closing
Date (collectively, the “Assumed Liabilities”).
 
2.5. Excluded Liabilities. Notwithstanding anything contained in this Agreement
to the contrary, neither Buyer nor Eastern shall assume or be obligated to pay,
perform or otherwise discharge any other liability or obligation of the Sellers
whatsoever or any liabilities or obligations constituting an Encumbrance upon
the Purchased Assets, regardless of whether any such liabilities or obligations
are absolute or contingent, liquidated or unliquidated, or otherwise
(collectively, the “Excluded Liabilities”). The Sellers shall remain liable for
all Excluded Liabilities, including any obligations arising prior to Closing or
the applicable Inventory Closing Date, any liabilities and obligations arising
prior to Closing or the applicable Inventory Closing Date under any Assumed
Contract, any liabilities related to any Excluded Assets, any liabilities
arising under the Excluded Contracts and all liabilities in respect of Taxes for
which the Sellers are liable pursuant to Section 7.12. Without limiting the
generality of the foregoing, in no event shall Buyer or Eastern assume any legal
obligations of the Sellers under HIPAA or other applicable Requirements of Law,
including the HIPAA privacy standard requiring accounting of certain disclosures
of PHI made by the Sellers prior to the Closing Date.
 
2.6. Bulk Sales Laws. Buyer hereby waives compliance by Sellers with the
requirements and provisions of any “bulk-transfer” laws or other similar
Requirements of Law of any jurisdiction that may otherwise be applicable with
respect to the sale of any or all of the Purchased Assets to Buyer.
 
ARTICLE III
 
PURCHASE PRICE
 
3.1. Purchase Price. In consideration for the sale of the Purchased Assets
described in this Agreement, the aggregate purchase price (the “Purchase Price”)
shall be equal to:
 
(a) the “File-Transfer Amount” set forth on Schedule 3.1 (such amount the
“File-Transfer Amount”); plus
 
(b) the “Total Worksite Amount” set forth on Schedule 3.1, (i) less the Purchase
Price Adjustments set forth on Exhibit B for any Worksite Pharmacies designated
as Excluded Worksite Pharmacies pursuant to Section 7.16, and (ii) plus the
“Prospective Worksite Amount” set forth on Schedule 3.1 (unless the Prospective
Worksite Pharmacies are excluded pursuant to Section 7.17) (such amount, the
“Worksite Amount”); plus
 
(c) the “Total Operate Amount” set forth on Schedule 3.1, less the Purchase
Price Adjustments set forth on Exhibit B for any Operate Location Pharmacies
designated as Excluded Operate Location Pharmacies pursuant to Section 7.16
(such amount, the “Operate Amount”); plus
 

 
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(d) unless the Tupelo Property is excluded pursuant to Section 7.22, the “Tupelo
Amount” set forth on Schedule 3.1 (such amount, the “Tupelo Amount”); plus
 
(e) the Patient Charges Aggregate Amount; plus
 
(f) the Aggregate Inventory Amount; plus
 
(g) the Lease Adjustment Amount.
 
3.2. Payments; Indemnity Escrow Account. The Purchase Price shall be payable as
follows:
 
(a) On the Closing Date, Buyer and Eastern shall pay to the Sellers an amount
equal to (A) the File-Transfer Amount, plus (B) unless the Tupelo Property is
excluded pursuant to Section 7.22, the Tupelo Amount, plus (C) the Estimated
Aggregate Inventory Amount, as set forth on the Estimated Inventory Certificate,
plus (D) with respect to each of the File-Transfer Locations, the Patient
Charges Amount, as set forth in the applicable Patient Charges Certificate, plus
(E) the Prospective Worksite Amount (unless the Prospective Worksites are
excluded pursuant to Section 7.17), plus (F) the Lease Adjustment Amount, less
(G) one-half of the Inventory Closing Shared Expense Amount, less (H) one-half
of the Closing Date Shared Expenses, as set forth on the Closing Date Shared
Expenses Schedule, less (I) any amount paid to the Indemnity Escrow Account on
the Closing Date pursuant to Section 3.2(d) (such payment, the “Closing Date
Payment”).
 
(b) On each Inventory Closing Date with respect to each Purchased Operate
Location Pharmacy and Purchased Worksite Pharmacy, Buyer will pay to the Sellers
an amount equal to (i) the “Location Operate Amount” or the “Location Worksite
Amount”, as applicable, with respect to such Location as set forth on Schedule
3.1, plus (ii) with respect to each of the Purchased Operate Location
Pharmacies, the Patient Charges Amount, as set forth in the applicable Patient
Charges Certificate, less (iii) any such amount paid to the Indemnity Escrow
Account pursuant to Section 3.2(d) (each such payment, as it may be reduced
pursuant to Section 3.2(c)(ii), an “Inventory Closing Date Payment”).
 
(c) On the second business day following the date on which the Independent
Valuator delivers an Inventory Audit:
 
(i) with respect to a Purchased Operate Location Pharmacy or a Purchased
Worksite Pharmacy, Buyer shall pay the Sellers an amount equal to the Inventory
Amount for such Location; and
 
(ii) with respect to File-Transfer Locations, (x) if the Inventory Amount with
respect to such File-Transfer Location is greater than the Estimated Inventory
Amount for such File-Transfer Location, then Buyer shall pay the Sellers an
amount equal the Inventory Amount for such File-Transfer Location, less the
Estimated Inventory Amount for such File-Transfer Location, and (y) if the
Inventory Amount with respect to such File-Transfer Location is less than the
Estimated Inventory Amount for such File-Transfer Location (a “Shortfall”), then
the amount of the next following Inventory Closing Date Payment shall be reduced
by the amount of such Shortfall; provided, that in no event shall any Inventory
Closing Date Payment be reduced to less than zero; and provided, further, that
if any portion of any Shortfall remains unrecovered, Buyer shall be permitted to
recover such amount under this Agreement by reducing subsequent Inventory
Closing Date payments in a similar fashion or by making a claim under the
Indemnity Escrow Agreement to recover such amount until all Shortfalls are fully
recovered.
 

 
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(d) Buyer and Eastern shall be entitled, pursuant to the terms of the Indemnity
Escrow Agreement, to fund an indemnity escrow account (the “Indemnity Escrow
Account”), with up to a total amount of $3,000,000 (the “Indemnity Amount”) from
any payments that would otherwise be made to Sellers pursuant to this Article
III, provided, that, at any time, the total amount of payments made to the
Indemnity Escrow Account shall not exceed ten percent (10%) of the total amount
of the payments already made, or to be made concurrently therewith (not
including any payments made with respect to Inventory), to Sellers pursuant to
this Article III.
 
(e) All payments made by Buyer and Eastern hereunder shall be by wire transfer
of immediately available funds to an account specified by the Sellers or, in the
case of payments to the Indemnity Escrow Account, by the Escrow Agent.
 
3.3. Inventory Amount. The parties shall commission Washington Inventory
Service, RGIS, or another independent valuator (the “Independent Valuator”) to
conduct a full review and valuation of the Inventory, to be valued in tenths, at
each of the Purchased Operate Location Pharmacies, Purchased Worksite Pharmacies
and File-Transfer Locations as of the applicable Inventory Closing Date (each,
an “Inventory Audit”); provided, that if the Sellers have not made a Purchased
Operate Location Pharmacy or a Purchased Worksite Pharmacy available for
Installation at least thirty (30) days (or longer, if mutually agreed upon by
the parties) prior to the Closing Date, the Inventory Audit shall not take place
with respect to such Purchased Operate Location Pharmacy or Purchased Worksite
Pharmacy prior to the completion of the Installation at such Purchased Operate
Location Pharmacy or Purchased Worksite Pharmacy. Each of the Sellers and Buyer
shall be permitted to have representatives present to observe each Inventory
Audit. The costs and Expenses of the Independent Valuators are to be shared
equally by Buyer, on the one hand, and the Sellers, on the other hand, as part
of the Inventory Closing Shared Expense Amount. The Independent Valuators will
determine the aggregate value of the Inventory at each of the Purchased Operate
Location Pharmacies, Purchased Worksite Pharmacies and File-Transfer Locations
as of the applicable Inventory Closing Date (such amount, with respect to any
individual Location, the “Inventory Amount”, and the aggregate amount of the
Inventory Amounts for all of the Locations, the “Aggregate Inventory Amount”) in
accordance with the procedures and in the manner set forth on Exhibit C. Unless
otherwise agreed by the parties, the Inventory Amount as determined by the
Independent Valuator in conducting the Inventory Audit shall be binding upon the
Sellers and Buyer.
 

 
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3.4. Indemnity Fund. Notwithstanding anything to the contrary in this Agreement,
the Indemnity Amount shall be deposited by Buyer on the Closing Date with The
Bank of New York Trust Company, N.A., as indemnity escrow agent (the “Indemnity
Agent”). The Indemnity Amount so deposited with the Indemnity Agent shall
initially constitute the indemnity escrow fund (the “Indemnity Fund”) to be held
and released in accordance with the provisions of Article VIII and the Indemnity
Escrow Agreement. Pursuant to the terms and conditions of the Indemnity Escrow
Agreement, all interest, dividends and proceeds received on the Indemnity Amount
shall be retained by the Indemnity Agent as part of the Indemnity Fund. The
Indemnity Fund shall be governed by the terms set forth herein and in the
Indemnity Escrow Agreement. The Indemnity Fund shall be available to indemnify
the Buyer Group Members from any Loss or Expense as set forth in Article VIII.
All fees and Expenses of the Indemnity Agent shall be shared equally by Buyer
and Eastern on the one hand and the Sellers on the other as provided in Closing
Date Shared Expense Schedule.
 
3.5. Allocation of Purchase Price. On or before the Closing Date, Buyer, Eastern
and the Sellers shall negotiate and draft a schedule (the “Allocation Schedule”)
allocating the Purchase Price (including, for the purpose of this Section 3.5,
any other consideration paid to the Sellers and the Assumed Liabilities) among
the Purchased Assets. The Allocation Schedule shall be reasonable and shall be
prepared in accordance with Section 1060 of the Code and the Treasury
regulations thereunder. Each of Buyer, Eastern and the Sellers agrees to file
Internal Revenue Service Form 8594, and all federal, state, local and foreign
Tax Returns, in accordance with the Allocation Schedule.
 
ARTICLE IV
 
CLOSING
 
4.1. Closing Date. The Closing shall be consummated as promptly as practicable
(and in any event no later than five (5) business days) following satisfaction
of the conditions precedent contained herein (or such other date as shall be
mutually agreed upon by the parties), at a time mutually agreed upon by the
parties. 
 
4.2. Closing Date Payment; Buyer’s Closing Deliveries. At Closing, Buyer and/or
Eastern shall deliver to the Sellers each of the following:
 
(a) An amount equal to the Closing Date Payment, by wire transfer of immediately
available funds to an account specified by the Sellers;
 
(b) A certificate, dated as of the Closing Date, signed by an officer of Buyer
and Eastern to the effect set forth in clauses (a) and (b) of Section 9.1;
 
(c) The Instrument of Assignment and Assumption with respect to the
File-Transfer Assets, duly executed by an authorized officer of Buyer and
Eastern;
 
(d) The Indemnity Escrow Agreement, duly executed by an authorized officer of
Buyer and Eastern;
 

 
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(e) The Closing Date Shared Expenses Schedule, duly executed by an authorized
officer of Buyer; and
 
(f) Such other instruments or documents as may be necessary or appropriate to
carry out the transactions contemplated hereby.
 
At Closing, Buyer and/or Eastern shall also be permitted to make payments to the
Indemnity Escrow Account pursuant to Section 3.2(d).

4.3. Sellers’ Closing Date Deliveries. At or prior to Closing, the Sellers shall
deliver to Buyer and/or Eastern (as instructed by Buyer and Eastern) each of the
following:
 
(a) A certificate, dated as of the Closing Date, signed by an officer of FMRX,
Familymeds and Arrow to the effect set forth in clauses (a) and (b) of
Section 9.2;
 
(b) Certificates of the secretary or an assistant secretary of each of FMRX,
Familymeds and Arrow, respectively, dated as of the Closing Date, in form and
substance reasonably satisfactory to Buyer, as to (i) the certificate or
Articles of Incorporation of each of FMRX, Familymeds and Arrow, respectively;
(ii) the by-laws (or similar document) of each of FMRX, Familymeds and Arrow,
respectively; (iii) the authority of each of FMRX, Familymeds and Arrow,
respectively, regarding the due execution and performance of this Agreement and
the contemplated transactions; (iv) the good standing of FMRX, Familymeds and
Arrow, respectively, in their respective states of incorporation; and (v) the
incumbency and signatures of the officers of each of FMRX, Familymeds and Arrow,
respectively, executing this Agreement and any document or agreement required to
be delivered hereunder;
 
(c) The Instrument of Assignment and Assumption with respect to the
File-Transfer Assets, duly executed by an authorized officer of FMRX, Familymeds
and Arrow;
 
(d) The Indemnity Escrow Agreement, duly executed by an authorized officer of
FMRX, Familymeds and Arrow;
 
(e) The Required Worksite Consents, to the extent obtained by the Sellers, duly
executed by an authorized officer of FMRX, Familymeds and Arrow, as applicable,
and each third party to such Assumed Worksite Agreement;
 
(f) The Other Lease Amendments and the Required Lease Consents, in each case to
the extent obtained by the Sellers, duly executed by an authorized officer of
FMRX, Familymeds and Arrow, as applicable, and each third party to such Assumed
Real Estate Lease;
 
(g) An opinion of counsel to the Sellers with respect to the matters set forth
on Exhibit D;
 
(h) The Patient Charges Certificate with respect to the File-Transfer Locations;
 

 
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(i) Any documents required to be delivered by the Sellers to release all
Encumbrances (except Permitted Encumbrances) on the Purchased Assets, including
customary pay-off letters or similar acknowledgements of the discharge of any
indebtedness for borrowed money of the Sellers setting forth the amount owed as
of the Closing Date and indicating that upon payment of such amount, such
indebtedness will be discharged in full and all related Encumbrances (except
Permitted Encumbrances) on the Purchased Assets will be released and removed;
 
(j) The Powers of Attorney as contemplated by Section 7.14(c), duly executed by
authorized officers of FMRX, Familymeds and Arrow;
 
(k) Unless the Tupelo Property is excluded pursuant to Section 7.22, a deed with
respect to the Tupelo Property duly executed by the Sellers;
 
(l) The Estimated Inventory Certificate;
 
(m) The Closing Date Shared Expenses Schedule, duly executed by an authorized
officer of FMRX, Familymeds and Arrow;
 
(n) Possession of the File-Transfer Inventory and the File-Transfer Records in
accordance with Section 7.3;
 
(o) A schedule showing the amount of accrued and unpaid sales and use Taxes as
of a date within five (5) days of the Closing Date; and
 
(p) Such other instruments or documents as may be necessary or appropriate to
carry out the transactions contemplated hereby.
 
4.4. Inventory Closing Date Payment; Sellers’ Inventory Closing Deliveries. Each
of Buyer, Eastern and the Sellers will use its commercially reasonable efforts
to consummate the applicable Inventory Closing Dates as soon as practical
following the later of the Closing Date or the applicable Installation on a
mutually agreed upon schedule. On the applicable Inventory Closing Date with
respect to each Location, Buyer and/or Eastern will pay to the Sellers the
applicable Inventory Closing Date Payment, and the Sellers shall deliver to
Buyer and/or Eastern (as instructed by Buyer and Eastern):
 
(a) The Instrument of Assignment and Assumption with respect to the Purchased
Assets for such Location;
 
(b) All Record Data related to such Location in accordance with Section 7.3; and
 
(c) With respect to the Operate Location Pharmacies, the Patient Charges
Certificate related to such Location.
 
On each Inventory Closing Date, Buyer and/or Eastern shall also be permitted to
make payments to the Indemnity Escrow Account permitted pursuant to Section
3.2(d).

 
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ARTICLE V
 
REPRESENTATIONS AND WARRANTIES OF FMRX, FAMILYMEDS AND ARROW
 
Except as otherwise set forth in reasonable detail in the FMRX SEC Reports filed
with the SEC prior to the date hereof (but not including any exhibits (other
than FMRX’s consolidated financial statements) or schedules thereto or
forward-looking statements contained in the FMRX SEC Reports) or the Disclosure
Schedules (which Disclosure Schedules set forth items of disclosure with
specific reference to the particular Section or subsection of this Agreement to
which the information in the Disclosure Schedules relates; provided, however,
that any information set forth in one Section of the Disclosure Schedules will
be deemed to apply to each other Section or subsection of this Agreement to
which its relevance is reasonably apparent from the face of the disclosure),
FMRX, Familymeds and Arrow, as applicable, represent and warrant to Buyer and
Eastern as follows:
 
5.1. Organization and Authority. 
 
(a) FMRX is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada and has the corporate power and other
authority, subject to the FMRX Stockholder Approval, to execute, deliver and
perform this Agreement, the Indemnity Escrow Agreement and all other documents
and agreements required to be delivered hereunder. This Agreement, the Indemnity
Escrow Agreement and the transactions contemplated hereby and thereby have been
approved by the Board of Directors of FMRX. This Agreement has been duly
authorized, executed and delivered by FMRX and, subject to the FMRX Stockholder
Approval, is the legal, valid and binding obligation of FMRX enforceable in
accordance with its terms, and the Indemnity Escrow Agreement and all other
documents and agreements required to be delivered hereunder, have been duly
authorized by FMRX and upon execution and delivery thereof by FMRX will be
legal, valid and binding obligations of FMRX enforceable in accordance with
their terms, in each case subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application relating to or affecting
creditors’ rights and to general equity principles. The approval of the holders
of FMRX’s outstanding common stock in compliance with FMRX’s bylaws and Section
78.565 of the NRS (the “FMRX Stockholder Approval”) is the only action of any
holders of capital stock of FMRX that is necessary for the approval of this
Agreement and the transactions contemplated hereby by the holders of FMRX’s
capital stock.
 
