Exhibit 10.1
This Asset Purchase Agreement (the “Purchase Agreement”) contains
representations and warranties that ApothecaryRx and Walgreen made to each
other. These representations and warranties were made only for the purposes of
the Purchase Agreement and solely for the benefit of ApothecaryRx and Walgreen
as of specific dates, may be subject to important limitations and qualifications
agreed to by ApothecaryRx and Walgreen and included in confidential disclosure
schedules provided by ApothecaryRx to Walgreen in connection with the signing of
the Purchase Agreement, and may not be complete. Furthermore, these
representations and warranties may have been made for the purposes of allocating
contractual risk between ApothecaryRx and Walgreen instead of establishing these
matters as facts, and may or may not have been accurate as of any specific date
and do not purport to be accurate as of the date of the filing of the Purchase
Agreement by Graymark with the Securities and Exchange Commission. Accordingly,
you should not rely upon the representations and warranties contained in the
Purchase Agreement as characterizations of the actual state of facts, since they
were intended to be for the benefit of, and to be limited to, ApothecaryRx and
Walgreen.
ASSET PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 1, 2010
by and among
WALGREEN CO.,
APOTHECARYRx, LLC
and for purposes of Sections 7.2, 7.15, 7.18, 7.20 and 11.12, only,
GRAYMARK HEALTHCARE, INC.

 

 

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TABLE OF CONTENTS

         
ARTICLE I DEFINITIONS
    1  
 
       
1.1. Definitions
    1  
1.2. Additional Definitions
    8  
1.3. Interpretation
    9  
 
       
ARTICLE II PURCHASE AND SALE
    9  
 
       
2.1. Purchased Assets – File-Transfer Locations
    9  
2.2. Purchased Assets – Operate Location Pharmacies
    10  
2.3. Excluded Assets
    11  
2.4. Assumed Liabilities
    12  
2.5. Excluded Liabilities
    12  
 
       
ARTICLE III PURCHASE PRICE
    13  
 
       
3.1. Purchase Price
    13  
3.2. Payments; Indemnity Escrow Account
    13  
3.3. Inventory Amount
    14  
3.4. Indemnity Fund
    14  
3.5. Allocation of Purchase Price
    15  
3.6. Lease Adjustment
    15  
 
       
ARTICLE IV CLOSING
    15  
 
       
4.1. Closing Dates
    15  
4.2. First Closing Date Payment; Buyer’s First Closing Date Deliveries
    16  
4.3. Seller’s First Closing Date Deliveries
    16  
4.4. Subsequent Closing Date Payment; Buyer’s Subsequent Closing Date Deliveries
    18  
4.5. Seller’s Subsequent Closing Date Deliveries
    18  
 
       
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER
    20  
 
       
5.1. Organization and Authority; Parent Shareholder Approval
    20  
5.2. No Conflicts
    20  
5.3. Taxes
    21  
5.4. Title and Sufficiency
    21  
5.5. Financial Statements
    22  
5.6. No Undisclosed Liabilities
    22  
5.7. Absence of Certain Changes or Events
    22  
5.8. SEC Filings
    22  
5.9. Material Contracts
    22  
5.10. Suppliers; Distributors and Third Party Payors
    23  
5.11. Current Volume
    23  

 

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5.12. Leased Real Property
    23  
5.13. Personal Property
    25  
5.14. Inventory
    25  
5.15. Intellectual Property; Software
    25  
5.16. Employee Matters
    26  
5.17. Employee Relations
    28  
5.18. Legal Proceedings
    28  
5.19. Compliance With Law; Permits; Medicare and Medicaid
    28  
5.20. Sale Process
    30  
5.21. Fairness Opinion
    30  
5.22. Solvency
    30  
5.23. Affiliate Transactions
    31  
5.24. Broker
    31  
 
       
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER
    31  
 
       
6.1. Organization of Buyer
    31  
6.2. Authorization
    31  
6.3. Non-Contravention
    32  
6.4. Sufficient Funds
    32  
 
       
ARTICLE VII ADDITIONAL AGREEMENTS
    32  
 
       
7.1. Employees
    32  
7.2. Non-competition
    34  
7.3. Records and Data
    36  
7.4. Patient Letters
    36  
7.5. Matters Related to Prescriptions
    37  
7.6. Interim Operations
    37  
7.7. Signage
    38  
7.8. Telephone Numbers
    38  
7.9. Taxes
    38  
7.10. Access
    39  
7.11. Consent of Third Parties; Regulatory and Other Authorizations
    40  
7.12. Avoiding Abandonment
    41  
7.13. Nonassignable Contracts
    41  
7.14. Remittance; Accounts Payable; Patient Charge Accounts
    42  
7.15. Further Assurances
    42  
7.16. UCC Searches
    43  
7.17. Access to Records
    43  
7.18. Parent Shareholder Approval
    43  
7.19. Removal of Fixtures and Hazardous Chemicals
    43  
7.20. Information Statement
    44  
7.21. Seller Name Change
    44  
7.22. Long-Term Care Business
    44  
7.23. Limitations on Representations and Warranties
    45  
7.24. Notice of Change in Employment Status
    46  

 

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ARTICLE VIII INDEMNIFICATION
    46  
 
       
8.1. Indemnification by Seller
    46  
8.2. Indemnification by Buyer
    46  
8.3. Indemnity Fund; Termination of Indemnity Fund
    47  
8.4. Notice and Determination of Claims
    47  
8.5. Third Person Claims
    48  
8.6. Calculation of Losses and Expenses
    49  
8.7. Tax Treatment of Indemnity Payments
    49  
8.8. Certain Limitations on Indemnity
    49  
 
       
ARTICLE IX CONDITIONS TO CLOSING
    50  
 
       
9.1. Seller’s Conditions to Closing
    50  
9.2. Buyer’s Conditions to Closing
    50  
 
       
ARTICLE X TERMINATION
    52  
 
       
10.1. Termination
    52  
10.2. Effect of Termination
    52  
 
       
ARTICLE XI GENERAL PROVISIONS
    53  
 
       
11.1. Survival of Obligations
    53  
11.2. No Public Announcement
    53  
11.3. Notices
    53  
11.4. Successors and Assigns; No Third Party Beneficiaries
    55  
11.5. Entire Agreement; Amendments
    55  
11.6. Waivers
    55  
11.7. Expenses
    55  
11.8. Partial Invalidity
    56  
11.9. Injunctive Relief; Remedies
    56  
11.10. Counterparts
    57  
11.11. Governing Law
    57  
11.12. Parent Guaranty
    57  

 

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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
September 1, 2010, by and between Walgreen Co., an Illinois corporation
(“Buyer”), ApothecaryRx, LLC, an Oklahoma limited liability company (“Seller”),
and, for purposes of Sections 7.2, 7.15, 7.18, 7.20 and 11.12 only, Graymark
Healthcare, Inc., an Oklahoma corporation and the sole member of Seller
(“Parent”).
WHEREAS, Seller owns and operates independent retail pharmacies;
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, upon the terms and subject to the conditions set forth in this
Agreement, (a) certain of the assets of Seller used in the operation of the ten
(10) retail pharmacies identified as “Operate Location Pharmacies” on Exhibit A
(the “Operate Location Pharmacies”) and (b) all prescription files and inventory
related to the eight (8) retail pharmacies identified as “File-Transfer
Locations” on Exhibit A (the “File-Transfer Locations”); and
WHEREAS, Seller is a direct wholly-owned subsidiary of Parent, and Parent is
willing to guaranty the obligations of Seller hereunder, as provided herein.
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.
“Affiliate” means, with respect to any Person, any other Person that at the time
of determination directly or indirectly controls, is controlled by or is under
common control with such Person.
“Applicable Closing” means the closing of the transfer of certain Purchased
Assets of the Operate Location Pharmacies and/or File Transfer Locations
included in such closing from Seller to Buyer, and “Applicable Closing Date”
means the time and date upon which the Applicable Closing actually occurs.
“Applicable Indemnity Amount” means $2,000,000 multiplied by the number obtained
by dividing (a) the Applicable Non-Inventory Payment Amount by (b) $25,500,000.
“Applicable Non-Inventory Payment Amount” means the aggregate Non-Inventory
Payments due at the Applicable Closing.

 

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“Arvest Bank” means Arvest Bank, an Arkansas banking corporation.
“Assumed Contracts” means the Operate Real Estate Leases, Goodwill Protection
Agreements and Promissory Notes.
“Business” means as of the date hereof, the business conducted at the Operate
Location Pharmacies and the File-Transfer Locations.
“Buyer Group Members” means Buyer and its controlled Affiliates, successors and
assigns.
“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.
“Copyrights” means all copyrights, copyrightable works and maskworks, whether
registered or unregistered, and pending applications to register the same.
“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.
“End Date” means the date that is 120 days from the date of this Agreement.
“Environmental, Health and Safety Requirements” means all applicable
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.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

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“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” means the latest to occur of the Applicable Closings, and “Final
Closing Date” means the time and date upon which the Final Closing actually
occurs.
“First Closing” means the first Applicable Closing to occur, and “First Closing
Date” means the time and date upon which the First Closing actually occurs.
“First File-Transfer Locations” means the following File-Transfer Locations:
Barnes Pharmacy & Barb’s Gifts (Main St., not the Suite B location), Hapeth
(33rd St.), Corner Medical (Red Wing, MN), Newt’s (Guthrie, OK), Cox (Park Hill,
OK) and Professional Discount (Oklahoma City, OK).
“Goodwill Protection Agreements” means those goodwill protection agreements
listed as Assumed Contracts on Schedule 5.9.
“Governmental Body” means any foreign, federal, state, local or other
governmental authority or regulatory body.
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996,
P. L. 104-191, and its implementing rules and regulations.
“Hazardous Chemicals” means Acetaldehyde Reagent, Ammoniated Mercury Powder usp,
Ammonium Dichromate Reagent Crystals, Asafetida Tincture, Carbol Fuchsin
Solution, Chloroform, Chromic Acid 10% Solution, Chromium Trioxide Regent
Crystals, Hexachlorophene usp, Perchloric ac, Silver Nitrate usp Crystals,
Sodium Bifluoride Technical, Sodium Cyanide Granular Technical, Succinylcholine
Chloride, Thiourea Practical, Toluene Reagent, Toluene Technical,
Trichloroacetic Acid, Trichloroethane 11 Reagent, Tricholorethylene Degreaser,
Tungsten Powder, Turpentine and Vanadyl Sulfate Hydrate.
“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.
“Indemnity Escrow Agreement” means the Indemnity Escrow Agreement to be entered
into at or prior to the First Closing among Buyer, Seller and the Indemnity
Agent, in a form reasonably acceptable to Buyer, Seller and the Indemnity Agent.
“Installation” means, with respect to each Operate Location Pharmacy, the
completion of the installation of wiring and equipment for data and
communication devices and other related or similar store systems required for
Buyer to integrate the Business with Buyer’s own business and to operate such
Operate Location Pharmacy in a manner consistent with the operation of Buyer’s
existing pharmacies.

 

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“Instrument of Assignment and Assumption” means the Instrument of Assignment and
Assumption, to be delivered by Buyer and Seller at the Applicable Closing, in a
form reasonably acceptable to Buyer and Seller.
“Intellectual Property” means Copyrights, Patent Rights, Trademarks and Trade
Secrets primarily used in or related to the ownership or operation of the
Business owned by Seller.
“Lease Transfer Documents” means documents, in form and substance reasonably
acceptable to Buyer and Seller, evidencing the assignment of the Operate Real
Estate Leases to Buyer and the assumption thereof by Buyer, confirming lease
terms contained in the Operate Real Estate Leases from third parties and
containing the amendments described in the column labeled “Must Have” on
Exhibit B (such descriptions referencing terms in the drafts of Lease Transfer
Documents furnish by Buyer to Seller prior to the date hereof).
“Licensed Rights” means any transferable Intellectual Property or Software
primarily used in or related to the ownership or operation of the Business owned
by a third party to which Seller holds a license pursuant to a valid and
enforceable license agreement.
“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 result, consequence, condition or matter
which, when taken together with all other results, consequences, conditions and
matters: (a) materially adversely affects the Purchased Assets or the
operations, rights, results of operations or the value of the Purchased Assets,
taken as a whole, (b) materially impairs the ability of Seller to own, hold,
develop and operate the Purchased Assets, taken as a whole, or (c) impairs,
prevents or materially delays Seller’s ability to perform its obligations under
this Agreement or to consummate the transactions contemplated by this Agreement;
provided, however, that, in any event, the following shall not be deemed to
constitute, create or cause a Material Adverse Effect: any changes,
circumstances or effects (i) that affect generally the pharmacy industry, such
as fluctuations in prices, or that result from international, national,
regional, state or local economic conditions, from general developments or from
other general economic conditions, facts or circumstances that are not subject
to the control of either party, (ii) that result from the public announcement of
this Agreement or the identity of Buyer, (iii) that result directly from any
action taken by Buyer pursuant to this Agreement (but not as a result of any
action taken by Buyer in the conduct of its business that is unrelated to this
Agreement), or (iv) that result from conditions or events resulting from an
outbreak or escalation of hostilities (whether nationally or internationally),
or the occurrence of any other calamity or crisis (whether nationally or
internationally), including the occurrence of one or more terrorist attacks,
provided, however, in the case of each of clauses (i) and (iv) above, only to
the extent that any such result, consequence, condition or matter has not had,
and would not reasonably be expected to have, individually or in the aggregate,
a disproportionate effect on Seller relative to other companies in Seller’s
industry.

 

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“Non-compete Agreements” means the executed non-competition agreements in the
form attached hereto as Exhibit F for each of Lewis P. Zeidner and James A. Cox.
“Non-compete Signatories” means Lewis P. Zeidner and James A. Cox.
“Non-Inventory Amount” means, with respect to each File-Transfer Location and
each Operate Location Pharmacy, the amounts set forth opposite each such
File-Transfer Location and Operate Location Pharmacy on Schedule 3.1.
“Non-standard Business” means (a) delivering prescriptions by mail, courier,
automobile or other delivery system, (b) compounding, including both sterile and
non-sterile compounding, (c) filling prescriptions that involve any unique,
customized or non-standard packaging, including prescriptions filled for
patients in independent living, assisted living, nursing home, long-term care or
hospice facilities, (d) any business conducted pursuant to Section 340B of the
Public Health Service Act, or (e) any non-prescription business (including
durable medical equipment) done through any pharmacy’s computer system and
included in its prescription count (including the Current Volume).
“Operate Premises” means the premises upon which any of the Operate Location
Pharmacies conducts its business.
“Operate Real Estate Leases” means the real estate leases and related agreements
associated with the Operate Location Pharmacies.
“Owned Intellectual Property” means any Intellectual Property or Software
primarily used in or related to the ownership or operation of the Business owned
by Seller.
“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 Charge Account” 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.
“Permitted Encumbrances” means (a) encumbrances for Taxes or assessments or
other governmental charges which are not yet due and payable; (b) materialmen’s,
merchants’, carriers’, worker’s, repairer’s, or other similar Encumbrances
arising in the ordinary course of business which are not yet due or payable;
(c) the express terms of the Assumed Contracts and Software licenses;
(d) matters of record (provided that if Seller has any title policies relating
to any Operate Location Pharmacies, these matters of record shall be limited to
items contained on any such policies, copies of which have been provided to
Buyer), zoning and local ordinances affecting the Operate Premises which do not
materially detract from the value of or materially impair the existing use of
the property; (e) rights of customers in and to their records and prescriptions,
as provided under applicable Requirements of Law; and (f) Encumbrances securing
obligations under any Promissory Notes or Goodwill Protection Agreements assumed
by Buyer.