(b) Familymeds is a corporation duly organized, validly existing and in good
standing under the laws of the State of Connecticut and has the corporate power
and other authority to execute, deliver and perform this Agreement, the
Indemnity Escrow Agreement and all other documents and agreements required to be
delivered hereunder. This Agreement, the Indemnity Escrow Agreement and the
transactions contemplated hereby have been approved by the Board of Directors of
Familymeds. This Agreement has been duly authorized, executed and delivered by
Familymeds and is the legal, valid and binding obligation of Familymeds
enforceable in accordance with its terms, and the Indemnity Escrow Agreement and
all other documents and agreements required to be delivered hereunder, have been
duly authorized by Familymeds and upon execution and delivery thereof by
Familymeds will be legal, valid and binding obligations of Familymeds
enforceable in accordance with their terms, in each case subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors’ rights and to general equity principles. The
approval of FMRX, as sole shareholder of Familymeds, is the only action of any
holder of capital stock of Familymeds that is necessary for the approval of this
Agreement and the transactions contemplated hereby by the holders of Familymeds’
capital stock.
 

 
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(c) Arrow is a corporation duly organized, validly existing and in good standing
under the laws of the State of Connecticut and has the corporate power and other
authority to execute, deliver and perform this Agreement, the Indemnity Escrow
Agreement and all other documents and agreements required to be delivered
hereunder. This Agreement, the Indemnity Escrow Agreement and the transactions
contemplated hereby have been approved by the Board of Directors of Arrow. This
Agreement has been duly authorized, executed and delivered by Arrow and is the
legal, valid and binding obligation of Arrow enforceable in accordance with its
terms, and the Indemnity Escrow Agreement and all other documents and agreements
required to be delivered hereunder, have been duly authorized by Arrow and upon
execution and delivery thereof by Arrow will be legal, valid and binding
obligations of Arrow enforceable in accordance with their terms, in each case
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application relating to or affecting creditors’ rights and to general
equity principles. The approval of FMRX, as sole shareholder of Arrow, is the
only action of any holder of capital stock of Arrow that is necessary for the
approval of this Agreement and the transactions contemplated hereby by the
holders of Arrow’s capital stock.
 
5.2. No Conflicts. Subject to the FMRX Stockholder Approval, the filing of the
FMRX Proxy Statement and obtaining any consents set forth on Schedule 5.2 or
Exhibit B, neither the execution and delivery of this Agreement nor the
consummation of any of the transactions contemplated hereby will: (a) conflict
with, result in a material breach of the terms, conditions or provisions of, or
constitute a material default, a material event of default or an event creating
rights of acceleration, termination or cancellation or a loss of rights under,
or result in the creation or imposition of any Encumbrance upon any of the
Purchased Assets, under (i) the articles or certificate of incorporation or
bylaws of any of the Sellers or (ii) any Assumed Contract or material Contract,
agreement or understanding to which any of the Sellers is a party; (b) conflict
with any order from a Governmental Body or any Requirements of Law to which any
of the Purchased Assets is subject or by which any of the Sellers is bound; or
(c) require in any material respect, the approval, consent, authorization or act
of, or the making by any of the Sellers of any declaration, filing or
registration with, any Person, except as provided under the HSR Act.
 
5.3. Taxes.
 
(a) Except as set forth on Schedule 5.3, (i) the Sellers have, in respect of the
Business and the Purchased Assets, filed all Tax Returns which are required to
be filed and have paid all Taxes which have become due pursuant to such Tax
Returns or pursuant to any assessment which has become payable or for which
Buyer or Eastern may otherwise have any transferee liability; (ii) all such Tax
Returns are complete and accurate in all material respects; (iii) the Sellers’
Tax Returns in respect of the Business and the Purchased Assets for taxable
periods for which the period of limitations for the assessment of Taxes has not
expired have not been audited by the relevant taxing authorities; (iv) no Seller
is currently the beneficiary of any extension of time within which to file any
Tax Return in respect of the Business and the Purchased Assets; (v) there is no
action, suit, investigation, audit, claim or assessment pending or proposed or
threatened with respect to Taxes of the Business and the Purchased Assets, and,
to the best of the Sellers’ knowledge, no basis exists therefor; (vi) the
Sellers have not waived or been requested to waive any statute of limitations in
respect of Taxes associated with the Business and the Purchased Assets which
waiver is currently in effect; (vii) all Taxes required to be withheld by the
Sellers (including from employees of the Business for income Taxes and social
security and other payroll Taxes) have been collected or withheld, and either
paid to the respective taxing authorities, set aside in accounts for such
purpose, or accrued, reserved against and entered upon the books of the
Business; and (viii) none of the Purchased Assets is properly treated as owned
by persons other than the Sellers for income Tax purposes.
 

 
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(b) No payment or other benefit, and no acceleration of the vesting of any
options, payments or other benefits, will be, as a direct or indirect result of
the transactions contemplated by this Agreement, an “excess parachute payment”
to a “disqualified individual” as those terms are defined in Section 280G of the
Code and the Treasury regulations thereunder. Except as set forth on Schedule
5.3, no payment, or other benefit to any Transferred Employee, and no vesting of
any options, payments or other benefits to any Transferred Employee will, as a
direct or indirect result of the transactions contemplated by this Agreement, be
(or under Section 280G of the Code and the Treasury regulations thereunder be
presumed to be) a “parachute payment” to a “disqualified individual” as those
terms are defined in Section 280G of the Code and the Treasury regulations
thereunder, without regard to whether such payment or acceleration is reasonable
compensation for personal services performed or to be performed in the future.
 
(c) None of the Sellers is a “foreign person” within the meaning of Section 1445
of the Code.
 
5.4. Title and Sufficiency. The Sellers own all of the Purchased Assets, free
and clear of all Encumbrances (except (a) Permitted Encumbrances, (b)
Encumbrances under the terms of the Sellers’ indebtedness as set forth on
Schedule 5.4, all of which shall be released as of the Closing Date or the
applicable Inventory Closing Date, (c) restrictions on assignability or changes
in ownership set forth in Assigned Contracts or under applicable Requirements of
Law, and (d) as set forth in Schedule 5.4). The Sellers have good and marketable
title to the Tupelo Property free and clear of all Encumbrances (except
Permitted Encumbrances and except as set forth on Schedule 5.4). On the Closing
Date or the applicable Inventory Closing Date, the Sellers will transfer to
Buyer and Eastern all of the Purchased Assets subject to no Encumbrances (except
Permitted Encumbrances and Encumbrances of the kind referred to in clause (c) of
the parenthetical in the immediately preceding sentence). Except for corporate
and administrative services, on-site technology, software, corporate-level
equipment, “point of sale” systems, computers, any leased equipment that is not
subject to an Assumed Contract, third-party payor agreements and any
non-transferable permits from any Governmental Body, the Purchased Assets
constitute all the assets necessary, in all material respects, for the operation
of the Purchased Worksite Pharmacies and the Purchased Operate Location
Pharmacies as currently conducted. 
 

 
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5.5. Financial Schedules. Set forth on Schedule 5.5 are selected unaudited
prescription operations data (the “Rx Operations Data”) for each of the Operate
Location Pharmacies, Existing Worksite Pharmacies and File-Transfer Locations,
in each case, for the period commencing January 1, 2006 and ending November 25,
2006, and (ii) unaudited total revenues reports and certain unaudited balance
sheet data (subject to purchase) and unaudited selling, general and
administrative expenses for (w) each of the Operate Location Pharmacies,
Existing Worksite Pharmacies and File-Transfer Locations, (x) Sellers’
pharmacies not being purchased by Buyer or Eastern, (y) Sellers’ corporate and
administrative services, and (z) Sellers’ other businesses, including its
internet business (collectively, the “Revenue, SG&A and Balance Sheet Data”), in
each case as of (in the case of the balance sheet data) and for the period ended
(in the case of the revenue and selling, general and administrative data)
September 30, 2006 (the “Balance Sheet Date”). The Rx Operations Data and the
Revenue, SG&A and Balance Sheet Data have been compiled from source books,
records, pharmacy system and financial reports of FMRX and its Subsidiaries. The
Rx Operations Data and the Revenue, SG&A and Balance Sheet Data fairly reflects
in the aggregate, in all material respects, the prescription operating data,
revenues and balance sheet data (subject to purchase), and the selling, general
and administrative expenses, in each case, for the locations specified on
Schedule 5.5 and for the periods set forth therein. The Sellers cost files for
inventory at any date, and from time to time, reflect the actual costs of
inventory that would be charged by McKesson or other applicable suppliers as of
such date.
 
5.6. No Undisclosed Liabilities. The Sellers have no material liabilities,
claims or indebtedness related primarily to the Business of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
whether due or to become due, except liabilities that (i) are set forth in the
financial schedules in Schedule 5.5 or in the FMRX SEC Reports filed with the
SEC prior to the date hereof or (ii) were incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date and are
of the same nature and amount as the liabilities set forth on Schedule 5.5.
 
5.7. Absence of Certain Changes or Events. From the Balance Sheet Date through
the date hereof, the Sellers have conducted the Business in the ordinary course
in all material respects consistent with past practice, and, since such date,
there has not been any Material Adverse Effect. Except as set forth in Schedule
5.7, from the Balance Sheet Date through the date hereof, the Sellers have not
taken any action that, if taken after the date of this Agreement, would
constitute a breach of Section 7.6 hereof.
 
5.8. SEC Filings. FMRX has made available to Buyer (through reference to
documents filed by EDGAR or otherwise) accurate and complete copies of all FMRX
SEC Reports. As of their respective filing dates (or if amended or superseded by
a filing prior to the date of this Agreement, then on the filing date of such
amending or superseding filing), all of the FMRX SEC Reports (i) were prepared
in accordance with and complied in all material respects with the requirements
of the Securities Act of 1933, as amended, or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to such FMRX
SEC Reports and, (ii) to the Knowledge of FMRX, did not 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.
 

 
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5.9. Assumed Contracts. The Sellers have made available to Buyer true, correct
and complete copies of all of the Contracts listed on Schedule 5.9, including
all Real Estate Leases and Worksite Agreements, together with all modifications
and supplements thereto (the “Assumed Contracts”). Each of the material Assumed
Contracts is in full force and effect in accordance with its terms. None of the
Sellers is in breach of any of the material provisions of any such material
Assumed Contract, nor, to the Knowledge of the Sellers, is any other party to
any such material Assumed Contract in default thereunder. Each of the Sellers
have performed all material obligations required to be performed by it to date
under each material Assumed Contract. 
 
5.10. Suppliers, Distributors and Third Party Payors. Set forth in Schedule 5.10
are the names and addresses of (during the twelve months ending December 31,
2006) (a) the ten (10) largest suppliers or wholesalers to the Sellers, measured
by value of goods supplied, (b) all Persons who have, since January 1, 2006,
provided shipping and distribution services to the Business in excess of $25,000
in fees, and (c) the Sellers’ twenty-five (25) largest payors, measured by
percentage of revenue. To the Knowledge of the Sellers, as of the date hereof,
no distributor, payor, wholesaler, customer, supplier or other Person with a
material business relationship with the Sellers has any intention to cease or
substantially reduce the use or supply of products, goods or services of or to
the Business or return any products of the Business,
 
5.11. Prescription Volume. Schedule 5.11 sets forth, as of the date of this
Agreement, the average weekly prescription count at each of the Operate Location
Pharmacies, Worksite Pharmacies and File-Transfer Locations over the preceding
twelve months (the “Current Prescription Volume”). Such prescriptions have
arisen from bona fide, legal transactions. 
 
5.12. Owned Real Property. Except for the Tupelo Property, the Sellers do not
own, beneficially or of record, any real property used in the Business. Except
as set forth on Schedule 5.12, none of the Sellers has granted any leasehold
interests or other rights to any third parties with respect to the Tupelo
Property. All public utilities, including water, sewer, gas, electric, telephone
and drainage facilities, give adequate service to the Tupelo Property, and the
Tupelo Property has unencumbered access to and from publicly dedicated streets,
the responsibility for maintenance of which has been accepted by the appropriate
Governmental Body. Complete and correct copies of any title policies, surveys,
appraisals and environmental reports in the Sellers’ possession or any policies
of title insurance currently in force and in the possession of the Sellers with
respect to the Tupelo Property have heretofore been delivered by the Sellers to
Buyer.
 

 
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5.13. Leased Real Property. 
 
(a) The Real Estate Leases and Worksite Agreements set forth on Exhibit B
comprise all leasehold interests in the Premises. None of the Sellers have
pledged, encumbered or hypothecated its right, title or interest in any Real
Estate Lease, Worksite Agreement or Premises. The Sellers have provided Buyer
with true and correct copies of each Real Estate Lease and Worksite Agreement
and all amendments, addendums and attachments thereto. Subject to obtaining the
Required Lease Consents and subject to the occurrence of the Closing, the
Sellers will transfer to Buyer or Eastern, as applicable, the Sellers’ interests
in the leasehold estates covered by the Assumed Real Estate Leases free of any
Encumbrance granted by any of the Sellers. Subject to obtaining the Required
Worksite Consents subject to the occurrence of the Closing, the Sellers will
transfer to Buyer or Eastern, as applicable, the Sellers’ interests in the
leasehold estates covered by the Assumed Worksite Agreements free of any
Encumbrances granted by any of the Sellers. The Sellers enjoy peaceful and
undisturbed possession of all the Premises, and each of the Sellers have in all
material respects performed all the obligations with respect thereto required
through the date of this Agreement to be performed by it.
 
(b) No Seller is, or, to the Knowledge of the Sellers, alleged to be, in
material breach or default under any Real Estate Lease or Worksite Agreement
and, to the Knowledge of the Sellers, there is no event that, but for the
passage of time or the giving of notice or both, would constitute or result in
any such material breach or default. To the Knowledge of the Sellers, no third
party to any Real Estate Lease or Worksite Agreement is in material breach or
default of any Real Estate Lease or Worksite Agreement. To the Knowledge of the
Sellers, there is no event that, but for the passage of time or the giving of
notice or both, would constitute or result in any such material breach or
default.
 
(c) The Tupelo Property is not, and, to the Knowledge of the Sellers, none of
the Premises are, subject to any pending suit for condemnation or other taking
by any Governmental Body, and, to the Knowledge of the Sellers, no such
condemnation or other taking is threatened or contemplated.
 
5.14. Personal Property. Schedule 5.14 contains a list of all machinery,
equipment, vehicles, furniture and other tangible personal property (other than
inventory) owned by the Sellers having an original cost of $2,500 or more and
used in or relating to the Business (not including the File-Transfer Locations).
The property listed on Schedule 5.14 is and shall be as of the applicable
Inventory Closing Date in good working order and condition, in all material
respects, free of defect or damage, ordinary wear and tear excepted. Between the
date hereof and the applicable Inventory Closing Date, there will not be a
material reduction in the property listed on Schedule 5.14. Except for leases of
computers, photocopiers, postage machines and other similar office equipment,
there is no personal property leased to Sellers located at any of the Locations.
Within thirty (30) days of the date hereof, Sellers shall deliver to Buyer a
list of all such equipment subject to a lease. To the extent Buyer or Eastern
desire to assume any such lease, Sellers shall use commercially reasonable
efforts to assign such lease (or the applicable portion thereof) to Buyer or
Eastern, as applicable.
 

 
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5.15. Intellectual Property; Software. 
 
(a) Schedule 5.15(a) contains a list of all registered Copyrights, applications
to register Copyrights, in each case, owned by any of the Sellers with respect
to the Worksite Pharmacies, and Patent Rights and Trademarks (including all
assumed or fictitious names under which any of the Sellers are conducting
business or have within the previous five years conducted business) owned by,
licensed to or used by any of the Sellers with respect to the Worksite
Pharmacies.
 
(b) Schedule 5.15(b) contains a list and description (showing in each case any
owner, licensor or licensee) of all Software owned by, licensed to or used by
any of the Sellers with respect to the Worksite Pharmacies, except Software
licensed to any of the Sellers that is commercially available and subject to
“shrink-wrap,” “click-through” or similar license agreements.
 
(c) Schedule 5.15(c) contains a list and description of all material agreements,
Contracts, licenses, sublicenses, assignments and indemnities with respect to
the Worksite Pharmacies that relate to: (i) any Copyrights, Patent Rights or
Trademarks required to be identified on Schedule 5.15(a); (ii) any Trade Secrets
owned by or licensed to any of the Sellers or (iii) any Software required to be
identified on Schedule 5.15(b).
 
(d) Except as expressly stated in Schedule 5.15(d): (i) the Intellectual
Property included in the Purchased Assets is not subject to any license (royalty
bearing or royalty free) and is not subject to any other arrangement requiring
any payment to any Person or the obligation to grant rights to any Person in
exchange; (ii) the Licensed Rights included in the Purchased Assets are free and
clear of any royalties, obligations or Encumbrances; and (iii) the Sellers have
the sole and exclusive right to bring actions for infringement or unauthorized
use of the Intellectual Property included in the Purchased Assets.
 
(e) Except as expressly stated in Schedule 5.15(e), the Intellectual Property
and the Licensed Rights included in the Purchased Assets are in all material
respects valid and in force, and the validity of the Intellectual Property and
title thereto and validity of the Licensed Rights included in the Purchased
Assets: (i) have not been questioned in any prior action, suit, investigation or
proceeding; (ii) are not being questioned in any pending action, suit,
investigation or proceeding; and (ii) to the Knowledge of the Sellers, are not
the subject(s) of any threatened action, suit, investigation or proceeding.
 
(f) Except as expressly stated in Schedule 5.15(f): (i) the Worksite Business,
as presently conducted, does not conflict with and, to the Knowledge of the
Sellers, has not been alleged to conflict with any Patents, Trademark, Trade
Secret, Copyrights or other rights of others; (ii) the consummation of the
transactions contemplated hereby will not result in the loss or impairment of
any of the Intellectual Property or the right to use any of the Licensed Rights
included in the Purchased Assets; and (iii) there are no third parties using any
of the Intellectual Property that is material to the Worksite Business as
presently conducted.
 

 
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(g) Except as expressly stated in Schedule 5.15(g): (i) the Sellers own, or
possesses valid rights to, all Software that is material to the conduct of the
Worksite Business; and (ii) there are no infringement suits, actions or
proceedings pending or, to the Knowledge of the Sellers, threatened against any
of the Sellers with respect to any Software owned or licensed by the Sellers.
 
5.16. Employee Matters.
 
(a) Set forth on Schedule 5.16(a) is a list of all employees of the Sellers who
are employed at any of the Operate Location Pharmacies, Worksite Pharmacies or
File-Transfer Locations on the date hereof (each, a “Business Employee”),
including their full legal name, position, salary, bonus and other compensation
information. Schedule 5.16(a) shall be updated as necessary to reflect new hires
or other personnel changes occurring between the date hereof and Closing or to
add employees, other than Business Employees, whom Buyer (in consultation with
such employee) hires in connection with this transaction. Except set forth on
Schedule 5.16(a), no Seller is bound by any oral or written employment
agreement, consulting agreement, or deferred compensation agreement, in each
case with respect to any Business Employee. Except as described on Schedule
5.16(a), no Business Employee is a party to any collective bargaining agreement.
As related to the Business Employees, no Seller is nor has ever been subject to
any affirmative action obligations under any Requirements of Law with respect to
any current or former Business Employees, including Executive Order 11246, or is
or has been a government contractor for purposes of any Requirements of Law with
respect to the terms and conditions of employment of any current or former
Business Employees.
 
(b) Set forth on Schedule 5.16(b) is a correct and complete list identifying
each material “employee benefit plan,” as defined in Section 3(3) of ERISA, each
material employment, retention, severance or similar Contract, plan, arrangement
or policy and each other material plan or arrangement (written or oral)
providing for compensation, bonuses, profit-sharing, stock option or other
stock-related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance (including any self-insured arrangements), health
or medical benefits, employee assistance program, disability or sick leave
benefits, workers’ compensation, supplemental unemployment benefits, severance
or retention benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) which is
maintained, administered or contributed to by FMRX or any of its Affiliates or
by which any of them are bound, and which covers any Business Employee as of the
date hereof (all of the foregoing collectively referred to as the “Employee
Plans”). Each Employee Plan that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service that it is so qualified, and no fact or event has
occurred since the date of such determination letter that would reasonably be
expected to adversely affect such qualification. Each Employee Plan is now and
has been operated in all material respects in accordance with its terms and the
Requirements of Law, including ERISA and the Code. FMRX has made all required
contributions to the Employee Plans, except for any contribution which is not
yet due and payable. None of the Purchased Assets is the subject of any lien
arising under Section 302(f) of ERISA or Section 412(n) of the Code.
 

 
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5.17. Employee Relations. Except as set forth in Schedule 5.17, with respect to
the Business, each of the Sellers have complied in all material respects with
all applicable Requirements of Laws relating to prices, wages, hours,
discrimination in employment and collective bargaining and to the operation of
the Business and is not liable for any arrears of wages or any Taxes or
penalties for failure to comply with any of the foregoing. Each of the Sellers
believe that, as of the date hereof, its relations with its employees with
respect to the Business are satisfactory. No Seller is a party to, and no Seller
with respect to the Business is affected by or, to the Knowledge of Sellers,
threatened with, any dispute or controversy with a union or with respect to
unionization or collective bargaining involving the employees of such Seller
with respect to the Business. No Seller, with respect to the Business, is
adversely affected by any dispute or controversy with a union or with respect to
unionization or collective bargaining involving any supplier or customer of such
Seller with respect to the Business. Schedule 5.17 sets forth a description of
any union organizing or election activities involving any non-union employees of
any of the Sellers with respect to the Business that have occurred since January
1, 2005 or, to the Knowledge of the Sellers, are threatened as of the date
hereof.
 
5.18. Legal Proceedings. 
 
(a) Except as described in Schedule 5.18, there are no material claims, actions,
suits or proceedings pending or, to the Sellers’ Knowledge, threatened by or
against any of the Sellers relating to or affecting the Business or the
Purchased Assets.
 
(b) Except as described in Schedule 5.18, there are no material judgments,
decrees, orders, writs, injunctions, rulings, decisions or awards of any court
or Governmental Body to which the Business or any of the Purchased Assets is
subject. No Seller has received any notice of material complaints filed against
such Seller under HIPAA or applicable patient privacy and data protection laws
and, to the Sellers’ Knowledge, no such violation exists.
 
5.19. Compliance With Law; Permits; Medicare and Medicaid. 
 
(a) Each of the Sellers have obtained all material licenses, permits, approvals
and other authorizations from a Governmental Body that are necessary to entitle
the Sellers to own or lease, and operate and use the Purchased Assets and to
carry on the Business as currently conducted. Schedule 5.19 sets forth a list of
all such material licenses, permits, approvals and other authorizations used in
the Business (collectively, the “Permits”), and Sellers shall provide a list of
all NCPDP, Medicare, Medicaid or other billing or similar numbers used in the
Business no later than 10 days after the date hereof.
 
(b) No Seller is in violation, nor has been in violation in the preceding three
years, in any material respect of any Requirements of Laws with respect to the
Business or the Purchased Assets. None of the Sellers nor, to the Knowledge of
the Sellers, anyone acting on behalf of the Sellers has received or filed
for any Medicare or Medicaid overpayments. To the Sellers’ Knowledge, all
Medicare, Medicaid and third party reports and claims filed or required to be
filed by or on behalf of the Sellers have been timely filed and are complete and
accurate in all material respects. Such reports and claims properly claim and
disclose all information and other items to be disclosed for the periods covered
thereby. None of the Sellers, any director, officer or employee of the Sellers
or any Affiliate of the Sellers has been excluded from participation in any
government healthcare payment program, including Medicare or Medicaid, nor are
any of the foregoing Persons aware of any pending or threatened investigation or
government action that may lead to such exclusion, fine or other remedy.
 

 
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(c) Without limiting the generality of the foregoing,
 
(i) to the Knowledge of the Sellers except as set forth on Schedule 5.19, (x) no
payment program, including Medicare, TRICARE, Medicaid, worker’s compensation,
Blue Cross/Blue Shield programs, and all other health maintenance organizations,
preferred provider organizations, health benefit plans, health insurance plans,
and other third party reimbursement and payment programs (the “Payment
Programs”), has requested or threatened any material recoupment, refund, or
set-off from any of the Sellers except in the ordinary course of the Business
consistent with past practice; and (y) since January 1, 2005, no Payment Program
has imposed a fine, penalty or other sanction on any of the Sellers and no
Seller has been excluded or suspended from participation in any material Payment
Program; and
 
(ii) since January 1, 2005, none of the Sellers, nor, to the Knowledge of the
Sellers, any employee, with respect to actions taken in connection with their
employment by the Sellers, (A) has been assessed a civil money penalty under
Section 1128A of the Social Security Act or any regulations promulgated
thereunder, (B) has been excluded from participation in any federal health care
program or state health care program (as such terms are defined by the Social
Security Act), including Medicare or Medicaid, nor, to the Knowledge of the
Sellers, are any of the foregoing Persons aware of any pending or threatened
investigation or government action that would be reasonably likely to lead to
such an exclusion, (C) has been convicted of any criminal offense relating to
the delivery of any item or service under a federal health care program relating
to the unlawful manufacture, distribution, prescription, or dispensing of a
prescription drug or a controlled substance, (D) has failed to comply with the
requirements of Section 340B of the Public Health Service Act, (E) is now or has
ever been listed on the office of the Inspector General’s excluded persons list,
or (F) has been a party to or subject to any action concerning any of the
matters described above in clauses (A) through (E).
 
(d) Except as may be disclosed in any environmental audit, assessment or study
conducted pursuant to Section 7.22, none of the Sellers has, and to the Sellers’
Knowledge, no other Person has, used any Hazardous Substances, or placed or
stored any Hazardous Substances at, in, under, or about, either the Purchased
Assets (other than the File-Transfer Locations) or the Premises in a manner that
requires response, remedial, corrective action or cleanup of any kind under any
applicable Environmental, Health and Safety Requirements and no Hazardous
Substances generated by the operation of the Business or Purchased Assets have
be sent for treatment or disposal at any site that requires response, remedial,
corrective action or cleanup of any kind under any applicable Environmental,
Health and Safety Requirements.
 

 
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5.20. Warranties. Except as set forth on Schedule 5.20, all pharmaceuticals and
other products marketed, sold, distributed, delivered or licensed by the Sellers
or their Affiliates with respect to the Business at any time since May 1, 2003
have been in conformity, in all material respects, with all applicable express
or implied warranties. 
 
5.21. Sale Process. Schedule 5.21, sets forth a materially complete description
of the Sale Process undertaken by FMRX and its agents in offering the Purchased
Assets for sale to third parties and a substantially similar description will be
included in the FMRX Proxy Statement. FMRX and its agents acted diligently, in
good faith and at arm’s length to achieve the highest value in the marketing of
the Purchased Assets and the solicitation of proposals from potential
purchasers.
 
5.22. Fairness Opinion. FMRX has received an opinion from JMP Securities dated
as of February 7, 2007, to the effect that, as of such date, and subject to the
qualifications, limitations and assumptions set forth therein, assuming
consummation of certain transactions (including the transactions contemplated by
this Agreement) and actions authorized by the Plan of Complete Liquidation and
Dissolution, the consideration to be received by holders of the common stock of
FMRX would be fair, from a financial point of view, all as more fully set forth
in such fairness opinion (the “Fairness Opinion)”. A true, correct and complete
copy of the Fairness Opinion has been delivered to the Buyer as of the date
hereof.
 
5.23. Solvency.
 
(a) The Sellers are and will be Solvent as of the Closing Date and the
transactions contemplated by this Agreement will not render the Sellers
Insolvent.
 
(b) As of the Closing Date, no Seller is engaged in business or transactions,
nor is about to engage in business or transactions, for which any property
remaining with such Seller immediately after the Closing Date constitutes
unreasonably small capital with which to engage in such business or
transactions.
 
(c) By entering into this Agreement and consummating the transactions
contemplated in this Agreement, none of the Sellers intend to incur, nor believe
that it will incur, debts that will be beyond such Seller’s ability to pay as
such debts mature.
 
(d) The Sellers are not entering into the transactions contemplated by this
Agreement or incurring any obligation pursuant to this Agreement with the intent
to hinder, delay or defraud any creditor to which the Sellers are indebted on
the Closing Date or any creditor to which the Sellers may become indebted after
the Closing Date.
 
5.24. Affiliate Transactions. Except as set forth on Schedule 5.24, no Affiliate
of any of the Sellers and no employee, officer or director of any of the Sellers
or any of their respective Affiliates (a) owns, directly or indirectly, in whole
or in part, any Permits, real property, leasehold interests or other property,
the use of which is necessary for the operation of the Business (other than with
respect to the File-Transfer Locations), (b) has any claim or cause of action or
any other action, suit or proceeding against, or owes any amount to any of the
Sellers related to the Business, or (c) is a party to any Contract related to
the Business (other than with respect to the File-Transfer Locations) pursuant
to which any of the Sellers provide to, or receive services from, any such
Person, except as to any such individual in his or her capacity as a Business
Employee.
 

 
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5.25. Broker. Except as set forth on Schedule 5.25, none of the Sellers, nor any
Person acting on any of the Sellers’ behalf has paid or become obligated to pay
any fee or commission to any broker, finder or intermediary for or on account of
the transactions contemplated by this Agreement.
 
ARTICLE VI
 
REPRESENTATIONS AND WARRANTIES OF BUYER AND EASTERN
 
As an inducement to the Sellers to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer and Eastern, as applicable, hereby
represent and warrant to each of the Sellers and agree as follows:
 
6.1. Organization of Buyer and Eastern. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois
and has full corporate power and authority to carry on its business as now
conducted. Eastern is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has full corporate power
and authority to carry on its business as now conducted
 
6.2. Authorization. Each of Buyer and Eastern has the full corporate power and
authority to enter into this Agreement, the Indemnity Escrow Agreement and all
documents and agreements required to be delivered hereunder to which Buyer or
Eastern is or will be a party, to consummate the transactions contemplated
hereby and thereby and to comply with the terms, conditions and provisions
hereof and thereof. The execution, delivery and performance by each of Buyer and
Eastern of this Agreement, the Indemnity Escrow Agreement and the actions
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors of each of Buyer and Eastern and no other corporate
proceedings on the part of Buyer and Eastern are necessary with respect hereto
or thereto. This Agreement has been duly authorized, executed and delivered by
each of Buyer and Eastern and is the legal, valid and binding obligation of
Buyer and Eastern enforceable in accordance with its terms, and the Indemnity
Escrow Agreement and all other documents and agreements required to be delivered
hereunder by either Buyer or Eastern have been duly authorized by Buyer and
Eastern, as applicable, and upon execution and delivery by Buyer and Eastern
will be a legal, valid and binding obligation of Buyer and Eastern enforceable
in accordance with their terms, in each case subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors’ rights and to general equity principles.
 
6.3. Non-Contravention. Neither the execution and delivery of this Agreement,
the Indemnity Escrow Agreement or the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment of the terms,
conditions and provisions hereof or thereof, in each case by Buyer and Eastern,
as applicable, will:
 

 
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(a) conflict with, result in a breach of the terms, conditions or provisions of,
or constitute a default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights under, or result
in the creation or imposition of any Encumbrance upon, any of the assets of
Buyer or Eastern, under (i) the certificate of incorporation or by-laws of Buyer
or Eastern, (ii) any material agreement, note, instrument, mortgage, lease,
license, franchise, permit or other authorization, right, restriction or
obligation to which Buyer or Eastern is a party or any of their respective
assets or business is subject or by which Buyer or Eastern is bound, (iii) any
order, writ, injection or decree to which Buyer or Eastern is a party or any of
their respective assets or business is subject or by which Buyer or Eastern is
bound or (iv) any Requirements of Laws affecting Buyer or Eastern or their
respective assets or business, except as provided under the HSR Act; or
 
(b) require the approval, consent, authorization or act of, or the making by
Buyer or Eastern of any declaration, filing or registration with, any Person,
and such other approvals, consents, authorizations or acts the failure of which
to be obtained or made would not materially impair the ability of Buyer or
Eastern to perform their respective obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
 
6.4. Sufficient Funds. Buyer and Eastern have, and on the Closing Date and the
Inventory Closing Dates, as applicable, will have, sufficient funds available to
enable Buyer and Eastern to pay the Purchase Price pursuant to the terms of this
Agreement. Buyer and Eastern will not require any third party financing to
consummate the transactions contemplated by this Agreement
 
6.5. No Other Representations or Warranties. Buyer and Eastern acknowledge that
none of the Sellers nor any other Person is making or has made any express or
implied representation or warranty with respect to any of the Sellers or any of
their respective Affiliates, except as expressly set forth in this Agreement.
 