 

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“Person” means any individual, corporation, partnership, joint venture, trust,
Governmental Body or other organization or entity.
“Promissory Notes” means those promissory notes listed as Assumed Contracts on
Schedule 5.9 that are not paid off by Seller prior to the Applicable Closing.
“Rambo Pharmacy” means that certain pharmacy operated by Seller and located at
114 E. Leafland Ave. in Decatur, Illinois.
“Required Lease Consents” means the consents from the third parties to the
Operate Real Estate Leases set forth on Exhibit B to the transfer of the
respective Operate Real Estate Lease to Buyer or its Affiliate, the extension of
the existing term or the other amendments contemplated by Exhibit B, which
consent may be contained within the Lease Transfer Documents.
“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.
“Sale Process” means all matters related to Seller’s sale of the Purchased
Assets and all activities by or for Seller in connection therewith, including
the process undertaken by Seller with respect to soliciting proposals from third
parties for the Assets and the consideration of, and the actions taken in
connection with, possible alternatives to the transactions contemplated by this
Agreement.
“SEC” means the Securities and Exchange Commission.
“Security Deposits” means all security deposits paid by Seller to any Person
prior to the Applicable Closing related to the Business, if such deposits are
retained by the party currently holding them after the Applicable Closing for
the benefit of Buyer.
“Shared Expenses” means an amount equal to the aggregate of all expenses
associated with the Indemnity Agent, the Data Converter and the Third Party
Distributor.
“Software” means computer software programs and software systems used at the
Business locations, 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 a Person on a particular date, that, at fair
valuation, such Person’s assets are equal to or greater than the sum of all of
such Person’s debts and liabilities, subordinated, probable, contingent or
otherwise, on such date, and that such Person 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 Person on the particular date.

 

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“Straddle Period” means any taxable year or period beginning on or before and
ending after the Applicable Closing Date.
“Subsequent File-Transfer Locations” means (a) Parkway Drugs, located at 2342
North Clark Street, Chicago, Illinois, and (b) Barnes Pharmacy, located at 422
Main Street, Suite B, Sterling, Colorado.
“Tax” (and, with the correlative meaning, “Taxes”) means all federal, state,
local or foreign Taxes, charges, fees, imports, levies or other assessments,
including, without limitation, all net income, gross receipts, gains (including
capital gains), sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security (or similar), unemployment, unclaimed property, premium, fringe
benefits, goods and services, debits, windfall or excess profits, environmental
(including Taxes under Section 59A of the Code), unincorporated business,
information, disability, workers compensation, production, registrations,
alternative or add-on minimum, accumulated earnings, personal holding, escheat
payments, excise, severance, stamp, occupation, property and estimated Taxes,
customs duties, and other governmental charges of any kind whatsoever, together
with all interest, penalties, fines, additions to Tax or additional amounts
imposed by any taxing authority with respect to such amounts.
“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.
“Third-Party Payor Agreements” means, with respect to the Business, the
contracts and agreements between Seller and any Governmental Body, insurance
company, managed care company or other third party payor.
“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 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; provided, it shall specifically exclude
the corporate name Graymark Healthcare and shall specifically include the
corporate name ApothecaryRx, subject to the terms of Section 7.21.

 

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1.2. Additional Definitions. The following terms are defined in the sections set
forth across from such term in the following table:

      Agreement   Preamble
Allocation Schedule
  3.5
Assumed Liabilities
  2.4
Balance Sheet Date
  5.5
Business Employee
  5.16(a)
Buyer
  Preamble
Buyer Applications
  7.12(a)
Call Referral Arrangement
  7.8
Claim Notice
  8.4(a)
Closing Date Payment
  3.2(a)(ii)
Current Volume
  5.11
Customer
  7.2(b)
Data Converter
  7.3(a)
Employee Plans
  5.16(b)
Exchange Act
  5.8
Excluded Assets
  2.3
Excluded Contracts
  2.3(b)
Excluded Inventory
  Exhibit C
Excluded Liabilities
  2.5
Fairness Opinion
  5.21
File-Transfer Assets
  2.1
File-Transfer Inventory
  2.1(b)
File-Transfer Locations
  Recitals
File-Transfer Records
  2.2(a)
Final Conversion
  7.3(a)
Financial Statements
  5.5
First Purchased File-Transfer Assets
  4.2(c)
Fundamental Reps
  8.8
GPA Amount
  3.1(d)
Indemnified Event
  8.6
Indemnified Person
  8.4(a)
Indemnitor
  8.4(a)
Indemnity Agent
  3.4
Indemnity Escrow Account
  3.2(a)(i)
Indemnity Fund
  3.4
Independent Valuator
  3.3(a)
Information Statement
  7.20
Initial Conversion
  7.3(a)
Inventory
  2.2(c)
Inventory Amount
  3.3(a)
Inventory Audit
  3.3(a)
IOU Prescriptions
  7.5
Leased Real Property
  5.12(f)
Long-Term Care Business
  7.22
Notes Amount
  3.1(e)
Operate Location Pharmacies
  Recitals
Parent
  Preamble

 

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      Agreement   Preamble
Parent SEC Reports
  5.8
Parent Shareholder Approval
  5.1(b)
Parent Shareholder Approval Evidence
  7.18
Payment Program
  5.19(c)(i)
Permits
  5.19(c)(i)
Personal Property
  2.2(a)
Pharmacy Business
  7.2(a)
PHI
  7.3(b)
Power of Attorney
  7.12(c)
Purchase Price
  3.1
Purchased Assets
  2.2
Real Property Laws
  5.12(g)
Record Data
  7.3(a)
Records
  2.2(b)
Required Licenses
  9.2(f)
Seller
  Preamble
Seller Group
  7.2(a)
Seller Receivables
  7.14(a)
Subsequently Purchased Assets
  4.4(c)
Tax Survival Period
  11.1
Termination Date
  10.1(a)(iv)
Third Party Distributor
  7.4
Third Person Claim
  8.4(a)
Transfer Taxes
  7.9(a)
Transferable Permits
  7.12(a)
Transferred Employee
  7.1(b)
Transition Services Agreement
  4.2(e)

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, on the Applicable Closing Date, Seller shall
sell, transfer, assign, convey and deliver to Buyer, and Buyer shall purchase
from Seller, free and clear of all Encumbrances (except Permitted Encumbrances),
all right, title and interest of Seller in, to and under the following assets
and properties of Seller associated with the File-Transfer Locations, as the
same shall exist on the Applicable Closing Date (collectively, the
“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 Applicable Closing Date, in each case
related to the File-Transfer Locations (collectively, the “File-Transfer
Records”);

 

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(b) except for the Excluded Inventory, all prescription pharmaceutical inventory
utilized in connection with, or located on the premises of, any of the
File-Transfer Locations (the “File-Transfer Inventory”);
(c) all Trademarks and all rights in and to the trade names (and all derivatives
thereof) used in the operation of each File-Transfer Location (and all goodwill
associated with such Trademarks and trade names);
(d) all Software used to maintain the File-Transfer Records;
(e) any and all other books and records related to the File-Transfer Locations,
in each case that the parties agree should be transferred to Buyer in order to
convey ownership of the File-Transfer Inventory or File-Transfer Records to
Buyer or to otherwise effectuate the intention of this Agreement;
(f) any guarantees, warranties, indemnities and similar rights covering the
File-Transfer Assets; and
(g) any assets listed on Schedule 2.1(g).
2.2. Purchased Assets – Operate Location Pharmacies. Upon the terms and subject
to the conditions of this Agreement, on the Applicable Closing Dates, Seller
shall sell, transfer, assign, convey and deliver to Buyer, and Buyer shall
purchase from Seller, free and clear of all Encumbrances (except Permitted
Encumbrances), all right, title and interest of Seller in, to and under
substantially all of the assets and properties of Seller (other than the
Excluded Assets), primarily used in or related to the ownership or operation of
the Operate Location Pharmacies, as the same shall exist on such Applicable
Closing Dates, including the following (collectively, and, together with the
File-Transfer Assets, the “Purchased Assets”):
(a) any and all personal property located at the Operate Location Pharmacies,
including all furniture, fixtures (and fittings thereon), equipment, signage,
satellite and other communications equipment and leasehold improvements
(collectively, the “Personal Property”), listed on Schedules 5.13(a) and
5.13(b);
(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 the Applicable Closing Dates, in each
case related to the Operate Location Pharmacies (collectively, and, together
with the File-Transfer Records, the “Records”);

 

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(c) except for the Excluded Inventory, all prescription pharmaceutical inventory
and any items of over-the-counter and front-end inventory specifically
identified as inventory to be included in the Purchased Assets on Exhibit C
utilized in connection with, or located at, any Operate Location Pharmacy
(together with the File-Transfer Inventory, the “Inventory”);
(d) all improvements, fixtures, and fittings thereon, and other appurtenants
located at any Operate Location Pharmacies (such as appurtenant rights in and to
public streets) and all Security Deposits paid or made with respect to the
Operate Premises;
(e) to the extent transferable, all Permits and similar rights obtained from
Governmental Bodies primarily used in or related to the ownership or operation
of any Operate Location Pharmacies;
(f) copies of all other books and records of Seller relating primarily to the
assets, properties and operations of the Operate Location Pharmacies;
(g) all Intellectual Property, Software and any web sites, including the URL
addresses and related domain names, in each case, primarily used in or related
to the ownership or operation of the Business, including any trade names,
Trademarks (and all goodwill associated with such trade names and Trademarks)
and Trade Secrets;
(h) any guarantees, warranties, indemnities and similar rights covering
Purchased Assets;
(i) all rights in, to and under the Assumed Contracts, including the Operate
Real Estate Leases and any rent credits, tenant improvement credits and
allowances paid or made with respect to the Operate Real Estate Leases in form
and substance acceptable to Buyer;
(j) all telephone and facsimile numbers of each Operate Location Pharmacy; and
(k) pharmacy computers with access to the Records that are maintained
electronically and an attached printer for each such pharmacy computer.
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 including insurance
receivables and pre-paid Expenses, related to periods ending on the Applicable
Closing Dates, of Seller or the Business;

 

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(b) all agreements, contracts and understandings of Seller or Parent (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 Medicare surety
bonds and contracts of insurance of Seller;
(d) all limited liability company, partnership, financial, Tax, and legal
records of Sellers not specific to any Business location and all corporate,
financial, Tax and legal records and the corporate seal of Parent;
(e) the Excluded Inventory;
(f) all refunds of any Tax for which Seller is liable pursuant to Section 7.9;
(g) all tangible personal property of Seller or Parent other than that located
at the Operate Location Pharmacies, including all property in the company
offices in Golden Valley, Minnesota, and Oklahoma City, Oklahoma;
(h) decorations and similar personal property in Red Wing Corner Drug at 401
West 3rd Street, Red Wing, Minnesota, not owned by Seller; and
(i) all leased pharmacy robotics equipment.
2.4. Assumed Liabilities. As additional consideration for the Purchased Assets,
at the Applicable Closings Buyer shall assume: (a) the obligations of Seller
under the Assumed Contracts arising after the Applicable Closing Dates, but not
including any obligation accruing, arising out of, or relating to any event or
breach of any such Assumed Contract occurring on or prior to the Applicable
Closing Dates; and (b) all obligations and liability arising from Buyer’s
operation of the Business after the Applicable Closing Dates (collectively, the
“Assumed Liabilities”).
2.5. Excluded Liabilities. Notwithstanding anything contained in this Agreement
to the contrary, Buyer shall not assume or be obligated to pay, perform or
otherwise discharge any other liability or obligation of Seller whatsoever or
any liabilities or obligations constituting an Encumbrance (other than a
Permitted Encumbrance) upon the Purchased Assets arising on or prior to the
Applicable Closing Dates, regardless of whether any such liabilities or
obligations are absolute or contingent, liquidated or unliquidated, known or
unknown, or otherwise (collectively, the “Excluded Liabilities”). Seller shall
remain liable for, whether known or unknown on the Applicable Closing Dates, all
Excluded Liabilities, including any obligations arising on or prior to such
Applicable Closing Dates, any liabilities and obligations arising on or prior to
such Applicable Closing Dates 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 Seller is liable
pursuant to Section 7.9. Without limiting the generality of the foregoing, in no
event shall Buyer assume any legal obligations of Seller under HIPAA or other
applicable laws or regulations, including the HIPAA privacy standard requiring
accounting of certain disclosures of PHI made by Seller prior to the Applicable
Closing Dates.

 

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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 Non-Inventory Amount for each File-Transfer Location and each Operate
Location Pharmacy set forth on Schedule 3.1 in the aggregate amount of
$25,500,000.00; plus
(b) the Inventory Amount for each File-Transfer Location and each Operate
Location Pharmacy determined pursuant to Section 3.3; plus
(c) the amount of the Security Deposits for each Operate Location Pharmacy; less
(d) the sum of the remaining payments due under the Goodwill Protection
Agreements at the Applicable Closings, as set forth on Schedule 3.1 (such
amount, the “GPA Amount”); and less
(e) the sum of the principal amounts and interest due under the Promissory Notes
at the Applicable Closings, as set forth on Schedule 3.1 (such amount, the
“Notes Amount”).
3.2. Payments; Indemnity Escrow Account. The Purchase Price shall be payable as
follows:
(a) On each Applicable Closing Date:
(i) Buyer shall deposit the Applicable Indemnity Amount into an indemnity escrow
account (the “Indemnity Escrow Account”) pursuant to the terms of the Indemnity
Escrow Agreement; and
(ii) Buyer shall pay to Seller an amount equal to (A) the Non-Inventory Amount,
less (B) the GPA Amount, less (C) the Notes Amount, less (D) the Indemnity
Amount, and plus (E) the amount of the Security Deposits, in each case solely
with respect to the Purchased Assets associated with the File-Transfer Location
and the Operate Location Pharmacies that are being transferred from Seller to
Buyer as of such Applicable Closing Date (such payment, the “Closing Date
Payment”).
(b) Within three (3) business days after each Applicable Closing Date with
respect to one or more File-Transfer Locations and/or Operate Location
Pharmacies, Buyer shall pay Seller an amount equal to (i) the Inventory Amount
with respect to such File-Transfer Locations and/or Operate Location Pharmacies
determined by the Inventory Audit, less (ii) Seller’s portion of the Shared
Expenses with respect to such File-Transfer Locations and/or Operate Location
Pharmacies. In no event shall Seller’s portion of the Shared Expenses plus any
expenses relating to the Call Referral Arrangement exceed $1,700 per Business
location.