ARTICLE VII
 
ADDITIONAL AGREEMENTS
 
7.1. Employees.
 
(a) Unless otherwise agreed to by Buyer, between the date hereof and the
applicable Inventory Closing Date, the Sellers shall (i) continue to offer
employment to each of the Business Employees, subject to normal workplace
practices and discipline, and (ii) not transfer the Business Employees, or offer
the Business Employees an employment position, outside of the Purchased Operate
Location Pharmacies, Purchased Worksite Pharmacies or File-Transfer Locations,
in each case except for short-term assignments that terminate prior to the
applicable Inventory Closing Date as required for the prudent operation of the
Sellers’ business, taken as a whole. In addition, between the date hereof and
the applicable Inventory Closing Date, the Sellers shall inform Buyer if any
Business Employee has terminated or given notice of their termination of
employment at the Purchased Operate Location Pharmacies, Purchased Worksite
Pharmacies or File-Transfer Locations.
 

 
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(b) After the applicable Inventory Closing Date for the respective Location,
Buyer shall offer employment to all or substantially all of the Business
Employees from such Location who satisfy Buyer’s generally-applicable hiring
standards. The foregoing shall be applicable with respect to any such Business
Employee who is absent from active employment as of the Closing Date only to the
extent that the Employee has legally-protected reemployment rights. Such a
Business Employee described in the preceding sentence who presents himself or
herself to Buyer ready for active work within the time required by law to
preserve such legally-protected reemployment rights shall be offered employment
by Buyer as of the date on which he or she presents himself or herself to Buyer
ready for active work. Any employees who accept Buyer’ offer of employment
(each, a “Transferred Employee”) shall be employed on substantially similar
terms as currently available to similarly situated employees of Buyer. Any
Transferred Employee will be deemed terminated by the Sellers and hired by
Buyer, effective upon the hiring of such employee by Buyer. Any Business
Employee who is not a Transferred Employee will be terminated or retained by the
Sellers, in their discretion.
 
(c) Nothing herein contained shall be considered or construed as an agreement to
employ any Business Employee for any period of time. Buyer assumes no obligation
with respect to any of the Sellers’ employees, whether hired by Buyer or not,
for any benefit, perquisite or remuneration accrued or earned while under the
Sellers’ employ. Without limiting the generality of the foregoing, Buyer shall
have no obligation or liability for such employees’ accrued vacation time,
bonuses, awards, commissions, salaries, reimbursements of any kind, health or
disability benefit, insurance, severance pay, pension or profit sharing
interests or any other benefits, compensation or remuneration of any nature
whatsoever.
 
(d) The benefits of Transferred Employees under the Employee Plans (if and to
the extent applicable) will be determined as of Closing in accordance with the
terms of the applicable Employee Plans. Except as expressly set forth herein, no
assets or liabilities of any Employee Plan shall be transferred to Buyer or any
of its Affiliates or to any plan of Buyer or any of its Affiliates.
 
(e) Buyer will make available to Transferred Employees such benefits as are
currently made available to similarly situated employees of Buyer. Within the
time period required by applicable law, the Sellers shall pay to each
Transferred Employee the amount of all accrued unpaid vacation pay credited to
the Transferred Employee as of the applicable Inventory Closing Date. Buyer will
cause all employee benefit plans and programs of Buyer and its Affiliates to
recognize all service of Transferred Employees with the Sellers or any of their
respective Affiliates (to the extent such service was recognized under the
comparable Employee Plans as of the applicable Inventory Closing Date) for
purposes of vesting and eligibility under Buyer’s employee benefit plans (other
than any retiree health benefit plan) and for purposes of determining the length
of annual vacation, number of sick days and amount of severance benefits.
 
(f) No provision of this Section 7.1 shall create any third party beneficiary or
other rights in any Business Employee (including any beneficiary or dependent
thereof, and further including the Transferred Employees) of the Sellers or of
any of their respective Affiliates in respect of employment with Buyer or any of
its Affiliates and no provision of this Section 7.1 shall create any rights in
any such Persons in respect of any benefits that may be provided, directly or
indirectly, under any Employee Plan or any plan or arrangement which may be
established by Buyer or any of its Affiliates. No provision of this Agreement
shall constitute a limitation on rights to amend, modify or terminate after
Closing any such plans or arrangements of Buyer or any of its Affiliates.
 

 
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7.2. Non-competition. 
 
(a) In furtherance of the sale of the Purchased Assets to Buyer and Eastern
hereunder by virtue of the transactions contemplated hereby and more effectively
to protect the value and goodwill of the Purchased Assets so sold, for a period
of three (3) years after the Closing Date, FMRX shall not, and shall cause its
Subsidiaries not to, in any manner whatsoever, directly or indirectly operate,
own, lease, engage or participate in as an owner, landlord, partner, employee,
joint venturer, shareholder, director, assignor, seller, transferor, or as a
sales or marketing agent or otherwise, in, for, or in connection with any
Competing Business. For purposes of this Agreement, “Competing Business” means:
(i) any Worksite Business or (ii) any retail drug store, clinic pharmacy,
pharmacy business or other business which (x) requires a pharmacy license and
(y) competes with the Business as conducted by Buyer or Eastern after the date
hereof within a radius of five (5) miles from any Operate Location Pharmacies
(other than any Excluded Operate Location Pharmacies), any Worksite Pharmacies
(other than any Excluded Worksite Pharmacies) or any File-Transfer Locations.
 
(b) For a period of three (3) years after the Closing Date, FMRX shall not, and
shall cause its Subsidiaries not to, directly or indirectly solicit or induce
any Person who filled a prescription in the twelve (12) month period ending on
the Closing Date at any File-Transfer Locations, Purchased Worksite Pharmacies
or Purchased Operate Location Pharmacies to discontinue such Person’s practice
of filling prescriptions at such Locations.
 
(c) For a period of three (3) years after the Closing Date, to the extent that
any of the Sellers remain a party to any Real Estate Lease at any File-Transfer
Location or own the real property at a File-Transfer Location after the Closing
Date, FMRX shall not, and shall cause its Subsidiaries not to, transfer, lease
or sublease the real property at such File-Transfer Location to any Competing
Business. In addition, the parties agree to the matters set forth in Schedule
7.2(c).
 
(d) For a period of two (2) years after the Closing Date, FMRX shall not, and
shall cause its Subsidiaries not to, solicit, recruit or hire any employee of
the Business at the date of this Agreement who becomes a Transferred Employee
and shall not encourage any such employee to leave the employment of Buyer or
Eastern; provided, that the provisions of this Section 7.2(d) shall not apply
with respect to any employee who responds to a public advertisement by FMRX.
 
(e) Each of the Sellers covenants and agrees that, except as required by any
Requirements of Law, it shall not and it shall use commercially reasonable
efforts to ensure that its Affiliates do not, divulge to any Person any
Confidential Information of Buyer or Eastern or the Business.
 

 
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(f) The parties hereby recognize, acknowledge and agree that the territorial and
time limitations contained in this Agreement are reasonable and properly
required for the adequate protection of the business to be conducted by Buyer
and Eastern with the Purchased Assets. The parties further agree that the
geographical and temporal restrictions referred to in this Section 7.2 are
divisible and severable. The parties acknowledge that inclusion of this Section
7.2 in the Agreement is a material inducement to Buyer and Eastern to enter into
this Agreement and pay the Purchase Price
 
(g) Notwithstanding the foregoing, nothing in this Section 7.2 shall prevent the
Sellers or their successors from (i) owning and operating the Excluded
Businesses in their current locations or (ii) purchasing or otherwise acquiring,
up to a non-controlling interest, of any class of securities of any Competing
Business enterprise that may be competitive with Buyer and Eastern and the
Purchased Operate Location Pharmacies or the Purchased Worksite Pharmacies (but
without other participation in the activities of such enterprise) as long as
such securities are listed on any national or regional securities exchange or
have been registered under Section 12 of the Exchange Act.
 
7.3. Records and Data. 
 
(a) The parties agree that Buyer and the Sellers will engage Infowerks (the
“Data Converter”) to convert the Sellers’ prescription file and record data in
electronic form that are included in the Purchased Assets (the “Record Data”) to
a format specified by Buyer. After obtaining the FMRX Stockholder Approval, the
Sellers shall provide such access, information and cooperation to the Data
Converter as may be required to enable the Data Converter to deliver the Record
Data to Buyer (i) with respect to each of the File-Transfer Locations, at least
two (2) business days prior to the Closing Date and (ii) with respect to each of
the Purchased Operate Location Pharmacies and Purchased Worksite Pharmacies, at
least two (2) business days prior to the applicable Inventory Closing Date;
provided, that prior to the applicable Inventory Closing Date (or, with respect
to the File-Transfer Records, the Closing Date) such Record Data shall be
maintained and segregated in Buyer’s computer systems and access to such data
shall not be transferred and made accessible to any pharmacy locations until the
applicable Inventory Closing Date (or, with respect to the File-Transfer
Records, the Closing Date), and shall be limited to corporate-level employees
and only for purposes of quality assurance and preparing to transition such data
from the Sellers to Buyer; provided, further, that if any Inventory Closing Date
does not occur within 90 days of the Closing Date, Buyer shall delete and
destroy the applicable Record Data (and any copies thereof) so that such Record
Data may not be accessed by Buyer or Eastern or any of their respective
Affiliates. In the event that the Sellers fail to comply with their obligations
as set forth in this Section 7.3(a) and as a result of such failure the Record
Data is not or cannot be delivered from Buyer’s corporate-level systems to the
applicable pharmacy systems as of the applicable Inventory Closing Date, Buyer,
at Buyer’s sole discretion, may delay the applicable Inventory Closing Date
until the Record Data is delivered to Buyer’s pharmacy systems. For the
avoidance of doubt, the costs and Expenses of the Data Converter are to be
shared equally by Buyer, on the one hand, and the Sellers, on the other hand, as
part of the Inventory Closing Shared Expense Amount. Notwithstanding anything
else to the contrary, upon Buyer’s receipt of the File-Transfer Records pursuant
to this Section 7.3(a), Buyer or Eastern, as applicable, will be obligated to
pay to Sellers the portion of the Purchase Price allocable to such File-Transfer
Records, Sellers will be obligated to sell, transfer and assign to Buyer or
Eastern all of its rights, title and interest to such File-Transfer Records,
free and clear of all Encumbrances (other than Permitted Encumbrances) and each
of the parties will be obligated to make the other deliveries required by
Article IV with respect to such File-Transfer Records.
 

 
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(b) In addition, the Sellers agree to make the computer hardware, computer
software and electronic data currently used for record keeping purposes
available to Buyer and Eastern for up to six (6) months after the Closing Date.
 
(c) The Sellers have, with respect to each of the Purchased Operate Location
Pharmacies, Purchased Worksite Pharmacies and File-Transfer Locations,
maintained an accurate log of all disclosures, to the extent any have been made,
as of April 14, 2003, of Protected Health Information (“PHI”), as that term is
defined in HIPAA.
 
7.4. Patient Letters. Buyer will, at its own expense, engage Tribune Direct (the
“Third Party Distributor”) to notify each customer who has had a prescription
filled or refilled at any File-Transfer Location within the last two years by
mailing each of them a letter in form and substance reasonably satisfactory to
the parties; provided, that (a) such mailing will occur after the Closing Date
or applicable Inventory Closing Date and (b) FMRX shall have the right to review
and comment on the contents of any such correspondence prior to mailing, and
Buyer shall incorporate FMRX’s reasonable comments in such correspondence. The
parties agree that, promptly after its delivery of the Record Data related to
the File Transfer Locations to Buyer in accordance with Section 7.3, and subject
to obtaining reasonable assurance from Buyer of compliance with applicable
Requirements of Law regarding patient confidentiality, the Data Converter will
provide the Record Data to the Third Party Distributor in order to enable the
Third Party Distributor to assemble and distribute such letters promptly after
the Closing Date or the applicable Inventory Closing Date. Sellers shall
instruct the Data Converter not to deliver the File-Transfer Records to the
Third Party Distributor until after it delivers such Record Data to Buyer in
accordance with Section 7.3. Buyer shall instruct the Third Party Distributor
not to distribute such letters prior to the Closing Date or the applicable
Inventory Closing Date. 
 
7.5. Matters Related to Prescriptions. Prior to the applicable Inventory Closing
Date, the Sellers shall use commercially reasonable efforts to fill and deliver
to customers of Operate Location Pharmacies and Worksite Pharmacies any
partial-fill prescriptions with a remaining quantity balance (“IOU
Prescriptions”). For any IOU Prescriptions remaining on the applicable Inventory
Closing Date, the Sellers shall credit the prescription to the customer or to
the third party payor, as appropriate, on the applicable Inventory Closing Date.
Buyer assumes no liability for IOU Prescriptions. In addition, prior to the
applicable Inventory Closing Date, the Sellers shall reverse and return to stock
any filled prescriptions that have not been picked up, providing all necessary
notice to any third party payors, and shall provide Buyer with a list of such
prescriptions so that Buyer is prepared to fill such prescriptions on or after
the applicable Inventory Closing Date.
 

 
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7.6. Interim Operations. 
 
(a) Between the date hereof and the Final Closing Date, the Sellers shall
operate and carry on the Business (except to the extent a portion thereof has
previously been transferred to Buyer or Eastern as of the Closing Date or prior
Inventory Closing Date) only in the ordinary course and substantially as
presently operated. Consistent with the foregoing, the Sellers shall (i) keep
and maintain the Purchased Assets in good operating condition and repair, normal
wear-and-tear excepted; (ii) use their commercially reasonable efforts to
preserve the goodwill of the suppliers, contractors, licensors, employees,
customers, distributors and others having business relations with the Business;
(iii) maintain the Inventory at levels adequate and not excessive in the present
circumstances of the Business and at levels reasonably based on past practices
and historical sales of the Business; and (iv) maintain the Sellers’ current
operating practices with respect to Patient Charges. In furtherance of the
foregoing, the Sellers shall maintain normal operating hours, staffing levels,
inventory levels and merchandise mix. For the avoidance of doubt, changes
imposed or required by third parties of a kind and nature typical for a company
that has announced an intent to wind down its business or dissolve shall not be
deemed to violate the terms of this Agreement (but may be included in any
determination of the existence of a Material Adverse Effect).
 
(b) Except as expressly contemplated by this Agreement or except with the
express written approval of Buyer, the Sellers shall not: (i) take any action
that is intended or may reasonably be expected to result in (x) any of the
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect, (y) any of the conditions to the Closing set
forth in this Agreement not being satisfied or (z) any violation of any
provision of this Agreement, except, in each case, as may be required by
applicable Requirements of Law; (ii) except in the ordinary course of business
consistent with past practice, enter into any lease, agreement, Contract or
commitment of any nature, oral or written, nor make any capital investment or
expenditures, primarily related to the ownership or operation of the Operate
Location Pharmacies, Worksite Pharmacies or Transfer Locations; (iii) except in
the ordinary course of business consistent with past practice, enter into any
Contract with respect to, or make any increase in (or commitment to increase)
the compensation payable to any of its employees or agents primarily related to
the Operate Location Pharmacies, Worksite Pharmacies or Transfer Locations;
(provided, that the foregoing shall not prohibit the granting of “stay-bonuses”
or similar commitments) or (iv) sell, lease, transfer or otherwise dispose of
(including any transfers from any of the Sellers to any of their respective
Affiliates), or impose or suffer to be imposed any Encumbrance on, any of the
Purchased Assets, other than inventory and minor amounts of personal property
sold or otherwise disposed of for fair value in the ordinary course of the
Business consistent with past practice.
 
7.7. Signage. To the extent not prohibited under each real estate lease related
to the File-Transfer Locations, if any, (a) the Sellers shall permit Buyer or
Eastern to place a sign at the front entrance of each File-Transfer Location for
a period of ninety (90) days after the Closing Date advising customers that all
prescription files have been transferred to a Walgreen drug store or other
location designated by Buyer or Eastern and (b) subject to any consent required
by a landlord or lessor (which the Sellers shall use commercially reasonable
efforts to obtain), concurrently with the delivery of the File-Transfer Records
to Buyer in accordance with Section 7.3, the Sellers shall permit Buyer to place
a sign and distribute flyers at the File-Transfer Locations advising customers
that all prescription files will be transferred to such drug store or other
location.
 

 
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7.8. Telephone Numbers. Upon the applicable Inventory Closing Date, the Sellers
shall disconnect existing telephone lines and terminate any existing telephone
accounts, including advertising and yellow pages agreements, for the
File-Transfer Locations. The Sellers shall arrange, in a manner approved by
Buyer and at Buyer’s sole cost and expense, for call referral for all calls to
the numbers so canceled to a Walgreen drug store or other location designated by
Buyer. 
 