 

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(c) All payments made by Buyer hereunder shall be by wire transfer of
immediately available funds to an account specified by Seller or, in the case of
the funds in the Indemnity Escrow Account, by the Indemnity Agent.
3.3. Inventory Amount.
(a) The parties shall commission Washington Inventory Service or RGIS (the
“Independent Valuator”) to conduct a full review and valuation of the Inventory
at each of the File-Transfer Locations as of the Applicable Closing Date (each,
an “Inventory Audit”). Each of Seller and Buyer shall have present at each
Inventory Audit representatives with authority to approve all aspects of the
Inventory Audit including determinations of Excluded Inventory. The Independent
Valuators will determine the aggregate value of the Inventory at each of the
Operate Location Pharmacies and File-Transfer Locations as of the Applicable
Closing Date (such value, the “Inventory Amount”) in accordance with the
standards and procedures set forth on Exhibit C. Unless otherwise agreed by the
parties, including in the event of any dispute, each Inventory Amount as
determined by the Independent Valuator in conducting the Inventory Audit shall
be binding upon Seller and Buyer.
(b) Notwithstanding anything in this Agreement to the contrary except as set
forth in the following sentence, in no event shall the aggregate Inventory
Amount exceed $7,000,000. In the event that the aggregate Inventory Amount
exceeds the foregoing amount, Buyer shall have the option, in its sole
discretion, either to (i) pay the excess amount for such excess Inventory or
(ii) not pay for the excess Inventory, in which case Seller shall retain and be
liable for such excess Inventory which will be deemed to be Excluded Inventory.
3.4. Indemnity Fund. Notwithstanding anything to the contrary in this Agreement,
each Applicable Indemnity Amount shall be deposited by Buyer on the Applicable
Closing Dates with The Bank of New York Trust Company, N.A., as indemnity escrow
agent (the “Indemnity Agent”). The Applicable 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
pursuant to the terms of Article VIII. All fees and expenses of the Indemnity
Agent shall be shared equally by Buyer and Seller as provided in Section 11.7.

 

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3.5. Allocation of Purchase Price. Within ten (10) days prior to the Final
Closing, Buyer and Seller will mutually agree upon a schedule (the “Allocation
Schedule”) to allocate (or a formula for allocating) the Purchase Price
(including, for purposes of this Section 3.5, any other consideration paid to
Seller) 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 and Seller agrees to file
Internal Revenue Service Form 8594, and all federal, state and local Tax
Returns, in accordance with the Allocation Schedule. Buyer and Seller each
agrees to provide the other promptly with any other information required to
complete Form 8594. Notwithstanding anything set forth in this Section 3.5, the
allocation of the Purchase Price shall in no way limit Buyer’s recovery for
breach by Seller of any of its representations, warranties, covenants or other
obligations set forth in this Agreement. The Allocation Schedule shall be
consistent with Schedule 3.1.
3.6. Lease Adjustment. If any of the Required Consents or Lease Transfer
Documents are not delivered prior to the End Date, unless otherwise agreed in
writing by Buyer and Seller, (a) the related Operate Location Pharmacy and any
and all assets specifically related thereto (including, but not limited to,
Inventory and the applicable Operate Real Estate Lease) shall become Excluded
Assets, (b) any and all obligations and liabilities (including, but not limited
to, the obligations under the applicable Operate Real Estate Lease) relating to
such Operate Location Pharmacy shall become Excluded Liabilities (c) the
Non-Inventory Amount, Applicable Indemnity Amount, Inventory Amount and Closing
Date Payments that otherwise would have been due for such Operate Location
Pharmacy shall not be due or paid and (d) the operation of such Operate Location
Pharmacy and all customers thereof will be excluded from the provisions of
Section 7.2.
ARTICLE IV
CLOSING
4.1. Closing Dates.
(a) Subject to the satisfaction or waiver of the conditions set forth in Article
IX and Buyer’s rights under Section 7.3(a), the First Closing shall be
consummated as promptly as practicable and no later than five (5) business days
after Seller’s completion of compliance with the requirements of Regulation 14C
of the Exchange Act or on such other date as shall be mutually agreed upon by
the parties at a time mutually agreed upon by the parties. The First Closing
will include three of the First File Transfer Locations mutually agreeable to
Buyer and Seller. Subject to the satisfaction or waiver of the conditions set
forth in Article IX and Buyer’s rights under Section 7.3(a), the remaining three
(3) First File Transfer Locations will close as promptly as practicable within
three (3) business days after the First Closing.
(b) Subject to the satisfaction or waiver of the conditions set forth in Article
IX and Buyer’s rights under Section 7.3(a), the Applicable Closings of the
Operate Location Pharmacies and the Subsequent File-Transfer Locations shall
occur as promptly as practicable not less than forty-five (45) days nor more
than sixty (60) days after the date of this Agreement (or on such other dates as
shall be mutually agreed upon by the parties) at a time mutually agreed upon by
the parties; provided, however, that Buyer and Seller reserve the right to
effect the Applicable Closings on more than one day; it being understood that in
order to effect a smooth transition, neither Buyer nor Seller shall be required
to consummate the purchase of more than three (3) Operate Location Pharmacies in
any two (2) day period.

 

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(c) Notwithstanding anything in this Agreement to the contrary, Buyer and Seller
shall have no obligation to consummate the purchase and sale of any Purchased
Assets (and Assumed Liabilities) that have not been transferred as of the End
Date.
4.2. First Closing Date Payment; Buyer’s First Closing Date Deliveries. At the
First Closing, Buyer shall deliver the following to Seller or the Indemnity
Agent, as applicable:
(a) the amounts contemplated by Section 3.2(a), by wire transfer of immediately
available funds to the accounts specified by Seller or the Indemnity Agent, as
applicable;
(b) a certificate, dated as of the First Closing Date, signed by an officer of
Buyer certifying as to the provisions 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 that are being transferred from Seller to Buyer on the
First Closing Date (the “First Purchased File-Transfer Assets”), duly executed
by an authorized officer of Buyer;
(d) the Indemnity Escrow Agreement, duly executed by an authorized officer of
Buyer;
(e) a transition services agreement in form reasonably acceptable to Buyer and
Seller (the “Transition Services Agreement”), duly executed by Buyer; and
(f) such other instruments or documents as may be necessary or appropriate to
carry out the transactions contemplated hereby.
4.3. Seller’s First Closing Date Deliveries. At the First Closing, Seller shall
deliver to Buyer each of the following:
(a) possession of the First Purchased File-Transfer Assets;
(b) all Record Data related to the First Purchased File-Transfer Assets, in
accordance with Section 7.3;
(c) a certificate, dated as of the First Closing Date, signed by an officer of
Seller certifying as to the provisions set forth in clauses (a) and (b) of
Section 9.2;
(d) a certificate of the secretary or an assistant secretary of Parent, dated as
of the First Closing Date, in form and substance reasonably satisfactory to
Buyer, as to (i) the articles of organization of Seller; (ii) the operating
agreement of Seller; (iii) the authority of Seller regarding the due execution
and performance of this Agreement and the contemplated transactions; (iv) the
good standing of Seller in the State of Oklahoma; and (v) the incumbency and
signatures of the officers of Seller executing this Agreement and any document
or agreement required to be delivered hereunder;

 

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(e) a certificate of the secretary or an assistant secretary of Parent, dated as
of the First Closing Date, in form and substance reasonably satisfactory to
Buyer, as to (i) the certificate of incorporation of Parent; (ii) the by-laws
(or similar document) of Parent; (iii) the authority of Parent regarding the due
execution and performance of this Agreement and the contemplated transactions;
(iv) the good standing of Parent in the State of Oklahoma; and (v) the
incumbency and signatures of the officers of Parent executing this Agreement and
any document or agreement required to be delivered hereunder;
(f) the Instrument of Assignment and Assumption with respect to the First
Purchased File-Transfer Assets, duly executed by an authorized officer of
Seller;
(g) the Indemnity Escrow Agreement, duly executed by an authorized officer of
Seller;
(h) an opinion of counsel to Seller, in form and substance reasonably acceptable
to Buyer containing the opinions substantially in the form attached hereto as
Exhibit D and subject to customary assumptions and qualifications acceptable to
counsel to Buyer and Seller;
(i) any documents required to be delivered by Seller to release all Encumbrances
(except Permitted Encumbrances) on the First Purchased File-Transfer Assets,
including customary pay-off letters or similar acknowledgements of the discharge
of any indebtedness for borrowed money of Seller setting forth the amount owed
as of the First Closing Date and indicating that upon payment of such amount,
such indebtedness will be discharged in full and all related Encumbrances
(except Permitted Encumbrances) will be released and removed. Notwithstanding
the foregoing, documents required to be delivered by Seller to release
Encumbrances on Inventory shall be delivered upon Seller’s receipt of payment
from Buyer for such Inventory in accordance with Section 3.2(b);
(j) the Non-compete Agreements;
(k) a completed Non-standard Business form for each First File-Transfer Location
in the form attached hereto as Exhibit E;
(l) the Transition Services Agreement, duly executed by Seller; and
(m) such other instruments or documents as may be necessary or appropriate to
carry out the transactions contemplated hereby.

 

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4.4. Subsequent Closing Date Payment; Buyer’s Subsequent Closing Date
Deliveries. At each Applicable Closing after the First Closing, Buyer shall
deliver the following to Seller or the Indemnity Agent, as applicable:
(a) the amounts contemplated by Section 3.2(a), by wire transfer of immediately
available funds to the accounts specified by Seller or the Indemnity Agent, as
applicable;
(b) a certificate, dated as of the Applicable Closing Date, signed by an officer
of Buyer certifying as to the provisions set forth in clauses (a) and (b) of
Section 9.1;
(c) the Instrument of Assignment and Assumption with respect to the Purchased
Assets that are being transferred from Seller to Buyer on the Applicable Closing
Date (the “Subsequently Purchased Assets”), duly executed by an authorized
officer of Buyer;
(d) the Required Lease Consents with respect to the Operate Real Estate Leases
that are being transferred from Seller to Buyer on the Applicable Closing Date,
duly executed by an authorized officer of Buyer, if required by the party
consenting to the assignment;
(e) the Lease Transfer Documents with respect to the Operate Real Estate Leases
that are being transferred from Seller to Buyer on the Applicable Closing Date,
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.
4.5. Seller’s Subsequent Closing Date Deliveries. At each Subsequent Closing,
Seller shall deliver to Buyer each of the following:
(a) possession of the Subsequently Purchased Assets that are being transferred
from Seller to Buyer on the Applicable Closing Date;
(b) all Record Data related to the Subsequently Purchased Assets that are being
transferred from Seller to Buyer on the Applicable Closing Date, in accordance
with Section 7.3;
(c) a certificate, dated as of the Applicable Closing Date, signed by an officer
of Seller certifying as to the provisions set forth in clauses (a) and (b) of
Section 9.2;
(d) a certificate of the secretary or an assistant secretary of Parent, dated as
of the Applicable Subsequent Closing Date, in form and substance reasonably
satisfactory to Buyer, as to (i) the articles of organization of Seller;
(ii) the operating agreement of Seller; (iii) the authority of Seller regarding
the due execution and performance of this Agreement and the contemplated
transactions; (iv) the good standing of Seller in the State of Oklahoma; and
(v) the incumbency and signatures of the officers of Seller executing this
Agreement and any document or agreement required to be delivered hereunder;
(e) a certificate of the secretary or an assistant secretary of Parent, dated as
of the Applicable Subsequent Closing Date, in form and substance reasonably
satisfactory to Buyer, as to (i) the certificate of incorporation of Parent;
(ii) the by-laws (or similar document) of Parent; (iii) the authority of Parent
regarding the due execution and performance of this Agreement and the
contemplated transactions; (iv) the good standing of Parent in the State of
Oklahoma; and (v) the incumbency and signatures of the officers of Parent
executing this Agreement and any document or agreement required to be delivered
hereunder;

 

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(f) the Instrument of Assignment and Assumption with respect to the Subsequently
Purchased Assets that are being transferred from Seller to Buyer on the
Applicable Closing Date, duly executed by an authorized officer of Seller;
(g) the Required Lease Consents with respect to the Operate Real Estate Leases
that are being transferred from Seller to Buyer on the Applicable Closing Date,
duly executed by an authorized officer of Seller and each third-party to a
Operate Real Estate Lease;
(h) the Lease Transfer Documents with respect to the Operate Real Estate Leases
that are being transferred from Seller to Buyer on the Applicable Closing Date,
duly executed by an authorized officer of Seller and each third party to a
Operate Real Estate Lease;
(i) an Estoppel Certificate from Seller and each other party to an Operate Real
Estate Lease with respect to the Operate Real Estate Leases that are being
transferred from Seller to Buyer on the Applicable Subsequent Closing Date, duly
executed by an authorized officer of Seller and such other party unless the
terms of the Estoppel Certificate are contained in the Lease Transfer
Documents;any documents required to be delivered by Seller to release all
Encumbrances (except Permitted Encumbrances) on the Subsequently Purchased
Assets, including customary pay-off letters or similar acknowledgements of the
discharge of any indebtedness for borrowed money of Seller setting forth the
amount owed as of the Applicable Subsequent Closing Date and indicating that
upon payment of such amount, such indebtedness will be discharged in full and
all related Encumbrances (except Permitted Encumbrances) will be released and
removed. Notwithstanding the foregoing, documents required to be delivered by
Seller to release Encumbrances on Inventory shall be delivered upon Seller’s
receipt of payment from Buyer for such Inventory in accordance with
Section 3.2(b);
(j) the Powers of Attorney with respect to the Transferred Permits that are
being transferred from Seller to Buyer on the Applicable Closing Date, as
contemplated by Section 7.12(c), duly executed by authorized officers of Seller;
(k) a completed Non-standard Business form for each File-Transfer Location and
Operate Location Pharmacy that relates to Purchased Assets being transferred
from Seller to Buyer on the Applicable Closing Date, in the form attached hereto
as Exhibit E; and
(l) such other instruments or documents as may be necessary or appropriate to
carry out the transactions contemplated hereby.

 

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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller represents and warrants to Buyer and
agrees as follows:
5.1. Organization and Authority; Parent Shareholder Approval.
(a) Seller is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Oklahoma and has the 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 Managers of Seller and by Parent,
as sole member of Seller. This Agreement has been duly authorized, executed and
delivered by Seller is the legal, valid and binding obligation of Seller
enforceable in accordance with its terms, and the Indemnity Escrow Agreement and
all other documents and agreements required to be delivered hereunder to which
Seller is a party, have been duly authorized by Seller and upon execution and
delivery thereof by Seller will be a legal, valid and binding obligation of
Seller 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.
(b) Parent is the sole member of Seller. The affirmative vote of the holders of
a majority of the outstanding shares of common stock of Parent is the only vote
of shareholders of Parent necessary to adopt this Agreement and thereby approve
the transactions contemplated herein (the “Parent Shareholder Approval”). Set
forth on Schedule 5.1(b) is a list of (i) holders that, in the aggregate, own
and have the right to vote at least 56.5% of the outstanding shares of common
stock of Parent and (ii) each such holder’s total number and percentage of such
shares owned.
(c) At a meeting duly called and held, the Board of Directors of Parent has (i)
unanimously determined that this Agreement and the transactions contemplated
hereby are fair to, advisable and in the best interests of Parent’s
shareholders, (ii) unanimously approved and adopted this Agreement and the
transactions contemplated hereby and (iii) unanimously resolved to recommend
adoption of this Agreement and the transactions contemplated by this Agreement
by the shareholders of Parent.
5.2. No Conflicts. 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 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 Purchased
Assets, under (i) the articles of organization or the operating agreement of
Seller, (ii) the certificate of incorporation or bylaws of Parent, or (iii) any
material contract, agreement or understanding to which Seller or Parent is a
party (other than the credit facility with Arvest Bank), (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 Seller or Parent is bound, or
(c) require the approval, consent, authorization or act of, or the making by
Seller or Parent of any declaration, filing (other than the filing of the
Information Statement by Parent) or registration with, any Person, other than
the Required Lease Consents, any required third party consents to the assignment
of the Assumed Contracts and notices to Governmental Bodies required by the
Requirements of Law, all as scheduled and specified on Schedule 5.2.