7.9. Acquisition Proposals; Board Recommendation.
 
(a) Sellers shall, and shall cause their respective Subsidiaries to, and shall
direct and use commercially reasonable efforts to cause their respective
directors, officers, employees, advisors, agents and other representatives
(collectively, the “Representatives”) to, immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to an Acquisition
Proposal or any other proposal or offer to acquire any or all of the Purchased
Assets, other than the sale of inventory or obsolete equipment in the ordinary
course of business. From the date hereof until the Final Closing Date, except as
provided in this Section 7.9 and subject to compliance herewith, Sellers shall
not, and shall cause their respective Subsidiaries not to, and shall direct and
use commercially reasonable efforts to cause their respective Representatives
not to, directly or indirectly (i) solicit, initiate, encourage or take any
other action to facilitate any proposal, inquiry or request that constitutes, or
may reasonably be expected to lead to, an Acquisition Proposal or an Alternative
Proposal, (ii) participate or engage in discussions or negotiations with, or
disclose or provide any non-public information relating to FMRX to, or afford
access to any of the properties, books or records of FMRX to, any Person in
connection with an Acquisition Proposal or an Alternative Proposal, (iii)
approve, endorse or recommend any Acquisition Proposal or any Alternative
Proposal, (iv) enter into any letter of intent, agreement or agreement in
principle with any Person that has made an Acquisition Proposal or an
Alternative Proposal or (v) waive, amend, modify or grant any release under any
employee non-solicitation, standstill or similar agreement or confidentiality
agreement to which FMRX or any of its Subsidiaries is a party; provided,
however, that prior to obtaining the FMRX Stockholder Approval, Sellers, their
respective Subsidiaries and respective Representatives may take any of the
actions described in clause (ii) of this Section 7.9(a) in respect of a Person
that makes an Acquisition Proposal subsequent to the date hereof if, but only
if, (x) such Person has entered into a confidentiality agreement with FMRX on
terms that are substantially similar to the terms of the Confidentiality
Agreement, dated October 13, 2006, between FMRX and Buyer (the “Confidentiality
Agreement”), (y) a majority of the Board of Directors of FMRX has determined in
good faith, following consultation with outside counsel including counsel expert
in Nevada law, that (A) such Acquisition Proposal constitutes, or is reasonably
likely to result in, a Superior Proposal and (B) the failure of the Board of
Directors of FMRX to do so would be reasonably likely to result in a breach of
the directors’ fiduciary obligations to FMRX’s stockholders under applicable
Requirements of Law, and (z) the Acquisition Proposal was received and developed
without any intentional breach, or any material violation, of the provisions of
this Section 7.9(a).
 

 
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(b) FMRX shall advise Buyer, telephonically and in writing, of any Sellers’
receipt of any Acquisition Proposal, Alternative Proposal or any request for
Confidential Information in connection with a possible Acquisition Proposal or
Alternative Proposal, and the identity of the Person making any such proposal or
request, in any case within two (2) business days of any Sellers’ receipt
thereof. FMRX shall include in such written notice the material terms and
conditions of any such Acquisition Proposal. FMRX will keep Buyer reasonably and
promptly informed of the status of, and material information concerning
(including amendments, modifications or proposed amendments or modifications),
any Acquisition Proposal. If the Board of Directors of FMRX determines that an
Acquisition Proposal constitutes a Superior Proposal, FMRX shall deliver to
Buyer a written notice advising Buyer that the Board of Directors of FMRX has so
determined, specifying in detail the terms and conditions of such Superior
Proposal.
 
(c) The Board of Directors of FMRX has adopted a resolution recommending the
adoption and approval of this Agreement and the transactions contemplated hereby
by the stockholders of FMRX (the “FMRX Recommendation”). Except as set forth in
this Section 7.9(c), neither the Board of Directors of FMRX nor any committee
thereof may (i) amend, withdraw, modify, change, qualify or condition, or
propose publicly to amend, withdraw, modify, change, qualify or condition in a
manner adverse to Buyer, the FMRX Recommendation (a “Change of Recommendation”),
(ii) approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal or Alternative Proposal or (iii) cause or permit FMRX to
accept any Acquisition Proposal or Alternative Proposal or enter into any letter
of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an “Alternative Agreement”) related to any Acquisition Proposal
or Alternative Proposal. Notwithstanding the foregoing, in the event that, prior
to obtaining the FMRX Stockholder Approval, the Board of Directors of FMRX
determines in good faith, after consultation with FMRX’s outside legal counsel,
that the failure of the Board of Directors of FMRX to do so would be reasonably
likely to result in a breach of the directors’ exercise of their fiduciary
obligations to FMRX’s stockholders under applicable Requirements of Law, the
Board of Directors of FMRX may (x) make a Change of Recommendation, (y) approve
or recommend a Superior Proposal or (z) terminate this Agreement in order to
accept a Superior Proposal or enter into an Alternative Agreement with respect
to a Superior Proposal, but in each case (1) only at a time that follows Buyer’s
receipt of written notice (a “Notice of Superior Proposal”) advising Buyer that
the Board of Directors of FMRX has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
Person making such Superior Proposal and (2) after having provided Buyer five
(5) days prior written notice that FMRX or its Board of Directors intends to
recommend such Superior Proposal to its stockholders or terminate this Agreement
in order to accept a Superior Proposal or enter into an Alternative Agreement
with respect to such Superior Proposal, and having negotiated in good faith with
Buyer to revise the Buyer’s offer such that the Superior Proposal no longer
qualifies as a Superior Proposal, and in the case of clause (z) above, making
the payment required by Section 10.3(c), provided, that if in response to a
Superior Proposal (a “Pending Proposal”), Buyer revises its offer (the “Revised
Buyer Proposal”) such that the Pending Proposal no longer qualifies as a
Superior Proposal, and subsequent thereto any Seller receives any revisions or
amendments to the Pending Proposal which causes such Pending Proposal to
constitute a Superior Proposal, the Sellers shall promptly give notice of such
revision or amendment and shall again negotiate in good faith with Buyer (to
revise the Revised Buyer Proposal such that the Superior Proposal no longer
qualifies as a Superior Proposal) for two (2) business days prior to FMRX’s,
Familymeds’ or Arrow’s Board of Directors recommending such Superior Proposal to
its stockholders or Sellers terminating this Agreement in order to accept a
Superior Proposal or enter into an Alternative Agreement with respect to such
Superior Proposal. For the avoidance of doubt, the parties acknowledge that the
five (5) day period specified above shall apply to each and every Superior
Proposal other than a Superior Proposal resulting from a revision or amendment
to a Pending Proposal in response to a Revised Buyer Proposal, in which case the
two (2) business day period specified above shall apply.
 

 
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(d) Nothing contained in this Agreement shall prohibit FMRX or its Board of
Directors from (i) disclosing to its stockholders a position contemplated by
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act, or from issuing a
“stop, look and listen” statement pending disclosure of its position thereunder,
or (ii) making any disclosure to its stockholders if the Board of Directors
determines in good faith, after consultation with FMRX’s outside legal counsel,
that the failure of the Board of Directors of FMRX to make such disclosure would
be reasonably likely to result in a breach of the directors’ exercise of their
fiduciary obligations to FMRX’s stockholders under applicable Requirements of
Law. Subject to Section 7.9, FMRX shall take all lawful acts to obtain the FMRX
Stockholder Approval.
 
7.10. FMRX Stockholder Meeting; FMRX Proxy Statement.
 
(a) FMRX shall, subject to compliance by Buyer and Eastern with their respective
obligations pursuant to Section 7.10(d), as soon as practicable after the date
on which the FMRX Proxy Statement is cleared by the SEC, duly call, give notice
of, convene and hold a meeting of its stockholders (the “FMRX Stockholder
Meeting”) for the purpose of obtaining the FMRX Stockholder Approval.
 
(b) In connection with this Agreement and the FMRX Stockholder Meeting, FMRX
shall, subject to compliance by Buyer and Eastern with their respective
obligations pursuant to Section 7.10(d), prepare and file with the SEC, as
promptly as practicable and at FMRX’s expense, a proxy statement relating to the
FMRX Stockholder Meeting (together with any amendments thereof or supplements
thereto and any other required proxy materials, the “FMRX Proxy Statement”).
FMRX shall provide Buyer with a reasonable opportunity (but not less than three
(3) business days) to review and comment on the FMRX Proxy Statement (including
any amendment or supplement thereto) prior to the filing thereof with the SEC.
FMRX shall use its commercially reasonable efforts to respond to the comments of
the SEC and to cause the FMRX Proxy Statement to be mailed to the stockholders
of FMRX as promptly as practicable. FMRX shall promptly notify Buyer of the
receipt of comments of the SEC and of any request from the SEC for amendments or
supplements to the FMRX Proxy Statement or for additional information, and will
promptly supply Buyer with copies of all correspondence between FMRX and the SEC
or members of its staff with respect to the FMRX Proxy Statement. If at any time
prior to the FMRX Stockholder Meeting any event should occur that is required by
applicable Requirements of Law to be set forth in an amendment of, or a
supplement to, the FMRX Proxy Statement, FMRX will prepare and mail such
amendment or supplement. Subject to the provisions of Section 7.9, the FMRX
Recommendation shall be included in the FMRX Proxy Statement.
 

 
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(c) FMRX covenants that, subject to compliance by Buyer and Eastern with their
respective obligations pursuant to Section 7.10(d), the FMRX Proxy Statement
(including the description of the Sale Process included therein) will (i) as of
the time of the FMRX Proxy Statement (or any amendment thereof or supplement
thereof) is first mailed to its stockholders and as of the time of the FMRX
Stockholder Meeting, not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading and (ii) comply as to form in all
material respects with the provisions of the Exchange Act.
 
(d) Buyer and Eastern shall promptly provide to FMRX all relevant information
related to Buyer and Eastern for inclusion in the FMRX Proxy Statement, and any
amendments thereto, and so assure that the information does not contain any
untrue statement of material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances in which they are made, not misleading.
 
7.11. Access Through Final Closing Date. 
 
(a) Upon reasonable notice, subject to applicable Requirements of Law, each
Seller shall, and shall cause each of its directors, officers, agents and
employees to, afford Buyer and its representatives reasonable access during
regular business hours from the date hereof through the Final Closing to the
Premises, the Tupelo Property, and any and all properties, Contracts, books,
records, data and personnel of the Sellers relating to the Business; provided,
however, that neither Buyer nor any of its representatives shall initiate
contact (whether by written correspondence, telephone, in-person meeting, e-mail
or otherwise) with any employee of any Seller regarding the transactions and
matters contemplated by this Agreement without the prior written consent of FMRX
(which may include an e-mail consent from any officer of FMRX or the designee of
any such officer), which consent shall not be unreasonably withheld, conditioned
or delayed; and provided, further, that a representative of FMRX designated by
any officer of FMRX shall have the right to attend or participate in any such
conversations or meetings between Buyer and Sellers’ employees. Notwithstanding
the foregoing, the parties agree jointly to schedule and cause to occur
preliminary meetings with all Business Employees within five (5) days after the
date of this Agreement for the purpose of providing such general information as
the parties deem appropriate. In addition, each Seller shall afford to Buyer and
its representatives reasonable access to and an opportunity to speak with any
third parties to the Real Estate Leases and Worksite Agreements (including any
doctor groups, employers or persons related to the Prospective Worksite
Pharmacies) as well as Sellers’ third party payors and vendors; provided,
however, that FMRX and its representatives shall have the right to attend such
conversations or meetings between Buyer and its representatives and any third
parties to the Real Estate Leases and Worksite Agreements, any third party
payors or vendors. The Sellers shall provide to Buyer such information and
documents concerning the Business as reasonably may be requested by Buyer. In
exercising its rights under this Section 7.11(a), Buyer shall not unreasonably
interfere with the Sellers’ business and shall coordinate the exercise of such
rights through the Sellers. Any information obtained by Buyer pursuant to this
Section 7.11 shall be subject to the terms and conditions of the Confidentiality
Agreement. Buyer shall notify each of those employees of Buyer responsible for
transitioning the Locations to Buyer or Eastern pursuant to the transactions
contemplated by this Agreement of the foregoing restrictions and shall be liable
for any action by any of such Persons that, if taken by Buyer, would have been a
violation of this Section 7.11(a).
 

 
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(b) Upon reasonable notice, the Sellers shall permit Buyer access to all of the
Premises in order to install wiring and equipment for communication devices and
other store systems and to prepare for the integration of the Business with
Buyer’s own business, all at Buyer’s cost and without causing material damage to
such Premise. If this Agreement is terminated and the Closing Date or applicable
Inventory Closing Date shall not have occurred with respect to one or more
Locations, Buyer shall remove all such wiring and equipment at its sole cost and
expense. Buyer agrees to repair any damage which may be caused due to the
exercise of its rights or the performance of its obligations pursuant to this
Section 7.11(b) and to indemnify, defend and hold harmless the Sellers from any
and all Losses arising out of or in any way connected with Buyer’s exercise of
its rights pursuant to this Section 7.11(b). In exercising its rights under this
Section 7.11(b), Buyer shall not unreasonably interfere with Sellers’ Business
and shall coordinate the exercise of such rights through the Sellers and Buyer
shall act diligently to conduct such installations and integrations as promptly
as reasonably practicable.
 
7.12. Taxes.
 
(a) The Sellers shall be liable for and covenant to pay and, pursuant to Article
VIII, shall indemnify and hold harmless each Buyer Group Member from and against
(i) any and all Loss and Expense incurred by any of them in connection with or
arising from, all Taxes (whether assessed or unassessed) applicable to the
Business or the Purchased Assets, in each case attributable to taxable years or
periods ending prior to the Closing Date and, with respect to any Straddle
Period, the portion of such Straddle Period ending on and including the Closing
Date, and (ii) all Taxes (and all Loss and Expense incurred by Buyer in
connection with such Taxes) applicable to the Business or Purchased Assets and
attributable to taxable years or periods ending prior to the Closing Date and,
with respect to any Straddle Period, the portion of such Straddle Period ending
on and including the Closing Date, for which Buyer has transferee liability;
provided, however, that the Sellers shall not be liable for or pay, and shall
not indemnify or hold harmless any Buyer Group Member from and against, any
Taxes for which the Buyer is liable under this Agreement. Buyer shall be liable
for and covenants to pay and, pursuant to Article VIII, shall indemnify and hold
harmless the Sellers and their respective Affiliates, directors, officers,
employees and agents from and against any and all Loss and Expense incurred by
any of them in connection with or arising from, all Taxes (whether assessed or
unassessed) applicable to the Business or the Purchased Assets, in each case
attributable to taxable years or periods beginning on or after the Closing Date
and, with respect to any Straddle Period, the portion of such Straddle Period
beginning after the Closing Date; provided, however, that Buyer shall not be
liable for or pay, and shall not indemnify or hold harmless the Sellers and
their respective Affiliates, directors, officers, employees or agents from and
against, any Taxes for which the Sellers are liable under this Agreement,
including without limitation, pursuant to the preceding sentence or Section 5.3.
For purposes of this Section 7.12 any Straddle Period shall be treated on a
“closing of the books” basis as two partial periods, one ending at the close of
the Closing Date and the other beginning on the day after the Closing Date,
except that Taxes (such as property Taxes) imposed on a periodic basis shall be
allocated on a daily basis. If the actual amount of property Taxes for a
Straddle Period is not known on the Closing Date, the amount of such Taxes
prorated by the parties shall equal (i) with respect to real property Taxes,
one-hundred and ten percent (110%) of the amount of such real property Taxes
payable for the prior taxable year and (ii) with respect to personal property
Taxes, one-hundred percent (100%) of the amount of such personal property Taxes
payable for the prior taxable year.
 

 
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(b) The Sellers or Buyer, as the case may be, shall provide reimbursement for
any Tax for a Straddle Period paid by one party all or a portion of which is the
responsibility of the other party in accordance with the terms of this Section
7.12 without regard to the terms of the Indemnity Escrow Agreement. Within a
reasonable time prior to the payment of any such Tax, the party paying such Tax
shall give notice to the other party of the Tax payable and the portion which is
the liability of each party, although failure to do so will not relieve the
other party from its liability hereunder.
 
(c) After the Closing Date, each of the Sellers and Buyer shall (and cause their
respective Affiliates to): (i) assist the other party in preparing any Tax
Returns which such other party is responsible for preparing and filing; (ii)
cooperate fully in preparing for any audits of, or disputes with taxing
authorities regarding, any Tax Returns of the Business or the Purchased Assets;
(iii) make available to the other party and to any taxing authority as
reasonably requested all information, records, and documents relating to Taxes
of the Business or the Purchased Assets; (iv) provide timely notice to the other
party in writing of any pending or threatened Tax audits or assessments relating
to Taxes of the Business or the Purchased Assets for taxable periods for which
the other party may have a liability under this Section 7.12; and (v) furnish
the other party with copies of all correspondence received from any taxing
authority in connection with any Tax audit or information request with respect
to any such taxable period.
 
(d) Notwithstanding the foregoing, any Tax (including a sales tax, use tax, real
property transfer or gains tax, or documentary stamp tax) attributable to the
sale or transfer of the Purchased Assets shall be shared equally by the Sellers
on one hand and Buyer and Eastern on the other.
 