 

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5.3. Taxes.
(a) Except as set forth on Schedule 5.3, (i) Seller and its Affiliates 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 may otherwise have any transferee liability; (ii) all such Tax
Returns are complete and accurate and disclose all Taxes required to be paid in
respect of the Business and the Purchased Assets; (iii) since and including
2006, no federal or state income or franchise Tax Returns have been closed by
audit; (iv) Seller is not currently the beneficiary of any extension of time
within which to file any Tax Return; (v) there is no action, suit,
investigation, audit, claim or assessment pending or, to Seller’s knowledge,
threatened with respect to Taxes of the Business and the Purchased Assets, and,
to Seller’s knowledge, no basis exists therefor; (vi) Seller has 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 monies required to be withheld by Seller (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 Seller or
Parent for income Tax purposes.
(b) Except as set forth on Schedule 5.3, no payment, or other benefit, and no
acceleration of the vesting of any options, payments or other benefits, 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.
5.4. Title and Sufficiency. Seller has full legal, equitable and marketable
title to all of the Purchased Assets, free and clear of all Encumbrances except
Permitted Encumbrances and except as set forth in Schedule 5.4. At each
Applicable Closing, Seller will transfer to Buyer full legal, equitable and
marketable title to all of the Purchased Assets that are being transferred from
Seller to Buyer at such Applicable Closing free and clear of all Encumbrances
(except Permitted Encumbrances). Except for the Excluded Assets, the Purchased
Assets constitute all the assets necessary for the operation of the Operate
Location Pharmacies as currently conducted. Other than Excluded Assets, there
are no assets or property of any nature that are being retained after the Final
Closing Date by Seller or any of its Affiliates which have been used at and in
the business of the Operate Location Pharmacies.

 

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5.5. Financial Statements. Seller has delivered to Buyer the unaudited income
statements and balance sheets (the “Financial Statements”) for Seller for the
twelve (12) month period ending December 31, 2009, and the six (6) month period
ending June 30, 2010 (the “Balance Sheet Date”). The Financial Statements are
true and correct in all material respects and have been prepared in accordance
with generally accepted accounting principles, except (a) for the exclusion of
the statement of changes in cash flows and the statement of changes in
shareholder’s equity, (b) as otherwise stated therein, (c) for the omission of
footnote disclosures and, (d) with respect to the unaudited interim financial
statements, normally recurring year-end audit adjustments, to the extent such
adjustments are immaterial in amount and consistent with generally accepted
accounting principles and prior such adjustments.
5.6. No Undisclosed Liabilities. Seller has no material liabilities, claims or
indebtedness related to the Business of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, whether due or to
become due, except liabilities that (a) are set forth in the Financial
Statements or (b) 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 in the Financial Statements.
5.7. Absence of Certain Changes or Events. Since the Balance Sheet Date, Seller
has conducted the Business in the ordinary course in all material respects
consistent with past practice, and, since such date, there has not been any
change, event or occurrence which has had or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Business or the Purchased Assets. Except as set forth in Schedule 5.7, since the
Balance Sheet Date, Seller has 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. Seller has made available to Buyer (through reference to
documents filed by EDGAR or otherwise) accurate and complete copies of all
material reports filed by Parent with the U.S. Securities and Exchange
Commission within the last two (2) years, all in the form so filed (as amended
to date, including the financial statements thereto, the “Parent 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), the Parent SEC Reports were prepared in accordance and
complied in all material respects with the requirements of the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), as the case may be, and the rules and regulations of the U.S.
Securities and Exchange Commission thereunder applicable to such Parent SEC
Reports.
5.9. Material Contracts. Schedule 5.9 sets forth a complete and accurate list of
all material contracts and all Third-Party Payor Agreements (including and
specifically designating all Assumed Contracts) with respect to or relating to
the Business to which Seller is a party or by which Seller is bound or to which
Seller or any of the Purchased Assets is subject. Without limiting the
foregoing, Schedule 5.9 shall include the following: (a) long-term care
agreements, (b) 340B agreements, (c) agreements (including goodwill protection
agreements) that include any non-competition or non-solicitation provisions
which currently do, or upon consummation of the transactions contemplated by
this Agreement, will, (i) restrict Buyer, the Purchased Assets or the Business
in any way or (ii) restrict any Person competing with the Business;
(d) agreements relating to the underlying assets of the Business, (e) the
Operate Real Estate Leases, (f) employment agreements and (g) any other contract
or other agreement not made in the ordinary course of business. Seller has made
available to Buyer true, correct and complete copies of all such material
contracts, together with all modifications and supplements thereto. Except as
set forth at Schedule 5.9, (a) each of the Assumed Contracts is in full force
and effect in accordance with its terms, (b) Seller is not in breach of any of
the material provisions of any such contract, (c) to the knowledge of Seller, no
other party to any such contract is in default thereunder, nor does any event or
condition exist which with notice or the passage of time or both would
constitute a material default thereunder, and (d) Seller has performed all
material obligations required to be performed by it to date under each Assumed
Contract. No Assumed Contract includes any provision the effect of which would
be, upon assignment to and assumption by Buyer, to materially enlarge or
accelerate any obligations of Buyer to be assumed thereunder or give material
additional rights to any other party thereto or will materially adversely affect
the Business as presently conducted by Seller.

 

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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 June 30, 2010)
(a) the largest pharmaceutical supplier to the Business, measured by value of
goods supplied and (b) Seller’s ten (10) largest payors, measured by percentage
of revenue. To Seller’s knowledge, no distributor, payor, wholesaler, customer,
supplier or other Person with a material business relationship with Seller 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,
whether as a result of any Applicable Closing or otherwise.
5.11. Current Volume. Schedule 5.11 sets forth the average daily prescription
count at each of the Operate Location Pharmacies and File-Transfer Locations
over the twelve month period ending April 30, 2010 (the “Current Volume”). Such
prescriptions filled at each of the Operate Location Pharmacies and
File-Transfer Locations have arisen from bona fide, legal transactions and the
information related to such prescriptions included in the Records is accurate in
all material respects. Except as set forth on the Non-standard Business forms
provided to Buyer in the form attached as Exhibit E, none of the prescriptions
filled at any of the Operate Location Pharmacies or File-Transfer Locations
result from any Non-standard Business.
5.12. Leased Real Property.
(a) The Operate Real Estate Leases set forth on Exhibit B comprise all leasehold
interests in the Operate Premises. Seller has not pledged, encumbered or
hypothecated its right, title or interest in any Operate Real Estate Lease or
Operate Premises. Seller has provided Buyer with true and correct copies of each
Operate Real Estate Lease and all amendments, addendums and attachments thereto.
Upon obtaining the Required Lease Consents, Seller will transfer to Buyer
Seller’s interest in the leasehold estates covered by the Operate Real Estate
Leases free of any Encumbrance granted by Seller other than Permitted
Encumbrances. Seller enjoys peaceful and undisturbed possession of all the
Operate Premises, and Seller has in all material respects performed all the
obligations with respect thereto required through the date of this Agreement to
be performed by it.

 

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(b) Seller is not in, or, to the knowledge of Seller, alleged to be in, material
breach or default under any Operate Real Estate Lease, and to the knowledge of
Seller 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. Seller has not declared any, and, to the knowledge of Seller, no third
party to any Operate Real Estate Lease is alleged to be in, material breach or
default of such Operate Real Estate Lease, and to the knowledge of Seller, 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) None of the Operate Real Estate Leases are subject to any pending suit for
condemnation or other taking by any Governmental Body, and, to the knowledge of
Seller, no such condemnation or other taking is threatened or contemplated.
(d) To the knowledge of Seller, no security deposit or portion thereof deposited
with respect any Operate Real Estate Lease has been applied in respect of a
breach or default under such Operate Real Estate Lease which has not been
redeposited in full.
(e) Seller does not, and will not in the future, owe any brokerage commissions
or finder’s fees with respect to any Operate Real Estate Lease.
(f) Except for the Sublease Agreement between Seller and RX Artisans, Inc. dated
October 1, 2007, covering premises in Wayzata, Minnesota, Seller has not
subleased, licensed or otherwise granted any third party the right to use or
occupy any real property which is subject to any Operate Real Estate Lease (the
“Leased Real Property”) or any portion thereof.
(g) Seller’s improvements are and Seller has taken no action to cause any other
part of the Leased Real Property not to be in compliance with all applicable
building, zoning, subdivision, health and safety and other land use laws,
including, without limitation, The Americans with Disabilities Act of 1990, as
amended, and all insurance requirements affecting the Leased Real Property
(collectively, the “Real Property Laws”), and the current use or occupancy of
the Real Property or operation of the Business thereon does not violate any Real
Property Laws. Seller has not received any notice of violation of any Real
Property Law and, to Seller’s knowledge, there is no basis for the issuance of
any such notice or the taking of any action for such violation. To Seller’s
knowledge, there is no pending or anticipated change in any Real Property Law
that will have a Material Adverse Effect on the lease, use or occupancy of any
Leased Real Property or any portion thereof in the continued operation of the
Business.
(h) All water, oil, gas, electrical, steam, compressed air, telecommunications,
sewer, storm and waste water systems and other utility services or systems for
the Leased Real Property have been installed and are operational and sufficient
for the operation of the Business as currently conducted thereon, and all
hook-up fees or other similar fees or charges due by Seller prior to the date
hereof have been paid in full.

 

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5.13. Personal Property.
(a) Schedule 5.13(a) contains a list of all material machinery, equipment,
vehicles, furniture and other tangible personal property (other than Inventory)
owned by Seller and used in or relating to the Business. The property listed on
Schedule 5.13(a), other than Excluded Assets, is in good working order and
condition, free of defect or damage, ordinary wear and tear excepted. Between
the date hereof and each Applicable Closing, there will not be a material
reduction in the property listed on Schedule 5.13(a).
(b) Schedule 5.13(b) contains a list and description of each lease or other
agreement or right, whether written or oral (showing in each case the annual
rental, the expiration date thereof and a brief description of the property
covered), under which Seller is lessee of, or holds or operates, any machinery,
equipment, vehicle or other tangible personal property owned by a third Person
and used in the Operate Location Pharmacies.
5.14. Inventory. The Inventory is in good, merchantable and useable condition,
and consists only of items of quality commercially usable and salable in the
ordinary course of the Business, except for any items of obsolete material or
material below standard quality. The representation in the foregoing sentence
will only survive closing for a period of 120 days. The present quantities of
all items included in the Inventory are at levels adequate and not excessive in
the present circumstances of the Business and are at levels reasonably based on
historical sales of Seller.
5.15. Intellectual Property; Software.
(a) Schedule 5.15(a) contains a list of all registered Copyrights, applications
to register Copyrights, Patent Rights and Trademarks (including all assumed or
fictitious names under which Seller is conducting business or has within the
previous five years conducted business) owned by, licensed to or used by Seller
with respect to the Purchased Assets.
(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
the by Seller with respect to the Purchased Assets, except Software licensed to
Seller 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 agreements,
contracts, licenses, sublicenses, assignments and indemnities with respect to
the Purchased Assets 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 Seller or (iii) any Software required to be identified
on Schedule 5.15(b).

 

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(d) Except for the Permitted Encumbrances or as expressly stated in Schedule
5.15(d): (i) Seller owns all right, title and interest in the Owned Intellectual
Property, free and clear of any liens, claims or Encumbrances; (ii) the Owned
Intellectual Property 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; (iii) the
Licensed Rights are free and clear of any royalties, obligations or
Encumbrances; (iv) the Owned Intellectual Property and the Licensed Rights are
all those material Intellectual Property rights necessary to the conduct of the
Business at the Operate Location Pharmacies as presently conducted; and (v)
Seller has the sole and exclusive right to bring actions for infringement or
unauthorized use of the Owned Intellectual Property.
(e) Except as expressly stated in Schedule 5.15(e), the Owned Intellectual
Property and the Licensed Rights are valid and in force, and the validity of the
Owned Intellectual Property and title thereto and validity of the Licensed
Rights: (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 Seller, 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 Business, as
presently conducted, does not conflict with and, to the knowledge of Seller, 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
Owned Intellectual Property or the right to use any of the Licensed Rights in
the Business; and (iii) there are no third parties using any of the Owned
Intellectual Property that is material to the Business as presently conducted.
(g) Except as expressly stated in Schedule 5.15(g): (i) Seller owns, or
possesses valid rights to, all Software that is material to the conduct of the
Business; and (ii) there are no infringement suits, actions or proceedings
pending or, to the knowledge of Seller threatened, against Seller with respect
to any Software owned or licensed by Seller.
5.16. Employee Matters.
(a) Set forth on Schedule 5.16(a) is a list of all employees of Seller who are
employed at any of the Operate Location 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 and, in the case of
pharmacists or other licensed Persons, their relevant license numbers.
Schedule 5.16(a) shall be updated as necessary to reflect new hires or other
personnel changes occurring between the date hereof and the Applicable Closing.
Except as set forth on Schedule 5.9, Seller is not bound by any oral or written
employment agreement, consulting agreement, or deferred compensation agreement.
To Seller’s knowledge, no Business Employee is a party to any collective
bargaining agreement. As related to the Business Employees, Seller is not and
has never 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.

 

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(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 Seller or any of its Affiliates or
any professional employment organization 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”). Copies of such Employee Plans
(and, if applicable, related trust or funding agreements or insurance policies)
and all amendments thereto have been made available to Buyer together with, if
applicable, the most recently filed annual report (Form 5500 including, if
applicable, Schedule B thereto) in connection with any such plan or trust. Each
Employee Plan maintained or administered by Seller, or, to the knowledge of
Seller, contributed to by Seller or maintained, administered or contributed to
by a professional employment organization, 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
maintained or administered by Seller, or, to the knowledge of Seller,
contributed to by Seller or maintained, administered or contributed to by a
professional employment organization 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. Seller has made all required contributions to the
Employee Plans maintained, administered or contributed to by Seller, or, to the
knowledge of Seller, maintained, administered or contributed to by a
professional employment organization, 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.
(c) Prior to employment or offer of a contract, Seller screens all Business
Employees and independent contractors against the List of Excluded Individuals
and Entities maintained by the Office of Inspector General for the U.S.
Department of Health & Human Services and the Excluded Parties List System
maintained by the General Services Administration.