 
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(e) Sellers shall, from the date hereof through the date of the final
distribution of assets to FMRX’s stockholders or dissolution of FMRX, promptly
notify Buyer of the commencement and resolution of, and any oral or written
communications with taxing authorities regarding, any audit with respect to
state and local Taxes of the Business and the Purchased Assets.
 
7.13. Consent of Third Parties; Regulatory and Other Authorizations; HSR Act. 
 
(a) The Sellers will use commercially reasonable efforts to secure before the
Closing Date (i) each consent, approval or waiver, in form and substance
reasonably satisfactory to Buyer, required to be satisfied or obtained prior to
Closing in order to avoid any breach, default or termination of any agreement,
Contract, Permit, license or other instrument and (ii) each Other Lease
Amendment (it being acknowledged that “commercially reasonable efforts” with
regard to the Other Lease Amendment shall mean sending a proposed amendment
substantially in the form of the Other Lease Amendment to the applicable
counterparty and negotiating in good faith to obtain amendments substantially
similar to those set forth in the Other Lease Amendment); provided, that the
Sellers shall not make any agreement or understanding affecting, in any material
respect, the Business or the Purchased Assets as a condition for obtaining any
such consents or waivers except as set forth on Exhibit B, and except with the
prior written consent of Buyer, which consent shall not be unreasonably
withheld. During the period prior to the Closing Date, Buyer shall use
commercially reasonable efforts to cooperate with the Sellers to obtain the
consents, approvals and waivers contemplated by this Section 7.13(a).
 
(b) During the period prior to the Closing Date, the Sellers and Buyer shall use
commercially reasonable efforts, and shall cooperate with each other, to (1)
secure any consents and approvals of any Governmental Body required to be
obtained by them in order to permit the consummation of the transactions
contemplated hereby or (2) otherwise satisfy the conditions set forth in
Sections 9.1 and 9.2; provided, that the Sellers shall not make any agreement or
understanding affecting, in any material respect, the Business or the Purchased
Assets as a condition for obtaining any such consents or waivers except with the
prior written consent of Buyer, which consent shall not be unreasonably
withheld.
 
(c) As promptly as practicable after the date hereof and in no event more than
ten (10) days after the date hereof, Buyer and FMRX shall file with the FTC and
the Antitrust Division the notifications and other information required to be
filed under the HSR Act with respect to the transactions contemplated hereby.
Each party warrants that all such filings by it are, as of the date filed, true
and accurate and in accordance with the requirements of the HSR Act. Each of the
Sellers and Buyer agrees to make available to the other such information as each
of them may reasonably request relative to its business, assets and property
(including, in the case of the Sellers, the Business) as may be required of each
of them to file any additional information requested by such agencies under the
HSR Act. Each of the Sellers and Buyer agree to provide to the other copies of
all correspondence between it (or its advisors) and any such agency relating to
this Agreement or any of the matters described in this Section 7.13(c);
provided, that such correspondence does not contain or reveal Confidential
Information of Buyer, the Sellers or their respective Affiliates. Each of the
Sellers and Buyer agree that, except as either party may otherwise agree, all
telephonic calls and meetings with such agencies regarding the transactions
contemplated hereby or any of the matters described in this Section 7.13(c)
shall include representatives of each of Buyer and FMRX. All filing fees
associated with this Section 7.13(c) are to be shared equally by Buyer, on the
one hand, and the Sellers, on the other, as provided in the Closing Date Shared
Expenses Schedule; provided, that if the Closing shall not occur, the parties
agree to share equally the costs of all filing fees incurred with respect to the
HSR Act (including reimbursing one party or the other, as applicable).
 

 
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7.14. Avoiding Abandonment. 
 
(a) Effective as of the applicable Inventory Closing Date with respect to each
of the Purchased Operate Location Pharmacies and Purchased Worksite Pharmacies,
the Sellers hereby authorize Buyer and Eastern to operate under each Permit
related to the Business at such Location after the Closing, to the extent
permitted by applicable Requirements of Law and to the extent necessary to
enable Buyer and Eastern to conduct the Business at such Location while Buyer
and Eastern seek to replace such Permit with their own license, authorization,
permit or waiver (such Permits, the “Transferable Permits”). Buyer and Eastern
shall promptly after execution of this Agreement prepare and submit the
necessary applications (the “Buyer Applications”) to the applicable regulatory
agencies to obtain the licenses required to operate the Business. The Sellers
will take all steps reasonably necessary to maintain their respective
authorizations under the Transferable Permits that Buyer and Eastern operate
under during the period between Closing and the issuance of Buyer’s and
Eastern’s own licenses, authorizations, permits or waivers and the Sellers will
cooperate with Buyer and Eastern in preparing and submitting the Buyer
Applications. Buyer shall reimburse the Sellers for any out-of-pocket costs
(including reasonable attorney fees and Expenses) incurred by the Sellers in
connection with such cooperation, and shall indemnify and hold harmless the
Sellers and their respective Affiliates and employees against any Losses
incurred by such Persons as a result of the foregoing.
 
(b) Prior to the Closing, the Sellers agree to use commercially reasonable
efforts as may be reasonably requested by Buyer to assist Buyer and Eastern in
(i) obtaining all licenses, authorizations, permits or waivers as may be
necessary for Buyer and Eastern to conduct the Business at the Operate Location
Pharmacies and the Worksite Pharmacies (including, taking all steps reasonably
necessary to relinquish the Permits) and (ii) making such licenses,
authorizations, permits or waivers effective as of the Closing Date or as
promptly thereafter as is practicable. The parties further agree that, prior to
the Closing, they will cooperate as may be reasonably necessary to enable Buyer
and Eastern to (x) obtain either a new license or the approval of the transfer
of Buyer’s and Eastern’s existing license issued by the pharmacy boards of the
states in which the Operate Location Pharmacies and the Worksite Pharmacies are
located, and (y) obtain any other required authorizations, permits or licenses.
Buyer shall reimburse the Sellers for any out-of-pocket costs (including
reasonable attorney fees and Expenses) incurred by the Sellers in connection
with such cooperation, and shall indemnify and hold harmless the Sellers and
their respective Affiliates and employees against any Losses incurred by such
Persons as a result of the foregoing.
 

 
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(c) Effective as of the applicable Inventory Closing Date with respect to each
of the Purchased Operate Location Pharmacies and Purchased Worksite Pharmacies,
the Sellers shall execute a power of attorney, in form and substance reasonably
acceptable to the parties, authorizing Buyer and Eastern to operate the Business
at such Location under state pharmacy and Drug Enforcement Agency permits
included in the Transferable Permits (the “Power of Attorney”) and such other
powers of attorney, pharmacy management and other agreements, assignments,
amendments, addenda and other documents as may be necessary to enable Buyer and
Eastern to conduct the Business at such Location, in each case as are reasonably
requested by Buyer and Eastern.
 
(d) During the term of the Real Estate Leases and any extensions, the Sellers
will not take or fail to take any action under the Real Estate Leases that would
impair the ability of the Sellers to perform their respective obligations under
the Real Estate Leases.
 
7.15. Licenses.
 
(a) For a period of 120 days after the applicable Inventory Closing Date, Buyer
and Eastern shall have the non-exclusive right to use the tradenames and
Trademarks associated with the Purchased Operate Location Pharmacies in
connection with store signage, advertisements, solicitations, announcements and
similar matters related to any Purchased Operate Location Pharmacies; provided,
however, that Buyer and Eastern shall have obtained the prior written consent of
FMRX (which consent shall not be unreasonably withheld) with respect to the use
in connection with store signage, advertisements, solicitations, announcements
and similar matters (other than with respect to use that is limited to
announcing a change in the name or location of a particular pharmacy, for which
prior consent is not required); provided, further, that such period shall be
extended to the extent necessary if re-branding is not permitted by the
applicable Requirements of Law before the expiration of such period. For a
period of 120 days after the applicable Inventory Closing Date, Buyer and
Eastern shall be permitted to continue using existing store signage located at
the Purchased Operate Location Pharmacies and Purchased Worksite Pharmacies.
 
(b) After the Closing Date, Buyer and Eastern shall have the right to use
existing packaging, labeling, containers, supplies, advertising materials and
any similar materials, to the extent Buyer and Eastern have purchased such
materials from the Sellers, bearing the tradenames and Trademarks primarily used
in or related to the ownership or operation of the Purchased Operate Location
Pharmacies for 90 days following the applicable Inventory Closing Date. Buyer
and Eastern shall have the right to use the tradenames and Trademarks associated
with the Purchased Operate Location Pharmacies in advertising that cannot be
changed by Buyer or its Affiliates or resellers using commercially reasonable
efforts for a period not to exceed 180 days after the applicable Inventory
Closing Date. Buyer and Eastern shall comply with all applicable Requirements of
Law in any use of packaging or labeling containing the tradenames and Trademarks
primarily used in or related to the ownership or operation of the Purchased
Operate Location Pharmacies. Buyer and Eastern shall not be obligated to change
the tradenames and Trademarks primarily used in or related to the ownership or
operation of the Purchased Operate Location Pharmacies on goods in the hands of
dealers, distributors and customers at the time of the expiration of the time
period set forth herein.
 

 
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(c) For a period of one-hundred twenty (120) days after the Closing Date, the
Sellers shall have a non-exclusive right to use the Intellectual Property
included in the Purchased Assets and used in the operation of any Excluded
Worksite Pharmacies. Additionally, the Sellers shall have a perpetual,
royalty-free, non-exclusive license to use the existing tradename of any
Excluded Worksite Pharmacy, provided, that the Sellers will act diligently to
re-brand any such Excluded Worksite Pharmacy and such license may only be
transferred to a purchaser of such Excluded Worksite Pharmacy. If the Sellers
are able to re-brand any such Excluded Worksite Pharmacy, the license granted
pursuant to the preceding sentence will automatically terminate and be of no
further force or effect.
 
7.16. Excluded Pharmacies; Post-Closing Consents. 
 
(a) The parties agree that on or prior to the Closing Date, Buyer may (i)
designate any Operate Location Pharmacies for which Required Lease Consents are
not obtained as an “Excluded Operate Location Pharmacy” and (ii) designate any
Worksite Pharmacies for which Required Worksite Consents are not obtained as an
“Excluded Worksite Pharmacy”. The parties agree Buyer or Eastern, as applicable,
will purchase and the Sellers will sell to Buyer or Eastern, as applicable, any
Operate Location Pharmacies designated as an Excluded Operate Location Pharmacy
or any Worksite Pharmacies designated as an Excluded Worksite Pharmacy pursuant
to this Section 7.16(a) if the Sellers are able to obtain the Required Lease
Consent or Required Worksite Consent for such location within sixty (60) days
after the Closing Date on the terms set forth in this Agreement.
 
(b) The parties agree that the risk of loss or damage to the Purchased Assets
after the Closing Date, but prior to the assets being transferred to Buyer on
the applicable Inventory Closing Date, shall be on the Sellers. Notwithstanding
anything in the Agreement to the contrary, if any Purchased Assets at a
particular Operate Location Pharmacy or Worksite Pharmacy are damaged or
destroyed prior to the applicable Inventory Closing Date (any such event, an
“Event of Loss”) and such Event of Loss shall materially affect the value of the
Purchased Assets at such Operate Location Pharmacy or Worksite Pharmacy, Buyer
may designate such Operate Location Pharmacy or Worksite Pharmacy as an
“Excluded Operate Location Pharmacy” or “Excluded Worksite Pharmacy”, as
applicable. The parties agree Buyer or Eastern, as applicable, will purchase and
the Sellers will sell to Buyer or Eastern, as applicable, any Operate Location
Pharmacy or Worksite Pharmacy designated as an Excluded Operate Location
Pharmacy or Excluded Worksite Pharmacy pursuant to this Section 7.16(b) if the
Sellers are able to cure the applicable Event of Loss within sixty 60 days of
the Event of Loss, on the terms set forth in this Agreement. If any Event of
Loss results in any Operate Location Pharmacy or Worksite Pharmacy being
designated as an Excluded Operate Location Pharmacy or Excluded Worksite
Pharmacy, the parties shall negotiate in good faith to cause such Excluded
Operate Location Pharmacy or Excluded Worksite Pharmacy to be purchased and sold
as though it were a File-Transfer Location (taking into account all relevant
consideration, including the proximity of existing pharmacies owned and operated
by Buyer or Eastern or their respective subsidiaries and Buyer’s and Eastern’s
expected retention of the business generated by such Excluded Operate Location
Pharmacy or Excluded Worksite Pharmacy if any such pharmacy were purchased and
sold as though it were a File-Transfer Location).
 

 
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7.17. Prospective Worksite Pharmacies. Between the date hereof and the Closing
Date, the Sellers shall continue to pursue and develop Prospective Worksite
Pharmacies consistent with past practices and the Sellers shall not enter into
any Worksite Agreements with respect to any Prospective Worksite Pharmacies
without the written consent of Buyer. To the extent that Sellers do not receive
any of the Required Worksite Consents and Buyer and Eastern designate all three
(3) of the Worksite Pharmacies as “Excluded Worksite Pharmacies” pursuant to
Section 7.16, the Sellers will not sell to Buyer, and Buyer will not purchase
from the Sellers, the Prospective Worksite Pharmacies. The parties agree Buyer
or Eastern, as applicable, will purchase and the Sellers will sell to Buyer or
Eastern, as applicable, the Prospective Worksite Pharmacies on the terms set
forth in this Agreement if Buyer or Eastern purchase an Excluded Worksite
Pharmacy after the Closing Date pursuant to Section 7.16(a).
 
7.18. Nonassignable Contracts. 
 
(a) To the extent that the assignment by the Sellers of any Assumed Contract is
not permitted without the consent of the other party to the Contract, then this
Agreement shall not be deemed to constitute an assignment or an attempted
assignment of the same, if such assignment or attempted assignment would
constitute a breach thereof.
 
(b) If any necessary consent or approval is not obtained, the Sellers shall
cooperate with Buyer and Eastern in any reasonable arrangement designed to
provide Buyer or Eastern with all of the benefits under such Contract, as if
such consent or approval had been obtained. Nothing herein shall excuse the
Sellers from responsibility for any of their respective representations and
warranties or covenants hereunder.
 
7.19. Remittance. The parties agree that (a) in the event Buyer or Eastern
receives payment from any parties for services rendered by the Sellers before
the applicable Inventory Closing Date with respect to any Location (including
payment from Medicare and Medicaid programs), Buyer or Eastern will remit such
payment to the Sellers as soon as reasonably practicable after receipt thereof
(but in no event later than fifteen (15) days) and (b) in the event the Sellers
receive payment from any parties for services rendered by Buyer or Eastern after
the applicable Inventory Closing Date with respect to any Location (including
payment from Medicare and Medicaid programs), the Sellers will remit such
payment to Buyer or Eastern as soon as reasonably practicable after receipt
thereof (but in no event later than fifteen (15) days). 
 
7.20. Further Assurances. At any time and from time to time at or after the
Closing, the parties agree to cooperate with each other to execute and deliver
such other documents, instruments of transfer or assignment, files, books and
records and do all such further acts and things as may be reasonably required in
order to carry out the purposes of this Agreement.
 

 
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7.21. Access to Records and Management After Closing. 
 
(a) From the Closing Date through the earlier of (i) the third anniversary of
the Closing Date or (ii) FMRX’s final distribution of assets to FMRX’s
stockholders or dissolution of FMRX, the Sellers shall afford to Buyer and, upon
request, Buyer’s counsel, accountants and other representatives, reasonable
access at reasonable times and occasions to access and inspect information not
included in the Purchased Assets but relating to the Purchased Assets, the
Business, any Transferred Employee, or a claim by any Buyer Member for
indemnification pursuant to Section 8.1. From the Closing Date through the
earlier of (i) the third anniversary of the Closing Date or (ii) FMRX’s final
distribution of assets to FMRX’s stockholders or dissolution of FMRX, Buyer
shall afford to the Sellers and, upon request, the Sellers’ counsel, accountants
and other representatives, reasonable access at reasonable times and occasions
(and for any reasonable business purposes) to information previously provided to
Buyer by the Sellers relating to the Purchased Assets, Transferred Employees,
Records related to periods before the Closing Date or a claim by the Sellers for
indemnification pursuant to Section 8.2. If FMRX determines to dissolve itself
prior to the third anniversary of the Closing Date, FMRX will notify Buyer at
least thirty (30) days in advance and give Buyer an opportunity, at its sole
expense, to make copies of any of the Sellers’ records relating to the Purchased
Assets.
 
(b) Buyer and FMRX agree that for a period of four (4) months following the
Closing (the “Management Consulting Period”), upon reasonable advance notice
from Buyer, FMRX shall cause its senior management to provide reasonably
requested consulting services to Buyer (relating the ownership and operation of
the Business prior to Closing); provided, however, that such consulting services
shall be limited to services that can reasonably be performed by those members
of senior management who are at such time employed by FMRX throughout any time
period in which such services are to be performed, and shall not interfere with
FMRX’s operation of its businesses or with senior management’s duties and
responsibilities to the Sellers. Buyer shall compensate FMRX for such management
time at an hourly rate equal to each employee’s time on a fully loaded basis,
provided, that Buyer shall not be required to compensate FMRX for (i) any
cooperation required by Section 7.20 or (ii) any services provided pursuant to
the Consulting and Non-Competition Agreement to be executed between Buyer and
Edgardo Mercadante.
 