 

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5.17. Employee Relations. Except as set forth in Schedule 5.17, Seller has
complied in respect of the Business 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. Seller believes that its relations with the Business Employees with
respect to the Business are satisfactory. Seller is not a party to, and Seller
with respect to the Business is not affected by or threatened with, any dispute
or controversy with a union or with respect to unionization or collective
bargaining involving the Business Employees with respect to the Business.
Seller, with respect to the Business, is not adversely affected by any dispute
or controversy with a union or with respect to unionization or collective
bargaining involving any supplier or customer of Seller with respect to the
Business. To the knowledge of Seller, there are no union organizing or election
activities involving any non-union Business Employees with respect to the
Business which have occurred since Seller acquired the Business or, to the
knowledge of Seller, 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 Seller’s knowledge, threatened by or against
Seller relating to or affecting the Business or the Purchased Assets and to
Seller’s knowledge, there is no basis or circumstance that would reasonably be
expected to lead to any such material claim, action, suit or proceeding against
Seller.
(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 to which any of the Purchased
Assets is subject. Seller does not know or have any grounds to know of any
reasonable basis for any such action or of any governmental investigations
relating to the Business or the Purchased Assets. Seller has received no notice
of complaints filed against Seller under HIPAA or applicable patient privacy and
data protection laws and, to Seller’s knowledge, no such violation exists.
5.19. Compliance With Law; Permits; Medicare and Medicaid.
(a) Seller has obtained all material licenses, franchises, permits, approvals
and other authorizations from a Governmental Body that are necessary to entitle
Seller 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 and brief
description of all such licenses, franchises, permits, approvals and other
authorizations and a list of all NCPDP, TRICARE, NPI, DME, Medicare, Medicaid or
other billing or similar numbers used in the Business (collectively, the
“Permits”).
(b) Seller is not in violation, and has not been in violation in the preceding
three years, in any material respects of any Requirements of Laws with respect
to the Business or the Purchased Assets. Seller has timely filed all material
reports, registrations, certifications and statements required to be filed by it
with any Governmental Body, and has paid all related fees and assessments due
and payable. Neither Seller nor anyone acting on behalf of Seller has, to the
knowledge of Seller, received any unrefunded Medicare, Medicaid or TRICARE
overpayments. All Medicare, Medicaid, TRICARE and third-party reports and claims
filed or required to be filed by or on behalf of Seller 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 Seller, any director, officer or present or
former employee of Seller or any Affiliate of Seller has been excluded from
participation in any government healthcare payment program, including Medicare,
Medicaid or TRICARE, nor are any of the foregoing Persons aware of any pending
or threatened investigation or government action that may lead to such
exclusion, fine, sanction, penalty or other remedy.

 

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(c) Without limiting the generality of the foregoing,
(i) there is no pending or, to the knowledge of Seller, threatened, lawsuits,
claims, suits, or other proceedings relating to Seller’s participation in any
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”);
(ii) to the knowledge of Seller, (x) no Payment Program has requested or
threatened any recoupment, refund, or set-off from Seller except in the ordinary
course of the Business consistent with past practice; and (y) since January 1,
2005, no Payment Program has imposed an exclusion, fine, penalty or other
sanction on Seller and Seller has never been excluded, suspended or otherwise
sanctioned from participation in any Payment Program.
(iii) Since January 1, 2005, neither Seller, nor, to the knowledge of Seller,
any present or former employee, with respect to actions taken in connection with
their employment by Seller, (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, disbarred, suspended or otherwise declared
ineligible 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, Medicaid, or TRICARE, nor, to the knowledge of Seller, are any of the
foregoing Persons aware of any pending or threatened investigation or government
action that may 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 the General Services
Administration’s list of excluded parties, (F) has been convicted of a criminal
offense that falls within the ambit of 42 U.S.C. Section 1320a-7(a) or (G) has
been a party to or subject to any action concerning any of the matters described
above in clauses (A) through (E).

 

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(d) Seller has no knowledge of and has not caused the Business to be in any
material violation of any Environmental, Health and Safety Requirements in
connection with the ownership, use, maintenance or operation of the Business.
There are no pending or, to the knowledge of Seller, any threatened allegations
against Seller by any Person that any of the Purchased Assets are not, or that
the Business has not been conducted, in compliance with all Environmental,
Health and Safety Requirements and Seller has not received any notice, report,
or information (including information that litigation, investigation or
administrative action of any kind are pending or threatened) regarding any
actual or potential liabilities or any corrective, investigatory, or remedial
obligations, arising under Environmental, Health and Safety Requirements
relating to the Business or the use of any of the Purchased Assets. Seller has
not caused any Hazardous Substances to be located at, in, under, or about,
either the Purchased Assets or the Operate Premises in a manner that:
(i) violates in any material respect any applicable Environmental, Health and
Safety Requirements or (ii) requires response, remedial, corrective action or
cleanup of any kind under any applicable Environmental, Health and Safety
Requirements.
5.20. Sale Process. Schedule 5.20 sets forth a materially accurate description
of the Sale Process undertaken by Seller and its agents in offering the
Purchased Assets for sale to third parties.
5.21. Fairness Opinion.  Seller has received a copy of an opinion from Morgan
Joseph & Co. Inc. addressed to Parent, to the effect that, as of such date, and
subject to the qualifications, limitations and assumptions set forth therein,
certain consideration to be received by Seller pursuant to this Agreement is
fair, from a financial point of view, to Seller (the “Fairness Opinion”). A
true, correct and complete copy of the Fairness Opinion has been delivered to
Buyer as of the date hereof.
5.22. Solvency.
(a) Seller and Parent, consolidated together as a whole, are Solvent and the
transactions contemplated by this Agreement will not render Seller and Parent,
consolidated together as a whole, Insolvent.
(b) Neither Seller nor Parent is engaged in business or transactions, nor is
about to engage in business or transactions, for which any property remaining
with Seller or Parent, as applicable, immediately after the Applicable 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, neither Seller nor Parent intends to incur, nor
believes that it will incur, debts that will be beyond such party’s ability to
pay as such debts mature.
(d) Neither Seller nor Parent is 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 such party is indebted
on the Applicable Closing Date or any creditor to which the such party may
become indebted after the Applicable Closing Date.

 

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5.23. Affiliate Transactions. Except as set forth on Schedule 5.23, no Affiliate
of Seller and no employee, officer or director of Seller or any of its
Affiliates (i) 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 the personal
professional licenses of employees, (ii) has any claim or cause of action or any
other action, suit or proceeding against, or owes any amount to Seller related
to the Business, or (iii) is a party to any contract related to the Business
pursuant to which Seller provides to, or receives services from, any such
Person, except as to any such individual in his or her capacity as a Business
Employee and except for general corporate management and shared services
provided by Parent and its Affiliates.
5.24. Broker. Except as set forth on Schedule 5.24, neither Seller nor any
Person acting on Seller’s 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
As an inducement to Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Buyer hereby represents and warrants to Seller
and agrees as follows:
6.1. Organization of Buyer. 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.
6.2. Authorization. Buyer has full corporate power and authority to execute,
deliver and perform this Agreement, the Indemnity Escrow Agreement and all
documents and agreements required to be delivered hereunder, 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 Buyer of this Agreement, the Indemnity Escrow Agreement and the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of Buyer and no other corporate proceedings
on the part of Buyer are necessary with respect hereto or thereto. This
Agreement has been duly authorized, executed and delivered by Buyer and is the
legal, valid and binding obligation of Buyer 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 Buyer and upon
execution and delivery by Buyer will be a legal, valid and binding obligation of
Buyer 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.

 

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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 will:
(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, under (i) the certificate of incorporation or by-laws of Buyer, (ii) any
material agreement, note, instrument, mortgage, lease, license, franchise,
permit or other authorization, right, restriction or obligation to which Buyer
is a party or any of their respective assets or business is subject or by which
Buyer is bound, (iii) any order, writ, injection or decree to which Buyer is a
party or any of their respective assets or business is subject or by which Buyer
is bound or (iv) any applicable Requirements of Laws affecting Buyer or its
assets or business; or
(b) require the approval, consent, authorization or act of, or the making by
Buyer 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 to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
6.4. Sufficient Funds. Buyer has, and on each Applicable Closing Date will have,
sufficient funds available to enable Buyer to pay the applicable portion of the
Purchase Price payable thereon pursuant to the terms of this Agreement. Buyer
will not require any third-party financing to consummate the transactions
contemplated by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Employees.
(a) Unless otherwise agreed to by Buyer, between the date hereof and the
Applicable Closing, Seller shall (i) continue to employ 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 Operate Location Pharmacies or File-Transfer Locations.
In addition, between the date hereof and the Applicable Closing, Seller shall
inform Buyer if any Business Employee has terminated or given notice of their
termination of employment at any Business Location.
(b) Between the date hereof and the Applicable Closing, Buyer may interview some
or all of the Business Employees to determine whether to offer employment to any
of such employees. Buyer shall have no obligation to hire any Business Employee.
Any Business Employees who accept Buyer’s 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 Seller 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 Seller, in its
discretion. Buyer shall coordinate interviews through Seller in order to
minimize disruptions to ongoing operations of the Business.

 

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(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 Business Employees, whether hired by Buyer or not,
for any benefit, perquisite or remuneration accrued or earned while under
Seller’s 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, other than for Transferred Employees after the Applicable Closing
Date.
(d) The benefits of Transferred Employees under the Employee Plans (if and to
the extent applicable) will be determined as of the Applicable 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 Buyer
currently makes available to its similarly situated employees. Upon the
Applicable Closing, Seller, in accordance with Seller’s personnel policies and
procedures, shall pay to each Transferred Employee the amount of (i) all accrued
unpaid vacation and time-off pay credited to the Transferred Employee as of the
Applicable Closing and (ii) all other accrued unpaid compensation credited to
the Transferred Employee as of the Applicable Closing. Buyer will cause all
employee benefit plans and programs of Buyer and its Affiliates to recognize all
service of Transferred Employees with Seller or any of its Affiliates (to the
extent such service was recognized under the comparable Employee Plans as of the
Applicable Closing) for purposes of vesting and eligibility under Buyer’s
employee benefit plans (other than the frozen 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) 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 the Applicable Closing any such plans
or arrangements of Buyer or any of its Affiliates.

 

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(g) With respect to all employees of Seller who are employed at any pharmacy
location of Seller, Seller shall use commercially reasonable efforts to comply
with, and be responsible for performing and discharging, all applicable
requirements under the WARN Act, and any similar applicable state or local law,
and for the timely notification to its employees, or any other required
individuals or entities, of any “employment loss” within the meaning of the WARN
Act which occurs prior to, at or following the Applicable Closing Date as a
result of or to the extent otherwise related to the transactions contemplated by
this Agreement. Seller shall be responsible for, and shall indemnify Buyer and
its Affiliates for, all costs and liabilities associated with any failure by
Seller to comply with the requirements of the WARN Act or any similar applicable
state or local laws.
7.2. Non-competition.
(a) In furtherance of the sale of the Purchased Assets to Buyer 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 five
(5) years after the Final Closing Date, Parent and Seller agree not to (and
shall cause their respective Affiliates 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 retail drug store, clinic pharmacy, long-term
care facility pharmacy business or other business which competes with the
Business as conducted by Seller prior to the date hereof (“Pharmacy Business”)
within (x) Illinois, Colorado, Minnesota, Missouri or Oklahoma as it relates to
the long-term care segment of the Business or (y) the United States as it
relates to any other segment of the Business, including retail pharmacies. The
limitations in this Section 7.2(a) will not prohibit: (i) any passive investment
by Parent, Seller or their Affiliates (the “Seller Group”) in securities that
are listed on a securities exchange or quotation system issued by a company,
firm, corporation, partnership, trust or other entity involved in or conducting
a Pharmacy Business provided that the Seller Group own no more than five percent
(5%) of the outstanding voting securities of the entity; (ii) Parent, SDC
Holdings, LLC and their Affiliates other than Seller from acquiring and
organically growing any businesses that diagnose and/or treat sleep disorders or
otherwise support the ongoing care of patients with respect to such disorders;
including but not limited to the diagnostic testing of patients in an
institution, facility or personal residence and the rental, lease or sale of
medical devices, supplies and accessories currently or in the future used in the
care of sleep disorders or reasonably growing out of such care and as long as
the business does not sell prescription drugs or market itself as a pharmacy,
this exclusion shall not be limited by State or Federal rules or guidelines
governing how a business is licensed, accredited or categorized for
administrative purposes; or (c) any purchaser, unaffiliated with Parent and
Seller (or any successor or assign), of a controlling interest in Parent from
conducting Pharmacy Business in the same manner conducted prior to the
acquisition of Parent, as long as such Pharmacy Business is not conducted
directly or indirectly through Parent or its subsidiaries and as long as such
purchase does not occur prior to one year after the Final Closing.
(b) Parent and Seller also agree not to (and shall cause their respective
Affiliates not to), for a period of five (5) years after the Final Closing Date,
directly or indirectly call upon, solicit, write, direct or divert business from
any Person who filled a prescription in the twelve (12) month period ending on
the Applicable Closing Date at any Operate Location Pharmacy or File-Transfer
Location (a “Customer”).

 

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(c) Parent and Seller also agree, for a period of five (5) years after the Final
Closing Date, not to (and shall cause their respective Affiliates during the
same period not to) transfer, lease or sublease the real property at the
File-Transfer Locations to any business which competes with the Business.
Seller’s termination of any lease shall not violate this provision; provided,
that no such lease shall be terminated within ninety (90) days of the Applicable
Closing Date.
(d) For a period of five (5) years after the Final Closing Date, Parent and
Seller shall not (and shall cause their respective Affiliates to not) solicit,
recruit or hire any Business Employee at the date of this Agreement who becomes
a Transferred Employee and shall not (and shall cause their respective
Affiliates to not) encourage any such employee to leave the employment of Buyer;
provided, that the provisions of this Section 7.2(d) shall not apply with
respect to any Business Employee who responds to a public advertisement by
Parent or Seller.
(e) For the period during which Parent or Seller (or any of their respective
Affiliates) is the tenant under a lease at any File-Transfer Location, each of
Parent and Seller covenants and agrees that such location shall not be used to
operate a retail pharmacy.
(f) Parent and Seller covenant and agree not to (and shall cause their
respective Affiliates not to) use or divulge to any Person any Confidential
Information included in the Purchased Assets or otherwise relating to the
Business.
(g) 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
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 to enter into this Agreement and pay
the Purchase Price.
(h) Notwithstanding anything to the contrary herein, Seller may continue to
operate the File-Transfer Locations for ninety (90) days after the Applicable
Closing for the sale of non-pharmaceutical Excluded Assets and Excluded
Inventory.

 

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7.3. Records and Data.
(a) The parties agree that Seller will engage Infowerks (the “Data Converter”)
to convert Seller’s prescription file and record data (the “Record Data”) to a
format specified by Buyer. Seller agrees to 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 in English at least two (2) weeks
prior to each Applicable Closing Date (the “Initial Conversion”). In the event
that the Record Data is not or cannot be delivered to the Data Converter in
English as of such date, or cannot be converted by the Data Converter, Buyer, at
Buyer’s sole discretion, may delay the Applicable Closing until the Record Data
is delivered to Buyer in English. Prior to each Applicable Closing, Buyer will
not use the Record Data for any purpose other than to test integration with
Buyer’s systems. If an Applicable Closing does not occur for any reason, Buyer
will not contact any of the customers in the Record Data and will promptly
destroy the Record Data and send Seller written certification of such
destruction. The parties further agree that in the event that despite having
received the Record Data, the Data Converter is unable to convert such Record
Data at least one (1) week prior to the Applicable Closing, Buyer, at Buyer’s
reasonable discretion, may, upon written notice to Seller, delay such Applicable
Closing by the amount of time reasonably required to convert such data. If Buyer
does not provide such notice to Seller at least three (3) business days prior to
such Applicable Closing, then Buyer shall forfeit its right to delay such
Applicable Closing pursuant to this Section 7.3(a). Buyer agrees that it will
use commercially reasonable efforts to have the data converted within the time
periods set forth above. Seller shall deliver the Record Data with respect to
each File-Transfer Location and Operate Location Pharmacy for the period between
the Initial Conversion and each Applicable Closing Date (the “Final
Conversion”), to the Data Converter, so that the Data Converter can deliver the
Final Conversion to Buyer as soon as possible on each Applicable Closing Date.
(b) Seller has, with respect to each of the Operate Location Pharmacies and
File-Transfer Locations, maintained (i) an accurate log of all disclosures, to
the extent any have been made, since Seller acquired each Business, of Protected
Health Information (“PHI”), as that term is defined in HIPAA, (ii) hard copies
of all prescriptions for a minimum of the shorter of (x) the existence of such
Operate Location Pharmacies or (y) six (6) years prior to the Applicable Closing
Date, (iii) hard copy printouts of all patient profiles and histories, active
and archived, on any and all databases, and (iv) hard copy printouts of all
customer requests for amendments to prescription records and related Seller
responses, as contemplated by 45 C.F.R. §164.526. Seller agrees to provide Buyer
with a record of any disclosure of PHI made by any Operate Location Pharmacies
and File-Transfer Locations while Seller owned such Business.
7.4. Patient Letters. Buyer will 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 (2) years by mailing
to each such customer a letter in form and substance compliant with applicable
Requirements of Law and reasonably satisfactory to Buyer and Seller. 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 Applicable Closing Date. Buyer and Seller shall instruct the Data Converter
not to deliver the Record Data related to the File-Transfer Locations 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 Applicable Closing.

 

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7.5. Matters Related to Prescriptions. Prior to each Applicable Closing, Seller
shall use reasonable efforts to fill and deliver to customers of Operate
Location Pharmacies any partial-fill prescriptions with a remaining quantity
balance (each, an “IOU Prescription”). For any IOU Prescriptions remaining on an
Applicable Closing Date, Seller shall credit the prescription to the customer or
to the third-party payor, as appropriate, on such Applicable Closing Date. Buyer
assumes no liability for IOU Prescriptions. In addition, prior to each
Applicable Closing, Seller 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
such Applicable Closing Date.
7.6. Interim Operations.
(a) Between the date hereof and each Applicable Closing Date, Seller shall
operate and carry on the Business not previously transferred to Buyer only in
the ordinary course and substantially as presently operated. Consistent with the
foregoing, Seller shall (i) keep and maintain the Purchased Assets in good
operating condition and repair; (ii) use commercially reasonable efforts to
preserve the goodwill of the suppliers, contractors, licensors, employees,
customers, distributors and others having business relations with the Business;
and (iii) other than the reduction of surplus non-pharmaceutical Excluded
Inventory that does not eliminate the display of a product or create the
appearance of an inventory shortage, 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. In
furtherance of the foregoing, Seller shall maintain normal operating hours,
staffing levels, inventory levels and merchandise mix. Additionally, between the
date hereof and each Applicable Closing Date, Seller will take commercially
reasonable steps that are consistent with (x) Seller’s past practice in the
ordinary course of the Business and (y) regional pharmacy standards to maintain
or increase the applicable Current Volume. Buyer shall have the right, at any
time before the Final Closing upon reasonable notice and at Buyer’s expense, to
audit Seller’s prescription records to determine the then-current average daily
prescription counts.
(b) Except as expressly contemplated by this Agreement or except with the
express written approval of Buyer, Seller 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 each Applicable
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 law; (ii) enter into any lease, agreement, contract or commitment of
any nature (or amendment, supplement or modification of any existing lease,
agreement, contract or commitment, other than amendments to the Operate Real
Estate Leases contemplated by this Agreement), oral or written, that would be
binding on or adversely impact the Purchased Assets or Buyer after any
Applicable Closing, nor make any capital investment or expenditures, primarily
related to the ownership or operation of the Operate Location Pharmacies or
File-Transfer Locations; (iii) 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 or
File-Transfer Locations; or (iv) sell, lease, transfer or otherwise dispose of
(including any transfers from Seller to any of its 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.

 

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7.7. Signage. To the extent permitted under each real estate lease related to
the File-Transfer Locations, if any, and applicable zoning and similar laws and
ordinances (a) Seller shall permit Buyer to place a sign at the front entrance
of each File-Transfer Location for a period beginning two (2) weeks after Seller
files the Information Statement with the SEC and ending on the earlier of
(i) ninety (90) days after the Applicable Closing Date, or (ii) the termination
of Seller’s lease for such location, advising customers that all prescription
files have been transferred to a Walgreen drug store or other location
designated by Buyer and (b) Seller shall permit Buyer to place a sign at the
front entrance of each File-Transfer Location prior to the Applicable Closing
Date advising customers that all prescription files will be transferred to such
drug store or other location.
7.8. Telephone Numbers. Upon each Applicable Closing, Seller shall disconnect
existing telephone lines and fax lines and terminate any existing telephone and
fax accounts, including advertising and yellow pages agreements, for the
applicable File-Transfer Locations. Seller shall arrange, in a manner approved
by Buyer, for call referral for all calls to the numbers so canceled to a
Walgreen drug store or other location designated by Buyer for a period of no
less than ninety (90) days (the “Call Referral Arrangement”). Except as
contemplated by Section 3.2(b), there shall be no charge to Buyer for the Call
Referral Arrangement and Seller shall pay all telephone charges and billings
arising from the numbers canceled by Seller.
7.9. Taxes.
(a) Seller shall be liable for and covenants to pay, and pursuant to Article
VIII shall indemnify and hold harmless each Buyer Group Member from and against
any and all Loss and Expense incurred by any of them in connection with or
arising from (i) all Taxes imposed on Seller or for which Seller may otherwise
be liable (whether assessed or unassessed) applicable to the Business or the
Purchased Assets, in each case attributable to taxable years or periods (or
portions thereof) ending on or prior to the Closing Date and (ii) all excise,
sales, use, transfer (including real property transfer or gains), stamp,
registration, documentary, filing, recordation and other similar Taxes which may
be imposed or assessed as a result of the transactions effected pursuant to this
Agreement (the “Transfer Taxes”).
(b) Seller shall provide reimbursement for any Tax paid by Buyer, all or a
portion of which is the responsibility of Seller in accordance with the terms of
this Section 7.9 without regard to the terms of the Indemnity Escrow Agreement.
Within a reasonable time prior to the payment of any such Tax, Buyer shall give
notice to Seller of the Tax payable and the portion which is the liability of
Seller, although failure to do so will not relieve Seller from its liability
hereunder.

 

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(c) After the Closing Date, each of Seller and Buyer shall (and cause their
respective Affiliates to): (i) make available to the other and to any taxing
authority as reasonably requested all information, records, and documents
relating to Taxes of the Business or the Purchased Assets; (ii) provide timely
notice to the other 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 may have a liability; and (iii) furnish the
other 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. Any returns or reports with respect to Transfer Taxes that are
required to be filed shall be prepared and, to the extent Buyer is permitted by
law or administrative practice, filed by Buyer when due.
(d) Seller and Buyer shall each comply with all of their respective requirements
and obligations under state tax bulk sales or similar laws that apply when a
person sells some or all of its assets.
(e) Notwithstanding anything to the contrary in this Agreement, the obligations
of the parties set forth in this Section 7.9 shall be unconditional and absolute
and shall remain in effect until sixty (60) calendar days after the expiration
of the statute of limitations with respect to any underlying claim.
7.10. Access.
(a) Upon reasonable notice, Seller, each of its directors, officers, agents and
employees shall afford Buyer and its representatives reasonable access during
regular business hours from the date hereof through each Applicable Closing to
the Operate Premises and any and all properties, contracts, books, records, data
and personnel of Seller relating to the Business. Seller shall afford to Buyer
and its representatives reasonable access to and an opportunity to speak with
any third parties to the Operate Real Estate Leases. Seller, its directors,
officers, agents and employees shall cooperate in connection with the foregoing.
Seller shall provide to Buyer such information and documents concerning the
Business as reasonably may be requested by Buyer. Buyer shall reimburse Seller
for payments made by Seller to pharmacist employees of Seller as compensation
for hours worked in accordance with Seller’s employment policy at the request of
Buyer in connection with providing the access required for the Installation or
contemplated by this Section 7.10(a) and upon the provision by Seller to Buyer
of reasonable documentation evidencing such overtime work to the satisfaction of
Buyer. In exercising its rights under this Section 7.10(a), Buyer shall not
unreasonably interfere with Seller’s Business and shall coordinate the exercise
of such rights through Seller.
(b) Upon reasonable notice, Seller shall permit Buyer access to all of the
Operate Premises in order to perform the Installation 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. Buyer agrees to repair any
damage which may be caused due to the exercise of its rights pursuant to this
Section 7.10(b) and to indemnify, defend and hold harmless Seller from any and
all Losses arising out of or in any way connected with Buyer’s exercise of its
rights pursuant to this Section 7.10(b). In exercising its rights under this
Section 7.10(b), Buyer shall not unreasonably interfere with Seller’s Business,
shall perform all work outside of business hours of the Business unless it is
impractical to do so, and shall coordinate the exercise of such rights through
Seller. Seller will not be deemed to have failed to provide access under this
Section until two (2) business days after receipt of written notice of such
failure from Buyer.

 

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(c) For a period of ninety (90) days following each Applicable Closing Date,
Seller shall afford Buyer the use of (i) a pharmacy computer with access to the
File-Transfer Records that are maintained electronically and (ii) an attached
printer. In addition, Seller agrees to make the computer hardware, computer
software and electronic data currently used for record keeping purposes
available to Buyer for up to six (6) months after each Applicable Closing Date
at no cost to Buyer. Seller will retain a complete copy of all Record Data in
accordance with applicable Requirements of Law regarding retention of records.
Buyer agrees to allow Seller access upon reasonable notice to the computer
hardware, computer software and electronic data currently used for record
keeping purposes at the Operate Location Pharmacies available for up to six
(6) months after each Applicable Closing Date at no cost to Seller. Buyer will
retain a complete copy of all Record Data in accordance with applicable
Requirements of Law regarding retention of records.
(d) Any breach of any representation or covenant of Seller to the extent
directly resulting from Buyer’s actions under this Section 7.10, will not be a
default under this Agreement and will not give rise to an indemnity claim by any
Buyer Group Member.
7.11. Consent of Third Parties; Regulatory and Other Authorizations.
(a) Seller will act diligently and reasonably to secure before each Applicable
Closing Date, each consent, approval or waiver, in form and substance reasonably
satisfactory to Buyer, required to be satisfied prior to such Applicable
Closing; provided, that Seller 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.
During the period prior to each Applicable Closing Date, Buyer shall use
commercially reasonable efforts to cooperate with Seller to obtain the consents,
approvals and waivers contemplated by this Section 7.11(a).
(b) During the period prior to each Applicable Closing Date, Seller 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 Seller 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.

 

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7.12. Avoiding Abandonment.
(a) Seller hereby authorizes Buyer to operate under each Permit related to the
Business after each Applicable Closing, to the extent permitted by applicable
law, rule or regulation and to the extent necessary to enable Buyer to conduct
the Business while Buyer seeks to replace such Permit with its own license,
authorization, permit or waiver (such Permits, the “Transferable Permits”).
Buyer 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. Seller will
take all steps reasonably necessary to maintain its authorizations under the
Transferable Permits that Buyer operates under during the period between Closing
and the issuance of Buyer’s own licenses, authorizations, permits or waivers and
Seller will cooperate with Buyer in preparing and submitting the Buyer
Applications.
(b) Prior to each Applicable Closing, Seller agrees to use commercially
reasonable efforts as may be reasonably requested by Buyer to assist Buyer in
(i) obtaining all licenses, authorizations, permits or waivers as may be
necessary for Buyer to conduct the Business at the Operate Location Pharmacies
(including, taking all steps reasonably necessary to relinquish the Permits
effective as of the Applicable Closing) and (ii) making such licenses,
authorizations, permits or waivers effective as of each Applicable Closing Date
or as promptly thereafter as is practicable. Seller further agrees that, prior
to each Applicable Closing, it will cooperate as may be reasonably necessary to
enable Buyer to (x) obtain either a new license or the approval of the transfer
of Buyer’s existing license issued by the pharmacy boards of the states in which
the Operate Location Pharmacies are located, and (y) obtain any required
Medicare or Medicaid authorizations or numbers, NCPDP numbers and Drug
Enforcement Agency authorizations, permits or licenses.
(c) Seller shall execute a power of attorney, in form and substance reasonably
acceptable to the parties, authorizing Buyer to operate the Business under 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 to conduct the
Business, in each case as are reasonably requested by Buyer.
(d) During the term of the Operate Real Estate Leases and any extensions, Seller
will not take or, prior to each Applicable Closing fail to take, any action
under the Operate Real Estate Leases that would impair the ability of Seller to
perform its obligations under the Operate Real Estate Leases.
7.13. Nonassignable Contracts.
(a) To the extent that the assignment by Seller of any Assumed Contract is not
permitted without (i) the consent of the other party to the contract, (ii) the
approval of Buyer as a source of the products or services called for by such
contract or (iii) the approval of Buyer as a lessee, 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. However, unless otherwise agreed as to any particular contract, Seller
shall use commercially reasonable efforts (without the requirement to pay money
or agree to terms which are less favorable to Seller) to obtain any and all such
consents and approvals before and after each Applicable Closing.