7.22. Tupelo Property. Buyer shall, at its expense, be permitted to conduct a
Phase I environmental audit with respect to the Tupelo Property. Additionally,
Buyer shall have the right to obtain prior to the Closing Date, at its expense,
a title commitment setting forth the current state of title (the “Title
Commitment”). If (i) the results of any such environmental audit, assessment or
study reveals any environmental defects or liabilities or violations of
Environmental, Health and Safety Requirements, (ii) if the Buyer shall have
attempted in good faith and been unable to obtain an acceptable Title Commitment
or the Title Commitment is obtained and reveals any Encumbrance, other than a
Permitted Encumbrance, (iii) the Tupelo Property is subject to condemnation or a
taking under eminent domain or (iv) Sellers do not deliver a deed with respect
to the property in form and substance acceptable to Buyer, in the case of
clauses (i) or (ii) that materially and adversely affects the value of the
Tupelo Property, then Buyer may elect to exclude the Tupelo Property from this
Agreement, in which case the Sellers will not sell to Buyer, and Buyer will not
purchase from the Sellers, the Tupelo Property; provided, that such election
shall constitute the sole remedy of Buyer or Eastern with respect to any breach
of representation, warranty or covenant hereunder with respect to the Tupelo
Property; and provided, further, that no such election, nor any breach of any
representation, warranty or covenant hereunder regarding the Tupelo property,
shall alter the obligations of the parties regarding the purchase and sale of
the other Purchased Assets.
 

 
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7.23. Collection of Patient Charges. During the 90 day period that begins on the
applicable Inventory Closing Date with respect to each File-Transfer Location
and Purchased Operate Location Pharmacy (the “Collection Period”), Buyer and
Eastern shall collect and receive payment in the ordinary course of business
with respect to the Patient Charges transferred to Buyer and Eastern with
respect to each File-Transfer Location and Purchased Operate Location Pharmacy,
generally in accordance with the billing and collection practices presently
applied by the Sellers in the collection of patient charges, except that Buyer
and Eastern shall be under no obligation to commence or threaten any litigation
to effect collection and may, after reasonable consultation with, and written
consent (which shall not be unreasonably withheld) from, the Sellers, make any
adjustment, concession or settlement which in the good faith judgment of Buyer
or Eastern is commercially reasonable. The Sellers agree to use commercially
reasonable efforts to assist in the collection of the Patient Charges when so
requested by Buyer and Eastern; provided, that the Sellers shall not be required
to incur any out-of-pocket Expenses in connection with such efforts. If the
cumulative principal amount of the collections received with respect to the
applicable Patient Charges as of the expiration of the applicable Collection
Period, less Buyer’s collection costs, exceeds 110% of the Patient Charges
Aggregate Amount (such collection amount in excess of 110% of the Patient
Charges Aggregate Amount, less Buyer’s collection costs, the “Collections
Excess”), Buyer shall pay promptly to the Sellers an amount equal to the
Collections Excess. If the cumulative principal amount of the Patient Charges
collected as of the expiration of the Collection Period is less than 90% of the
Patient Charges Aggregate Amount (such difference between the collection amount
and 90% of the Patient Charges Aggregate Amount, the “Collections Deficiency”),
the Sellers shall promptly pay to Buyer an amount equal to such Collections
Deficiency. At the end of the applicable Collection Period, Buyer shall cease to
have any further responsibilities to the Sellers with respect to the applicable
Patient Charges.
 
7.24. Website Termination. As of or immediately following the Closing Date and
any Inventory Closing Date, Sellers shall disable any connection between the
Sellers’ websites, including www.familymeds.com, and the Locations purchased by
Buyer or Eastern on such Closing Date or Inventory Closing Date.
 

 
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ARTICLE VIII
 
INDEMNIFICATION
 
8.1. Indemnification by the Sellers.
 
(a) The Sellers jointly and severally agree to indemnify and hold harmless each
Buyer Group Member from and against any and all Losses and Expenses incurred by
such Buyer Group Member in connection with or arising from:
 
(i) any breach of any warranty or the inaccuracy of any representation of the
Sellers contained or referred to in this Agreement or any certificate delivered
by or on behalf of the Sellers pursuant hereto;
 
(ii) any breach by the Sellers of any of their respective covenants or
agreements, or any failure of the Sellers to perform any of their respective
obligations, in this Agreement;
 
(iii) the failure of the Sellers to pay, perform or discharge any Excluded
Liability;
 
(iv) the failure of Seller to comply with any applicable Uniform Commercial Code
filing provisions with respect to “bulk transfers”; or
 
(v) any and all claims from or on behalf of any former, current or future (A)
holder of capital stock of, or other rights or interests in FMRX or (B) creditor
of the Sellers (other than with respect to Assumed Liabilities), in either case,
arising from or relating to the execution, delivery and performance of this
Agreement and the transactions contemplated hereby
 
provided, however, that:
 
(A) the Sellers shall not be required to indemnify and hold harmless Buyer Group
Members under clause (i) of this Section 8.1(a) with respect to Losses and
Expenses incurred by Buyer Group Members (other than Losses and Expenses
incurred as a result of inaccuracies of the representations and warranties
contained in Sections 5.1, 5.4 and 5.25, as to which this proviso shall have no
effect) unless the aggregate amount of such Losses and Expenses subject to
indemnification by the Sellers exceeds $200,000, and once such amount is
exceeded, the Sellers shall indemnify the Buyer Group Members only for the
amount in excess of such amount; and
 
(B) in no event shall the aggregate amount required to be paid by the Sellers
pursuant to clause (i) of this Section 8.1(a) (other than Losses and Expenses
incurred as a result of inaccuracies of the representations and warranties
contained in Sections 5.1, 5.4 and 5.25, as to which there shall be no
limitation) exceed $10,000,000.
 

 
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(b) The indemnification provided for in clause (i) of Section 8.1(a) shall
terminate on the earlier of (i) one (1) year after the Closing Date or (ii) the
final distribution of assets to FMRX’s stockholders or dissolution of FMRX (the
“Indemnity Termination Date”) (and no claims shall be made by any Buyer Group
Member under clause (i) of Section 8.1(a) after the Indemnity Termination Date),
except that the indemnification by Seller shall continue as to:
 
(i) the representations and warranties set forth in Sections 5.1, 5.4 and 5.25,
as to which no time limitation shall apply; and
 
(ii) any Loss or Expense arising under or related to a claim pursuant to clause
(i) of Section 8.1(a) of which any Buyer Group Member has notified the Sellers
in accordance with the requirements of Section 8.4 on or prior to the date such
indemnification would otherwise terminate in accordance with this Section 8.1,
as to which the obligation of the Sellers shall continue until the liability of
the Sellers shall have been determined pursuant to this Article VIII, and the
Sellers shall have reimbursed all Buyer Group Members for the full amount of
such Loss and Expense in accordance with this Article VIII.
 
8.2. Indemnification by Buyer. Buyer agrees to indemnify and hold harmless the
Sellers and their respective Affiliates, directors, officers and employees from
and against any and all Losses and Expenses incurred by any of them in
connection with or arising from: (a) any breach by Buyer of any of its
representations or warranties in this Agreement or in any agreement or document
required to be delivered by Buyer hereunder; (b) any breach by Buyer of any of
its covenants, agreements or obligations in this Agreement or in any agreement
or document required to be delivered by Buyer hereunder, (c) any Assumed
Liability; (d) the acts or omissions of Buyer or its Affiliates, employees,
agents and contractors, in connection with the transactions contemplated by this
Agreement. The indemnification provided for in Section 8.2 shall terminate on
the Indemnity Termination Date (and no claims shall be made by Seller under
Section 8.2 thereafter).
 
8.3. Indemnity Fund; Termination of Indemnity Fund. 
 
(a) For purposes of satisfying any amounts owed to any Buyer Group Member under
this Agreement, the Buyer Group Members shall be entitled (subject to final
determination of the right to, and amount of, indemnification pursuant to
Section 8.4(b) to either (a) set off and reduce any amounts owed to the Sellers
under this Agreement, or (b) charge the amount of any Loss and Expense against
(and be entitled to receive payment from) the Indemnity Fund, until the amounts
owed under this Article VIII exceed the Indemnity Fund.
 
(b) In the event that on the Indemnity Termination Date, no claims for
indemnification by any Buyer Group Member are pending or remain unpaid, the
Indemnity Fund shall terminate and any funds then remaining in the Indemnity
Fund shall be distributed in accordance with the terms of the Indemnity Escrow
Agreement. Alternatively, in the event that on the Indemnity Termination Date,
any such good faith claims for indemnification are pending or remain unpaid, the
Indemnity Fund shall not terminate and any funds remaining in the Indemnity Fund
shall not be distributed to the Sellers or any of their respective creditors or
stockholders unless and until all such claims have been resolved and, if
appropriate, paid in accordance with this Article VIII; provided, however, that
if the aggregate maximum amount of such claims is less than the then existing
Indemnity Fund, the Indemnity Agent shall distribute such difference in
accordance with the terms of the Indemnity Escrow Agreement. The parties agree
that if six (6) months after the Indemnity Termination Date, any good faith
claims for indemnification remain pending or unpaid, the party making such claim
shall bring an action to adjudicate such claims as promptly as practicable.
 

 
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8.4. Notice and Determination of Claims. 
 
(a) The party which is entitled to indemnification hereunder (the “Indemnified
Person”) may make claims for indemnification hereunder by promptly giving
written notice thereof to the party required to indemnify (the “Indemnitor”)
within the period in which indemnification claims can be made hereunder. If
indemnification is sought for a claim or liability asserted by a third party
(the “Third Person Claim”), the Indemnified Person shall also give written
notice thereof to the Indemnitor promptly after it receives notice of the claim
or liability being asserted, but the failure to do so, or any delay in doing so,
shall not relieve the Indemnitor of its indemnification obligation under this
Article VIII, unless, and then only to the extent that, the rights and remedies
of the Indemnitor are prejudiced as a result of the failure to give, or delay in
giving, such notice. Such notice shall in good faith summarize the bases for the
claim for indemnification (the “Claim Notice”) describing such Loss or Expense,
the amount thereof, if known, and the method of computation of such Loss or
Expense, all with reasonable particularity and containing a reference to the
provisions of this Agreement, any certificate or other agreement delivered
pursuant hereto in respect of which such Loss or Expense shall have occurred.
 
(b) Within fourteen (14) days after receiving such notice (or sooner as is
reasonably necessary, in the case of a Third Person Claim), the Indemnitor shall
give written notice to the Indemnified Person stating whether it in good faith
disputes the claim for indemnification and whether it will defend against any
Third Person Claim at its own cost and expense. If the Indemnitor fails to give
notice that it disputes an indemnification claim within 14 days after receipt of
notice thereof (or sooner as is reasonably necessary, in the case of a Third
Person Claim), it shall be deemed to have accepted and agreed to the claim, and
the amount of indemnification to which an Indemnified Person shall be entitled
under this Article VIII shall be determined: (i) by the written agreement
between the Indemnified Person and the Indemnitor; (ii) by a final,
non-appealable judgment or decree of any court of competent jurisdiction; or
(iii) by any other means to which the Indemnified Person and the Indemnitor
shall agree. The judgment or decree of a court shall be deemed final when the
time for appeal, if any, shall have expired and no appeal shall have been taken
or when all appeals taken shall have been finally determined.
 

 
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8.5. Third Person Claims. 
 
(a) Subject to Section 8.5(b), the Indemnitor shall have the right to conduct
and control, through counsel of its choosing (subject to the consent of the
Indemnified Person, which consent shall not be unreasonably withheld), the
defense, compromise or settlement of any such Third Person Claim against such
Indemnified Party as to which indemnification will be sought by any Indemnified
Party from any Indemnitor hereunder if the Indemnitor has acknowledged and
agreed in writing that, if the same is adversely determined, the Indemnitor has
an obligation to provide indemnification to the Indemnified Party in respect
thereof, and in any such case the Indemnified Party shall cooperate in
connection therewith and shall furnish such records, information and testimony
and attend such conferences, discovery proceedings, hearings, trials and appeals
as may be reasonably requested by the Indemnitor in connection therewith;
provided, that the Indemnified Party may participate, through counsel chosen by
it and at its own expense, in the defense of any such Third Person Claim as to
which the Indemnitor has so elected to conduct and control the defense thereof.
Notwithstanding anything herein to the contrary, the Indemnitor shall not settle
or compromise any Third Person Claim without the prior written consent of the
Indemnified Party which shall not be unreasonably withheld, unless the terms of
any settlement or compromise provide for (i) no relief other than the payment of
monetary damages for which the Indemnified Party will be indemnified in full and
(ii) a full release of the Indemnified Party for all liability in respect of
such claim or litigation.
 
(b)Notwithstanding the provisions of paragraph (a) above which grant to the
Indemnitor the right to assume the defense of a Third Person Claim, if (i) the
Indemnitor elects not to assume the defense or fails to assume the defense in a
timely manner, (ii) the Indemnitor and any Indemnified Party are both parties to
or subjects of such Third Person Claim and a conflict of interests exists
between the Indemnitor and such Indemnified Party which has the potential of
materially and adversely affecting the interests of the Indemnified Party in the
defense of such Third Person Claim or (iii) the Indemnified Party reasonably
determines in good faith that the Indemnified Party or its Affiliates could be
adversely affected in any material respect in such Third Person Claim other than
as a result of monetary damages, then the Indemnified Party may conduct its own
defense and employ counsel reasonably satisfactory to the Indemnitor to
represent or defend it against such Third Person Claim, in which case the
Indemnitor will pay the reasonable Expenses of such counsel. If the Indemnified
Party retains its own counsel, the Indemnitor shall reasonably cooperate in
providing information to and consulting with the Indemnified Party about the
Third Person Claim.
 
8.6. Calculation of Losses and Expenses.
 
(a) Any indemnity payment hereunder with respect to any Loss or Expense shall be
calculated on an “After-Tax Basis”, which shall mean an amount which is
sufficient to compensate the Indemnified Person for the event giving rise to
such Loss or Expense (the “Indemnified Event”), determined after taking into
account (1) all increases in federal, state, local or other Taxes (including
estimated Taxes) payable by the Indemnified Person as a result of the receipt of
the indemnity payment (as a result of the indemnity payment being included in
income, resulting in a reduction of Tax basis, or otherwise), (2) to the extent
not previously taken into account in computing the amount of the such Loss or
Expense, all increases in federal, state, local and other Taxes (including
estimated Taxes) payable by the Indemnified Person as a result of the
Indemnified Event for all affected taxable years or periods ending on or before
the Closing Date or the applicable Inventory Closing Date and, with respect to
any Straddle Period, the portion of such Straddle Period ending on and including
the Closing Date or the applicable Inventory Closing Date, and (3) to the extent
not previously taken into account in computing the amount of such Loss or
Expense, all reductions in federal, state, local and foreign Taxes (including
estimated Taxes) realized by the Indemnified Person as a result of the
Indemnified Event for all affected taxable years or periods ending on or before
the Closing Date or the applicable Inventory Closing Date and, with respect to
any Straddle Period, the portion of the Straddle Period ending on and including
the Closing Date or the applicable Inventory Closing Date.
 

 
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(b) Notwithstanding anything to the contrary elsewhere in this Agreement, no
party shall, in any event, be liable to any other Person for any consequential,
incidental, indirect, special or punitive damages of such other Person;
provided, that such exclusion shall not be interpreted to include any actual
out-of-pocket Losses or Expenses.
 
8.7. Tax Treatment of Indemnity Payments. The Sellers and Buyer agree to treat
any indemnity payment made pursuant to this Article VIII as an adjustment to the
Purchase Price for federal, state, local and foreign income Tax purposes.
 
8.8. Indemnification as Sole Remedy. Except as permitted under Section 11.11 and
except with respect to claims for Losses and Expenses which cannot be waived as
a matter of law (including fraud), the indemnity provided herein will be the
sole and exclusive remedy of the Buyer Group Members and the Sellers and their
respective Affiliates, directors, officers, employees and agents with respect to
any and all claims for Losses and Expenses sustained, incurred or suffered,
directly or indirectly, relating to or arising out of this Agreement.
 