 

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(b) If any necessary consent or approval is not obtained, Seller shall cooperate
with Buyer in any reasonable arrangement designed to provide Buyer with all of
the benefits under such Assumed Contracts without violating the terms thereof,
as if such consent or approval had been obtained. Nothing herein shall excuse
Seller from responsibility for any of its representations and warranties or
covenants hereunder.
7.14. Remittance; Accounts Payable; Patient Charge Accounts.
(a) The parties agree that (i) in the event Buyer receives payment from any
parties for services rendered by Seller on or before an Applicable Closing Date
(including payment from Medicare and Medicaid programs) (the “Seller
Receivables”), Buyer will remit such payment to Seller as soon as reasonably
practicable after receipt thereof (but in no event later than fifteen (15) days
after receipt) and (ii) in the event Seller or any Affiliate receives payment
from any parties for services rendered by Buyer after an Applicable Closing Date
(including payment from Medicare and Medicaid programs), Seller will remit such
payment to Buyer as soon as reasonably practicable after receipt thereof (but in
no event later than fifteen (15) days after receipt). At Seller’s reasonable
request and expense, Buyer shall provide Seller with information detailing
Buyer’s receipt and delivery of any Seller Receivables and use of the Borrowed
Permits; provided, that Buyer will not be required to provide any information
relating to any other aspect of its business or operations.
(b) The parties agree that (i) all accounts payable and other liabilities
incurred in connection with the Business on or before the Closing Date will be
the sole responsibility of Seller and (ii) all accounts payable and other
liabilities incurred by Buyer in connection with the Business after the Closing
Date will be the sole responsibility of Buyer. Each party shall, as soon as
reasonably practicable after receipt thereof (but in no event later than fifteen
(15) days after receipt) deliver to the other party copies of each relevant bill
or statement that may be in such party’s records.
(c) After the date hereof and for 180 days after the Final Closing Date, Seller
may pursue collection of Patient Charge Accounts, including utilizing the
services of a collection agency; provided, that in connection therewith, Seller
(or Seller’s collection agency) may not engage in or threaten to engage in
litigation against any individual customer from which Seller is pursuing
collection. Promptly after each Applicable Closing Date, Seller will send
written notice, in a form reasonably acceptable to Buyer, to the obligors under
the Patient Charge Accounts of the change in ownership and that payment should
be directed to Seller.
7.15. Further Assurances. At any time and from time to time at or after each
Applicable 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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7.16. UCC Searches. Buyer may conduct Uniform Commercial Code searches of state
and county records.
7.17. Access to Records.
(a) The parties acknowledge that, subsequent to each Applicable Closing, Seller
may need access to information or documents in the control or possession of
Buyer for the purposes of billing Medicare and other payors, concluding the
transactions herein contemplated, audits, compliance with governmental
requirements and regulations, and the prosecution or defense of third party
claims. Accordingly, the parties agree that for a period of not less than five
(5) years after each Applicable Closing, subject to applicable law, Buyer will
make reasonably available to Seller and Parent and their respective agents,
independent auditors, counsel, and/or governmental agencies, upon request, such
records as may be available for periods prior and subsequent to such Applicable
Closing to the extent necessary to facilitate billing by Seller, concluding the
transactions herein contemplated, audits, compliance with governmental
requirements and regulations, and the prosecution or defense of claims.
(b) The parties agree that for a period of not less than five (5) years after
each Applicable Closing, Seller shall make reasonably available to Buyer and its
respective agents, independent auditors, counsel and/or governmental agencies,
upon request, information not included in the Purchased Assets but relating to
the Purchased Assets, the Business, or any Transferred Employee.
7.18. Parent Shareholder Approval. Parent shall cause its corporate Secretary to
deliver to Buyer copies of written consents of shareholders of Parent evidencing
the Parent Shareholder Approval with a certificate executed on behalf of Parent
by its corporate Secretary certifying that such written consents reflect the
approval and adoption of this Agreement and the transactions described herein by
a majority of the common stock of Parent (the “Parent Shareholder Approval
Evidence”).
7.19. Removal of Fixtures and Hazardous Chemicals.
(a) If, with respect to any real estate lease associated with a File-Transfer
Location, either (i) Seller terminates such lease within ninety (90) days
following the Applicable Closing or (ii) such lease expires within ninety
(90) days after the Applicable Closing, Seller shall remove all fixtures located
at such File-Transfer Location within a period of time to be agreed upon by
Buyer and Seller.
(b) Seller shall remove all Hazardous Chemicals (including Hazardous Chemicals
included in Inventory) from each Operate Location Pharmacy prior to the
Applicable Closing Date.
(c) Seller shall remove or cause to be removed the leased pharmacy robotics
equipment from each Operate Location Pharmacy as soon as possible after the
Applicable Closing, and in any event no later than fifteen (15) days after the
Applicable Closing, subject to the requirements under the equipment lease that
the owner of such equipment conduct the removal.

 

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7.20. Information Statement. As promptly as practicable following the date of
this Agreement (and in no event more than four (4) days after the date hereof),
Parent shall prepare and file an information statement, describing the
transactions contemplated herein, on Schedule 14C (the “Information Statement”)
with the SEC in accordance with Regulation 14C of the Exchange Act. Parent shall
use its commercially reasonable efforts to cause the Information Statement to
comply with the rules and regulations promulgated by the SEC. Parent shall
provide Buyer with the opportunity to review and suggest comments on the
Information Statement prior to its filing with the SEC. Parent shall consider
Buyer’s comments in good faith, but Buyer’s consent shall not be required for
any SEC filing. Parent will advise Buyer promptly after it receives oral or
written notice of any oral or written request by the SEC for amendment to the
Information Statement or comments thereon and responses thereto or requests by
the SEC for additional information, and will promptly provide Buyer with copies
of any written communication from the SEC or any state securities commission. As
promptly as practicable, Parent shall distribute the Information Statement to
its shareholders in accordance with Regulation 14C of the Exchange Act.
7.21. Seller Name Change.
(a) Within ten (10) business days after the first anniversary of the Final
Closing Date, Seller shall take or cause to be taken all necessary action in
order to change its corporate name to a name that does not relate in any way to
(i) the pharmacy business, (ii) the name “Apothecary,” or (iii) any name under
which any File-Transfer Location or Operate Location Pharmacy currently conducts
business, and shall have effected such name change by filing an amendment to its
Certificate of Limited Liability Company with the Secretary of State of
Oklahoma. At such time, Seller shall execute and deliver such consents, waivers
and other documents as are necessary or, in Buyer’s determination, advisable in
order for Buyer to use the corporate name “ApothecaryRx” and any derivation of
such name.
(b) After each Applicable Closing Date, Seller shall have a non-exclusive
license to use the name “ApothecaryRx” solely for purposes of (i) operating the
File-Transfer Locations for 180 days after such Applicable Closing Date for the
sale of non-pharmaceutical Excluded Assets and Excluded Inventory
(ii) collecting outstanding accounts receivable for twelve (12) months after
such Applicable Closing Date and (iii) communicating with any Governmental Body.
Seller agrees to indemnify Buyer for use by Seller of the name ApothecaryRx
after each Applicable Closing.
7.22. Long-Term Care Business. In connection with Buyer’s efforts to enter into
an agreement for the sale of all or part of (i) the closed-door pharmacy
prescription business at Barnes Pharmacy, located at 422 Main Street, Suite B,
Sterling, Colorado, (ii) the facility segment of Rambo Pharmacy’s prescription
business that is serviced by the RNA prescription processing software, (iii) Cox
Pharmacy, located at 1301 E. Downing Ave., Tahlequah, Oklahoma, (iv) Ken’s
Discount Pharmacy, located at 808 N. Porter Ave., Norman, Oklahoma, and (v) Red
Wing Corner Drug, located at 401 W. 3rd Street, Red Wing, Minnesota (together,
the “Long-Term Care Business”), prior to the Applicable Closing of such
locations, Seller shall provide records and inventory of, and on-site access to,
the Long-Term Care Business to potential buyers of such Long Term Care Business
in a manner that does not substantially interfere with any Business.

 

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7.23. Limitations on Representations and Warranties.
(a) EXCEPT FOR THE EXPRESS AND SPECIFIC REPRESENTATIONS AND WARRANTIES OF SELLER
IN THIS AGREEMENT AND IN ANY CLOSING DOCUMENT DELIVERED PURSUANT HERETO, BUYER
ACKNOWLEDGES THAT SELLER HAS NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND
NEGATES, AND BUYER HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY,
EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO THE
ACCURACY, COMPLETENESS OR MATERIALITY OF ANY RECORDS, INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO BUYER BY
OR ON BEHALF OF SELLER.
(b) EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER IN THIS
AGREEMENT AND IN ANY CLOSING DOCUMENT DELIVERED PURSUANT HERETO, SELLER
EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY WAIVES, AS TO PERSONAL
PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES CONSTITUTING A PART OF
THE PURCHASED ASSETS (i) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY,
(ii) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
(iii) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS, (iv) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM DEFECTS, WHETHER
KNOWN OR UNKNOWN, AND (v) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER
APPLICABLE REQUIREMENTS OF LAW, IT BEING THE EXPRESS INTENTION OF BUYER AND
SELLER THAT, EXCEPT TO THE EXTENT EXPRESSLY PROVIDED HEREIN OR IN ANY CLOSING
DOCUMENT DELIVERED PURSUANT HERETO, THE PERSONAL PROPERTY, EQUIPMENT, INVENTORY,
MACHINERY AND FIXTURES IN WHICH SUCH SELLER HAS ANY INTEREST ARE BEING ACCEPTED
BY BUYER, “AS IS, WHERE IS, WITH ALL FAULTS” AND IN THEIR PRESENT CONDITION AND
STATE OF REPAIR.
(c) SELLER AND BUYER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE
REQUIREMENTS OF LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES
CONTAINED IN THIS SECTION 7.23 ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSES OF
ANY APPLICABLE REQUIREMENTS OF LAW.

 

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7.24. Notice of Change in Employment Status. So long as the Non-compete
Agreement between Buyer and James A. Cox remains in effect, Seller shall provide
Buyer with written notice of any change in the employment status of James A. Cox
as it relates to Parent, Seller or any of their respective subsidiaries as soon
as practicable after the date thereof.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification by Seller. Seller agrees 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:
(a) any breach of any warranty or the inaccuracy of any representation of Seller
contained or referred to in this Agreement or any agreement, certificate or
other document required to be delivered by or on behalf of Seller pursuant
hereto;
(b) any breach by Seller of any of its covenants or agreements, or any failure
of Seller to perform any of its obligations, in this Agreement or any agreement,
certificate or other document required to be delivered by or on behalf of Seller
pursuant hereto;
(c) the failure of Seller to pay, perform or discharge any Excluded Liability;
(d) any claims for brokerage commissions or compensation arising out of the
negotiation and execution of this Agreement;
(e) 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 Seller or
(B) creditor of Seller, in either case, arising from or relating to the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby; or
(f) any breach by a Non-compete Signatory of any of his obligations under his
Non-compete Agreement during the time such Non-compete Signatory is an employee
of Seller or its Affiliates.
8.2. Indemnification by Buyer. Buyer agrees to indemnify and hold harmless
Seller, its 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: (a) any breach by Buyer of any of its representations or
warranties in this Agreement or in any agreement, certificate or other 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,
certificate or other document required to be delivered by Buyer hereunder;
(c) any Assumed Liability; or (d) Buyer’s use of the Borrowed Permits on and
after the Closing Date.

 

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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 (i) 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, (ii) set off and reduce
any amounts owed to Seller under this Agreement or (iii) otherwise initiate
proceedings to seek recovery directly from Seller or, pursuant to Section 11.12,
from Parent.
(b) On the twelve (12) month anniversary of the Final Closing Date, the
Indemnity Agent shall distribute in accordance with the terms of the Indemnity
Escrow Agreement fifty percent (50%) of the total funds held in the Indemnity
Fund after deducting from the total funds the amounts for which claims for
indemnification by any Buyer Group Member are pending or remain unpaid, each as
of such date.
(c) In the event that on the eighteen (18) month anniversary of the Final
Closing 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
such 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 Seller or any of its creditors or
shareholders 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 are less than the then existing
Indemnity Fund, the Indemnity Agent shall distribute such difference in
accordance with the terms of the Indemnity Escrow Agreement.
8.4. Notice and Determination of Claims.
(a) The party which is entitled to indemnification hereunder (for purposes of
this Section 8.4, the “Indemnified Person”) may make claims for indemnification
hereunder by promptly giving written notice thereof to the party required to
indemnify (for purposes of this Section 8.4, the “Indemnitor”). 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 materially 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.

 

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(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
timely notice that it will defend a Third Person Claim it shall be deemed to
have refused to defend such Third Person Claim. 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.
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, 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 the foregoing, the Indemnified
Party shall have the right to pay, settle or compromise any such Third Person
Claim, provided, however, that in such event the Indemnified Party shall waive
any right to indemnity therefor hereunder and all other rights to recover on
such claim from the Indemnitor unless the Indemnified Party shall have sought
the consent of the Indemnitor to such payment, settlement or compromise and such
consent was unreasonably withheld, in which event no claim for indemnity
therefor hereunder shall be waived; provided, further, that such settlement or
compromise shall include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party a full release from all
liability in respect of such claim or litigation. 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 are
reasonably likely to 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.

 

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8.6. Calculation of Losses and Expenses. 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 (a) all increases in federal,
state, local or other 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), (b) 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 payable
by the Indemnified Person as a result of the Indemnified Event for all affected
taxable years or periods ending on or before the Final Closing Date and with
respect to any Straddle Period, the portion of such Straddle Period ending on
and including the Final Closing Date, and (c) 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 realized by the Indemnified Person as a
result of the Indemnified Event for all affected taxable years or periods ending
on or before the Final Closing Date and with respect to any Straddle Period, the
portion of the Straddle Period ending on and including the Final Closing Date.
8.7. Tax Treatment of Indemnity Payments. Seller 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. Certain Limitations on Indemnity. In no event will Seller’s aggregate
liability for breaches of representations and warranties hereunder (by
indemnification or otherwise) exceed Eight Million One Hundred Twenty-five
Thousand Dollars ($8,125,000.00) (other than with respect to liability for
breaches of Sections 5.1 (Organization and Authority; Parent Shareholder
Approval), 5.2 (No Conflicts), 5.4 (Title and Sufficiency), 5.19 (Compliance
With Law; Permits; Medicare and Medicaid), or 5.24 (Broker) (together, the
“Fundamental Reps”) or 5.3 (Taxes), as to which this proviso shall have no
effect). The amount of any indemnification provided under Sections 8.1 or 8.2
shall be net of any amounts actually recovered by the Indemnified Person under
insurance policies (net of any costs incurred in obtaining such recovery,
including increased insurance premiums to the Indemnified Person) and the
parties agree that each Indemnified Person shall use commercially reasonable
efforts to pursue in good faith claims under applicable insurance policies,
provided that where a Buyer Group Member is an Indemnified Person, such
Indemnified Person’s only obligation hereunder shall be to file claims under
insurance policies made available to Buyer by Seller and such Indemnified Person
shall not be obligated to pursue litigation or incur any other related expense.