ARTICLE IX
 
CONDITIONS TO CLOSING
 
9.1. Sellers’ Condition to Closing. The obligations of the Sellers under this
Agreement are subject to the satisfaction at or prior to the Closing of each of
the following conditions, but compliance with any or all of such conditions may
be waived, in writing, by the Sellers:
 
(a) The representations and warranties of Buyer and Eastern contained in this
Agreement that are qualified as to materiality shall be true and correct in all
respects and those representations and warranties not so qualified shall be true
and correct in all material respects, in each case, on the date hereof and on
the Closing Date (except to the extent that they expressly relate to an earlier
date);
 
(b) Buyer and Eastern shall have performed and complied in all material respects
with all of the covenants and agreements contained in this Agreement and
satisfied all of the conditions required by this Agreement to be performed or
complied with or satisfied by Buyer and Eastern at or prior to the Closing;
 

 
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(c) The waiting period under the HSR Act shall have expired or been terminated
and, on the Closing Date, there shall be no injunction, restraining order or
decree of any nature of any court or Governmental Body in effect that restrains
or prohibits the consummation of the transactions contemplated by this Agreement
and no action, suit or proceeding shall have been instituted by any Person or
entity, or threatened by any Governmental Body, before a court or Governmental
Body, to restrain or prevent the carrying out of the transactions contemplated
by this Agreement;
 
(d) The FMRX Stockholder Approval shall have been obtained; and
 
(e) Buyer and Eastern shall have delivered all documents required to be
delivered under Section 4.2.
 
9.2. Buyer’s Conditions to Closing. The obligations of Buyer and Eastern under
this Agreement are subject to the satisfaction at or prior to the Closing of
each of the following conditions, but compliance with any or all of any such
conditions may be waived, in writing, by Buyer and Eastern: 
 
(a) The representations and warranties of each of the Sellers contained in this
Agreement shall have been true and correct when made and shall be true and
correct as of the Closing Date, with the same force and effect as if made as of
the Closing Date (other than such representations and warranties as are made as
of another date which shall be true and correct as of such date), except where
the failure to be so true and correct (without giving effect to any limitations
or qualifications as to “materiality” (including the word “material” or
“Material Adverse Effect” set forth therein)) would not, individually or in the
aggregate, have, or reasonably be expected to have, a Material Adverse Effect;
 
(b) Each of the Sellers shall have performed and complied in all material
respects with all the covenants and agreements contained in this Agreement and
satisfied all the conditions required by this Agreement to be performed or
complied with or satisfied by it or them at or prior to the Closing Date;
 
(c) The waiting period under the HSR Act shall have expired or been terminated
and, on the Closing Date, there shall be no injunction, restraining order or
decree of any nature of any court or Governmental Body in effect that restrains
or prohibits the consummation of the transactions contemplated by this Agreement
and no action, suit or proceeding shall have been instituted by any Person or
entity, or threatened by any Governmental Body, before a court or Governmental
Body, to restrain or prevent the carrying out of the transactions contemplated
by this Agreement;
 
(d) Between the date hereof and the Closing Date, there shall not have been any
Material Adverse Effect;
 
(e) The FMRX Stockholder Approval shall have been obtained;
 

 
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(f) The Sellers shall have delivered to Buyer and Eastern documents, in form and
substance reasonably satisfactory to Buyer, demonstrating the release of all
Encumbrances (except Permitted Encumbrances) on the Purchased Assets, including
customary pay-off letters or similar acknowledgements of the discharge of any
indebtedness for borrowed money of the Sellers setting forth the amount owed as
of the Closing Date and indicating that upon payment of such amount, such
indebtedness will be discharged in full and all related Encumbrances (except
Permitted Encumbrances) on the Purchased Assets will be released and removed;
 
(g) The Sellers shall have delivered all documents required to be delivered
under Section 4.3;
 
(h) Buyer and Edgardo Mercadante shall have entered into a definitive Consulting
and Non-Competition Agreement on the terms set forth in the term sheet attached
as Exhibit E and such other customary terms mutually agreed upon by Buyer and
Edgardo Mercadante; and
 
(i) Buyer and Eastern shall have obtained all pharmacy licenses and pharmacy
permits required to operate the Business (either by transfer of Seller’s
Transferable Permits to the extent permitted by law or its receipt of new
licenses, permits or numbers, provided, however, that prior to Closing, Buyer
and Eastern will file their respective applications for the required licenses).
 
ARTICLE X
 
TERMINATION
 
10.1. Termination. Notwithstanding anything contained in this Agreement to the
contrary, this Agreement may be terminated at any time prior to the Closing Date
whether before or after the FMRX Stockholder Approval shall have been obtained
(except for any termination pursuant to Section 10.1(h)):
 
(a) by the mutual written consent of Buyer and each of the Sellers;
 
(b) by Buyer in the event of any material breach by any Seller of any of such
Seller’s agreements, covenants, representations or warranties contained herein
and such material breach is incapable of being cured or, if capable of being
cured, shall not have been cured within thirty (30) days following receipt by
such Seller of notice of such material breach from Buyer;
 
(c) by any of the Sellers in the event of any material breach by Buyer of any of
Buyer’s agreements, covenants, representations or warranties contained herein
and such material breach is incapable of being cured or, if capable of being
cured, shall not have been cured within thirty (30) days following receipt by
Buyer of notice of such material breach from the Sellers;
 

 
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(d) by any of the Sellers or Buyer if any Governmental Body shall have issued a
final and non-appealable order, decree or ruling permanently restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby;
 
(e) by any of the Sellers or Buyer if the Closing shall not have occurred on or
before 180 days after the date hereof (or such later date as may be mutually
agreed to in writing by Buyer and the Sellers) (the “Termination Date”);
provided, that the party seeking to exercise such right of termination has not
breached its obligations hereunder;
 
(f) by any of the Sellers or Buyer if, at the FMRX Stockholder Meeting or any
adjournment thereof at which this Agreement has been voted upon, the FMRX
Stockholder Approval shall have not been obtained; or
 
(g) by Buyer if (i) the Board of Directors of FMRX shall (A) make a Change of
Recommendation or shall fail to include the FMRX Recommendation in the FMRX
Proxy Statement, (B) approve or recommend to the stockholders of FMRX an
Acquisition Proposal or an Alternative Proposal, (C) fail to confirm the FMRX
Recommendation within five (5) business days of Buyer’s request to do so, (D)
approve or recommend that the stockholders of FMRX tender their stock in FMRX in
any tender or exchange offer that is an Acquisition Proposal or an Alternative
Proposal (or fail to recommend to FMRX’s stockholders rejection of such tender
or exchange offer within ten (10) days after such tender or exchange offer is
first published, sent or given), or (E) publicly propose, approve a resolution
or agree to do any of the foregoing, in each case, whether or not permitted by
the terms of this Agreement; (ii) FMRX shall have breached its obligations under
this Agreement by reason of a failure to call and hold the FMRX Stockholder
Meeting in accordance with Section 7.10(a) or a failure to prepare and mail to
its stockholders the FMRX Proxy Statement in accordance with Section 7.10(b); or
(iii) prior to the record date with respect to the FMRX Stockholder Approval,
any Person or group (other than Buyer or its Affiliates) acquires Beneficial
Ownership of a majority of the outstanding stock of any of the Sellers; or
 
(h) by FMRX, pursuant to Section 7.9(c).
 
10.2. Extension of Termination Date. Notwithstanding the foregoing, any of the
Sellers or Buyer shall have the option to extend, from time to time, the
Termination Date for additional periods of time not to exceed sixty (60) days in
the aggregate if all other conditions to the Closing are satisfied or capable of
then being satisfied and the sole reason that the Closing has not been
consummated is that the FMRX Stockholder Meeting has not yet been held as a
result of the time required to complete the SEC review process related to the
FMRX Proxy Statement; provided, that the right to extend the Termination Date
pursuant to this Section 10.2 shall not be available to any party whose breach
of any provision of this Agreement has been the cause of, or resulted, directly
or indirectly, in, the failure of the Closing to be consummated by the
Termination Date.
 

 
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10.3. Effect of Termination. 
 
(a) In the event of the termination of this Agreement pursuant to Section 10.1,
all further obligations of the parties under this Agreement shall be terminated
without further liability of any party or its stockholders, directors or
officers to the other parties, provided, (a) that this Section 10.3 and Sections
11.2, 11.7 and 11.13 shall survive any such termination, and (b) that nothing
herein shall relieve any party from liability or damages for its willful breach
of this Agreement.
 
(b) If:
 
(i)    (A) (x) any of the Sellers or Buyer shall terminate this Agreement
pursuant to Section 10.1(e) or (y) Buyer shall terminate this Agreement pursuant
to Section 10.1(b), and
 
(B) at any time after the date of this Agreement and before such termination, a
Superior Proposal shall have been publicly announced, become publicly known or
otherwise communicated to senior management, the Board of Directors and
stockholders of FMRX (whether or not conditional and whether or not withdrawn),
and
 
(C) within twelve months of such termination FMRX or any of its Subsidiaries
enters into a definitive agreement with respect to, or consummates, any
Acquisition Proposal or Alternative Proposal;
 
(ii) Buyer shall terminate this Agreement pursuant to Section 10.1(g); or
 
(iii) FMRX shall terminate this Agreement pursuant to Section 10.1(h);
 
then the Sellers shall promptly, but in no event later than the date of such
termination (or, in the case of clause (i), if later, the date any of the
Sellers or any of their respective Subsidiaries enters into such agreement with
respect to or consummates such Acquisition Proposal or Alternative Proposal),
(x) pay Buyer an amount equal to $2,500,000 and (y) assume and pay, or reimburse
Buyer for, all reasonable, out-of-pocket Expenses incurred by Buyer in
connection with this Agreement and the transactions contemplated hereby (but not
in excess of $500,000) by wire transfer of immediately available funds.
 
(c) If any of the Sellers or Buyer shall terminate this Agreement pursuant to
Section 10.1(f), then the Sellers shall on the date of such termination assume
and pay, or reimburse Buyer for, all reasonable, out-of-pocket Expenses incurred
by Buyer in connection with this Agreement and the transactions contemplated
hereby (but not in excess of $500,000) by wire transfer of immediately available
funds. In addition, if any of the Sellers or Buyer shall terminate this
Agreement pursuant to Section 10.1(f), and at any time after this date of this
Agreement and before the FMRX Stockholder Meeting, (i) there shall have been a
Change of Recommendation or (ii) a Superior Proposal shall have been publicly
announced, become publicly known or otherwise communicated to senior management,
the Board of Directors and stockholders of FMRX (whether or not conditional and
whether or not withdrawn) and within twelve months of such termination any of
the Sellers or any of their respective Subsidiaries enters into a definitive
agreement with respect to, or consummates, any Acquisition Proposal or
Alternative Proposal, then the Sellers shall pay Buyer an amount equal to
$2,500,000 (x) in the case of clause (i) above, upon the date of such
termination or (y) in the case of clause (ii) above, upon the date any of the
Sellers or any of their respective Subsidiaries enters into such agreement with
respect to or consummates any Acquisition Proposal.
 

 
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ARTICLE XI
 
GENERAL PROVISIONS
 
11.1. Survival. All representations and warranties made in this Agreement shall
survive the Closing Date until the indemnity obligations with respect thereto,
as set forth in Article VIII, shall terminate.
 
11.2. No Public Announcement. Neither party shall, without the approval of the
other party, make any press release or other public announcement concerning the
transactions contemplated by this Agreement, except as and to the extent that a
party may be so obligated by law, in which case the parties shall use their
commercially reasonable efforts to cause a mutually agreeable release or
announcement to be issued.
 
 
11.3. Notices. All notices or other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been given when
delivered in person, by telex or telecopier, when delivered to a recognized next
business day courier, or, if mailed, when deposited in the United States mail,
first class, registered or certified, return receipt requested, with proper
postage prepaid, addressed as follows or to such other address as notice shall
have been given pursuant hereto:
 
If to the Sellers, to:
 
Familymeds Group, Inc.
312 Farmington Avenue
Farmington, CT 06032
Attention: Allison D. Kiene R.Ph., Esq.
Sr. Vice President, General Counsel and Secretary
Phone:  (860) 676-1222 ext. 117
Fax:  (860) 676-8764

with a copy to:
 
Jones Day
555 California Street
San Francisco, CA 94104
Attention: Tobias S. Keller
Phone:  (415) 875-5869
Fax:  (415) 875-5700

 
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If to Buyer, to:
 
Walgreen Co. Law Department
104 Wilmot Road, M. S. #1425
Deerfield, Illinois 60015
Attention: Allan M. Resnick
Mark E. Vainisi
Phone:  (847) 315-4185
Fax:  (847) 315-4826

with a copy to:
 
Sidley Austin LLP
One South Dearborn
Chicago, Illinois 60603
Attention: Chris Abbinante
Phone:  (312) 853-7000
Fax:  (312) 853-7036
 
11.4. Successors and Assigns; No Third Party Beneficiaries. Either party may
assign any of its rights hereunder, but no such assignment shall relieve it of
its obligations hereunder. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and permitted assigns. Except
as set forth in Article VIII, nothing in this Agreement, expressed or implied,
is intended or shall be construed to confer upon any Person other than the
parties and successors and assigns permitted by this Section 11.4 any right,
remedy or claim under or by reason of this Agreement.
 
11.5. Entire Agreement; Amendments. This Agreement, the Confidentiality
Agreement and the Exhibits and Schedules referred to herein and the documents
delivered pursuant hereto contain the entire understanding of the parties hereto
with regard to the subject matter contained herein or therein, and, except with
respect to the Confidentiality Agreement, supersede all prior agreements,
understandings or letters of intent between or among any of the parties hereto.
This Agreement shall not be amended, modified or supplemented except by a
written instrument signed by an authorized representative of each of the parties
hereto.
 
11.6. Waivers. Any term or provision of this Agreement may be waived, or the
time for its performance may be extended, by the party or parties entitled to
the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if, as to any party, it is
authorized in writing by an authorized representative of such party. The failure
of any party hereto to enforce at any time any provision of this Agreement shall
not be construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
 

 
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11.7. Expenses. Except for the Closing Date Shared Expenses and Expenses
included in the Inventory Closing Shared Expense Amount, each party hereto will
pay all costs and Expenses incident to its negotiation and preparation of this
Agreement and to its performance and compliance with all agreements and
conditions contained herein on its part to be performed or complied with,
including the fees, Expenses and disbursements of its counsel and accountants.
All items of income and Expense incurred in connection with the Business of the
Purchased Operate Location Pharmacies or the Purchased Worksite Pharmacies and,
unless excluded pursuant to Section 7.22, the Tupelo Property (including rent,
Expenses, utilities, prepayments, deposits and similar items) shall be prorated
between the Sellers and Buyer such that Sellers shall receive and be responsible
for all items of income and Expense earned or incurred on or prior to the
Closing Date or applicable Inventory Closing Date. Notwithstanding the
foregoing, at the Closing Date or the applicable Inventory Closing Date, Buyer
will reimburse to Sellers the aggregate amount of any lease deposits transferred
to Buyer (and acknowledged to be transferred to Buyer by the applicable landlord
or sub-lessor) in connection with any Purchased Operate Location. For
administrative convenience, Buyer agrees to pay and be liable for the Closing
Date Shared Expenses and Expenses included in the Inventory Closing Shared
Expense Amount. In consideration therefore, the parties agree that Buyer will be
reimbursed, through a credit against the Purchase Price at Closing, in an amount
equal to one-half of the Inventory Closing Shared Expense Amount and one-half of
the Closing Date Shared Expenses.
 
11.8. Disclaimer Regarding Projections. In connection with Buyer’s investigation
of FMRX, Buyer has received from FMRX certain projections and other forecasts
and certain business plan information. Buyer acknowledges that there are
uncertainties in attempting to make such projections and other forecasts and
plans, that Buyer is familiar with such uncertainties, that Buyer is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
projections and other forecasts and plans so furnished to it, and that Buyer
will have no claim against anyone with respect thereto. Accordingly, Buyer
acknowledges that FMRX does not make any representation or warranty with respect
to such projections, forecasts or plans.
 
11.9. Partial Invalidity. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable
Requirements of Law, but in case any one or more of the provisions contained
herein shall, for any reason, be held to be invalid, illegal or unenforceable in
any respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
 
11.10. Injunctive Relief; Remedies. 
 
(a) The parties agree that any breach or threatened breach by any party or its
Affiliates of this Agreement, including Section 7.2, would result in substantial
and irreparable damage to the other parties, the amount of which would be
difficult, if not impossible, to ascertain. Therefore, each party agrees that in
the event of any such breach or threatened breach thereof, each non-breaching
party shall have the right to enforce this Agreement by preliminary or permanent
injunctive or other relief in equity, without the necessity of proving any
actual damages or providing any bond or other security. The right of each party
to obtain injunctive or other equitable relief to enforce the terms hereof shall
be in addition to all other rights and remedies it may otherwise have at law, in
equity, or otherwise. Such right to obtain injunctive or other equitable relief
may be exercised, at the option of the non-breaching parties, concurrently with,
prior to, after, or in lieu of the exercise of any other rights or remedies
which the non-breaching party may have as a result of any breach or threatened
breach of any of the terms hereof.
 

 
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(b) The prevailing party or parties in any action brought to enforce any
provision of this Agreement shall be entitled to recover all reasonable
attorneys’ fees and disbursements and other out-of-pocket costs incurred in
connection therewith.
 
11.11. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be considered an original instrument, but all of which shall
be considered one and the same agreement.
 
11.12. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of New York.
 
* * * * * * *

 

 
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