 

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ARTICLE IX
CONDITIONS TO CLOSING
9.1. Seller’s Conditions to Closing. The obligations of Seller under this
Agreement are subject to the satisfaction at or prior to each Applicable Closing
of each of the following conditions, but compliance with any or all of such
conditions may be waived, in writing, by Seller:
(a) the representations and warranties of Buyer 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 Applicable
Closing Date (except to the extent that they expressly relate to an earlier
date);
(b) Buyer 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 at or prior to the Applicable Closing;
(c) there shall be no legal restraint or prohibition preventing the consummation
of the transactions contemplated by this Agreement threatened, pending or in
effect, including any order, injunction, judgment or decree issued by any court
or other Governmental Body, any order or request by any Governmental Body
seeking to restrain, enjoin or otherwise prevent or delay the consummation of
the transactions contemplated by this Agreement or any action, suit or
proceeding instituted by any Person or entity before a court or Governmental
Body, which restrains or prevents the consummation of the transactions
contemplated by this Agreement;
(d) Seller shall have received the Parent Shareholder Approval;
(e) Parent shall have complied with all applicable requirements of
Regulation 14C of the Exchange Act; and
(f) with respect to the Purchased Assets and Assumed Liabilities to be
transferred on the Applicable Closing Date, Buyer shall have delivered all
documents and paid all sums required to be delivered or paid under Section 4.2.
9.2. Buyer’s Conditions to Closing. The obligations of Buyer under this
Agreement are subject to the satisfaction at or prior to each Applicable Closing
of each of the following conditions, but compliance with any or all of any such
conditions may be waived, in writing, by Buyer:
(a) Except for the representations in Section 7.3(b)(i) and (iv), the
representations and warranties of Seller 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);

 

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(b) Seller 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 Applicable Closing Date;
(c) Seller shall have received the Parent Shareholder Approval and delivered to
Buyer the Parent Shareholder Approval Evidence;
(d) between the date hereof and the Applicable Closing Date, there shall not
have been any Material Adverse Effect on the Business or the Purchased Assets to
be transferred on such Applicable Closing Date and no fact or condition shall
exist or be threatened which would reasonably be expected to have a Material
Adverse Effect thereon;
(e) Seller shall have delivered to Buyer either (a) documents, in form and
substance reasonably satisfactory to Buyer, demonstrating the release of all
Encumbrances (except Permitted Encumbrances) on the applicable Purchased Assets,
or (b) customary pay-off letters or similar acknowledgments of the discharge of
any indebtedness for borrowed money of Seller setting forth the amount owed as
of the Applicable 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 applicable Purchased Assets will be
released and removed;
(f) unless Buyer can operate under the terms of Section 7.12, Buyer shall have
obtained all licenses, permits, NCPDP numbers, Medicaid or Medicare numbers, or
similar items required to operate the Business as set forth at Schedule 9.2(f)
(the “Required Licenses”) (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 as soon as reasonably possible after execution
of this Agreement but in no event prior to the filing of the Information
Statement, Buyer will file its application for the Required Licenses);
(g) there shall be no legal restraint or prohibition preventing the consummation
of the transactions contemplated by this Agreement threatened, pending or in
effect, including any order, injunction, judgment or decree issued by any court
or other Governmental Body, any order or request by any Governmental Body
seeking to restrain, enjoin or otherwise prevent or delay the consummation of
the transactions contemplated by this Agreement or any action, suit or
proceeding instituted by any Person or entity before a court or Governmental
Body, which restrains or prevents the consummation of the transactions
contemplated by this Agreement;
(h) Seller shall have granted access to Buyer to interview the Business
Employees pursuant to Section 7.1(b);
(i) Parent shall have complied with all applicable requirements of
Regulation 14C of the Exchange Act;
(j) with respect to the Purchased Assets and Assumed Liabilities to be
transferred on the Applicable Closing Date, Seller shall have delivered all
documents required to be delivered under Section 4.3;

 

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(k) with respect to the Purchased Assets and Assumed Liabilities to be
transferred on the Applicable Closing Dates, Seller shall have received the
Required Lease Consents, in form and substance reasonably satisfactory to Buyer;
and
(l) with respect to each Operate Location Pharmacy (and the Purchased Assets
related thereto), Seller shall have made such location available for
Installation pursuant to Section 7.10(c) during the forty-five (45) day period
after the date hereof, provided that if such Installation is not complete as of
such date, Buyer may delay a Subsequent Closing Date until up to sixty (60) days
after the date hereof.
ARTICLE X
TERMINATION
10.1. Termination.
(a) Notwithstanding anything contained in this Agreement to the contrary, this
Agreement may be terminated at any time prior to the First Closing Date:
(i) by the mutual written consent of Buyer and Seller;
(ii) by Buyer or Seller pursuant to Section 11.9;
(iii) by either Buyer or Seller 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 any the transactions
contemplated hereby; or
(iv) by either Buyer or Seller if the First Closing shall not have occurred on
or before 90 days after the date hereof (or such later date as may be mutually
agreed to in writing by Buyer and Seller) (the “Termination Date”); provided,
that the party seeking to exercise such right of termination has not breached
its obligations hereunder.
10.2. Effect of Termination. 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
shareholders, directors or officers to the other parties, provided, (a) that
this Section 10.2 and Sections 11.2, 11.7 and 11.11 shall survive any such
termination, and (b) that nothing herein shall relieve any party from liability
for its willful breach of this Agreement.

 

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ARTICLE XI
GENERAL PROVISIONS
11.1. Survival of Obligations. Except for the Fundamental Reps (which shall
survive for thirty (30) days beyond the applicable statute of limitations), the
respective representations and warranties of Seller and Buyer contained in this
Agreement or in any certificate delivered in connection with this Agreement
(together with the indemnification rights with respect thereto) will survive
each Applicable Closing Date for a period of eighteen (18) months and shall
thereafter be of no further force or effect, except for any claim asserted by
Seller or Buyer, as applicable, with respect thereto before the end of such
eighteen (18) month period; provided, however, that Seller’s representations and
warranties with respect to any Taxes covered by this Agreement shall survive
each Applicable Closing until thirty (30) calendar days after the expiration of
all statutes of limitations (including any and all extensions thereof)
applicable to such Taxes (the “Tax Survival Period”), except for any claim
asserted by Buyer with respect thereto before the end of the Tax Survival Period
which shall survive with respect to such claim until such claim is finally paid
or adjudicated. The intended effect of termination of representations and
warranties (and the indemnification rights with respect thereto) is to bar, from
and after the date of termination, any claim or cause of action based on the
alleged inaccuracy of such representation or breach of such warranty, or with
regard to claims for indemnity with respect thereto. The covenants and
agreements contained in this Agreement shall survive each Applicable Closing
indefinitely.
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, regulation or stock exchange or quotation
system (including the rules and regulations of the SEC and the Nasdaq Capital
Market), in which case the parties shall use their best efforts to cause a
mutually agreeable release or announcement to be issued. In any event, no such
press release or other public announcement shall be made by either party prior
to Seller having received the Parent Shareholder Approval and provided the
Parent Shareholder Approval Evidence to Buyer; provided that Parent may make any
required disclosures (including a Current Report on Form 8-K) within the time
required.
11.3. Notices. All notices or other communications required or permitted under
this Agreement shall be in writing, 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 Seller, to:
ApothecaryRx, LLC
Attn: Lew Zeidner, President
5500 Wayzata Boulevard, Suite 210
Golden Valley, Minnesota 55416
Phone: (763) 245-8278
Fax: (763) 647-1137

 

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with copies to:
Graymark Healthcare, Inc.
Attn: Ashley Tate, General Counsel
210 Park Avenue, Suite 1350
Oklahoma City, Oklahoma 73102
Phone: (405) 601-5300 Ext. 361
Fax: (405) 601-4550
and
Commercial Law Group, P.C.
5520 North Francis
Oklahoma City, Oklahoma 73118
Attention: Mike Meleen
Telephone: (405) 232-3001
Fax: (405) 232-5553
and
Greenberg Traurig LLP
One International Place
Boston, Massachusetts 02110
Attention: Robert E. Puopolo
Phone: (617) 310-6033
Fax: (617) 279-8433
If to Buyer, to:
Walgreen Co.
Mergers & Acquisitions
106 Wilmot Road, MS-1655
Deerfield, Illinois 60015
Attention: Mark E. Vainisi
Phone: (847) 315-4185
Fax: (847) 405-9552
Walgreen Co.
Corporate and Transactional Law Department
104 Wilmot Road, MS-1425
Deerfield, Illinois 60015
Attention: Hiranda S. Donoghue
Phone: (847) 315-4399
Fax: (847) 315-4464
with a copy to:
Sidley Austin LLP
One South Dearborn
Chicago, Illinois 60603
Attention: Chris Abbinante
Phone: (312) 853-7000
Fax: (312) 853-7036

 

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11.4. Successors and Assigns; No Third Party Beneficiaries. Buyer may assign any
of its rights and interests hereunder to any Person; provided, however, Buyer
may not assign and be relieved of any of its obligations hereunder, other than
to an Affiliate, without the prior written consent of Seller, which consent may
not be unreasonably withheld. Seller shall not assign any of its rights,
interest and obligations hereunder without the prior written consent of Buyer.
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 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 supersede all prior agreements, understandings
or letters of intent between or among any of the parties hereto, other than the
letter confidentiality agreement dated April 23, 2010, between Parent and Buyer
which will remain in effect until Closing at which time the parties agree it
will terminate, notwithstanding anything in such letter confidentiality
agreement to the contrary. 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.
11.7. Expenses. Except for the Shared Expenses, 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 Purchased Assets (including
rent, expenses, utilities, prepayments, deposits and similar items) shall be
prorated between Seller and Buyer such that Seller shall receive and be
responsible for all items of income and expense earned or incurred prior to each
Applicable Closing Date and Buyer shall receive and be responsible for all items
of income and expense earned or incurred on or after each Applicable Closing
Date. The parties will use commercially reasonable efforts to settle and pay
such amounts within ninety (90) days after the Final Closing. For administrative
convenience, Buyer shall pay and be liable for the Shared Expenses. In
consideration therefore, the parties agree that Buyer will be reimbursed,
through a credit against the Purchase Price, equal to Seller’s share of the
Shared Expenses as set forth in Section 3.2(b). If the amount of Seller’s share
of Shared Expenses so credited is not the actual amount determined at a later
dated, the difference will be settled with other expenses as provided above in
this Section.

 

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11.8. Partial Invalidity. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable 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.
11.9. Injunctive Relief; Remedies.
(a) If any party fails to perform any obligation contained in this Agreement,
the party claiming default will serve written notice to the other party
specifying the nature of such default and demanding performance. If such a
default by Seller is of a nature that would cause a failure of one or more of
the conditions to Closing set forth in Section 9.2 to be satisfied, and such
default has not been cured within the sooner of ten (10) days after receipt of
such default notice or the Termination Date and each of the conditions contained
in Section 9.1 has been either fulfilled in all material respects or waived in
writing by Seller, Buyer will be entitled to exercise all remedies arising at
law by reason of such default, including, without limitation, termination of
this Agreement pursuant to Article X. If such a default by Buyer is of a nature
that would cause a failure of one or more of the conditions to Closing set forth
in Section 9.1 to be satisfied, and such default has not been cured within the
sooner of ten (10) days after receipt of such default notice or the Termination
Date and each of the conditions contained in Section 9.2 has been either
fulfilled in all material respects or waived in writing by Buyer, Seller will be
entitled to exercise all remedies arising at law by reason of such default,
including, without limitation, termination of this Agreement pursuant to
Article X. The parties agree that any breach or threatened breach by Seller of
or its Affiliates of Section 7.2 of this Agreement would result in substantial
and irreparable damage to Buyer, the amount of which would be difficult, if not
impossible, to ascertain. Therefore, Seller agrees that in the event of any such
breach or threatened breach thereof, Buyer shall have the right to enforce
Section 7.2 of 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 Buyer to obtain injunctive or
other equitable relief to enforce the terms of Section 7.2 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 Buyer, concurrently with, prior to, after, or
in lieu of the exercise of any other rights or remedies which Buyer may have as
a result of any breach or threatened breach of any of Section 7.2.

 

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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.
11.10. 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.
11.11. Governing Law. 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 Illinois.
11.12. Parent Guaranty. Parent hereby absolutely, irrevocably and
unconditionally guarantees to Buyer and its successors and permitted assigns the
prompt and full discharge by Seller of all of Seller’s covenants, agreements,
obligations, and liabilities under this Agreement, including the due and
punctual payment of all amounts that are or may become due and payable by Seller
hereunder when and as the same shall become due and payable, in accordance with
the terms hereof and subject to the limitations set forth herein, including,
without limitation, Seller’s indemnification obligations under Article VIII. The
foregoing obligation of Parent constitutes a continuing guaranty of payment and
is and shall be absolute and unconditional under any and all circumstances,
including without limitation, circumstances which might otherwise constitute a
legal or equitable discharge of a surety or guarantor. The obligation of Parent
hereunder shall not be discharged, impaired or otherwise affected by the failure
of Buyer to assert any claim or demand against Seller or to enforce any remedy
hereunder. Notwithstanding the foregoing, this guaranty is subject to and
Guarantor may assert all claims, counterclaims and defenses of Seller arising
hereunder.
* * * * * * *

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
the day and year first above written.

                  WALGREEN CO.    
 
           
 
  By:   /s/ Robert M. Silverman
 
Name: Robert M. Silverman    
 
      Title: Divisional Vice President    
 
                APOTHECARYRx, LLC    
 
           
 
  By:   /s/ Lewis P/ Zeidner
 
Name: Lewis P. Zeidner    
 
      Title: President & CEO, ApothecaryRx, LLC    
 
                For purposes of Sections 7.2, 7.15, 7.18, 7.20 and 11.12 only,  
      GRAYMARK HEALTHCARE, INC.    
 
           
 
  By:   /s/ Stanton Nelson
 
Name: Stanton Nelson    
 
      Title: CEO    

 

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EXHIBIT AND SCHEDULE INDEX
Exhibits

     
Exhibit A
  Operate Location Pharmacies and File-Transfer Locations
 
   
Exhibit B
  Purchase Real Estate Leases and Required Real Estate Consents
 
   
Exhibit C
  Inventory Procedures
 
   
Exhibit D
  Form of Opinion of Counsel
 
   
Exhibit E
  Non-standard Prescriptions
 
   
Exhibit F
  Form of Non-Compete Agreement
 
   

Schedules

     
Schedule 2.1(g)
  Purchased Assets
 
   
Schedule 3.1
  Purchase Price Allocation
 
   
Schedule 5.1(b)
  Holders of an Aggregate Majority of Parent Common Stock
 
   
Schedule 5.2
  No Conflicts
 
   
Schedule 5.3
  Taxes
 
   
Schedule 5.4
  Encumbrances
 
   
Schedule 5.7
  Changes since Balance Sheet Date
 
   
Schedule 5.9
  Material Contracts; Assumed Contracts
 
   
Schedule 5.10
  Suppliers, Distributors and Third Party Payors
 
   
Schedule 5.11
  Current Volume
 
   
Schedule 5.13(a)
  Owned Personal Property
 
   
Schedule 5.13(b)
  Leased Personal Property
 
   
Schedule 5.15(a)
  Copyrights, Patent Rights and Trademarks
 
   
Schedule 5.15(b)
  Software
 
   
Schedule 5.15(c)
  Intellectual Property Agreements
 
   
Schedule 5.15(d)
  Intellectual Property Encumbrances

 

 

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Schedule 5.15(e)
  Validity of Intellectual Property
 
   
Schedule 5.15(f)
  Intellectual Property Conflicts
 
   
Schedule 5.15(g)
  Software Ownership
 
   
Schedule 5.16(a)
  Business Employees
 
   
Schedule 5.16(b)
  Employee Benefit Plans
 
   
Schedule 5.17
  Employee Relations
 
   
Schedule 5.18
  Legal Proceedings
 
   
Schedule 5.19
  Permits
 
   
Schedule 5.20
  Sale Process
 
   
Schedule 5.23
  Affiliate Transactions
 
   
Schedule 5.24
  Broker
 
   
Schedule 9.2(f)
  Required Licenses