Exhibit 10.1





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.




 


 









 







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	 






 


i









 





	 	 	 	 	 
	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	 






 


ii









 





	 	 	 	 	 
	 
	 	 	 	 
	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	 







 


iii









 







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.


 


1









 






“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.


 


2









 





“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.


 


3









 





“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.


 


4









 





“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.


 


5









 





“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.


 


6









 





“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.


 


7









 





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






 


8









 





	 	 	 
	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.


 


12









 





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.


 


13









 






(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.


 


14









 





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.


 


15









 






(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;


 


16









 






(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.


 


17









 





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;


 


18









 






(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.


 


27









 





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


 


54









 





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.


 


55









 





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.


 


56









 






(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.



* * * * * * *



 


57









 





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	 	 







 














 




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





 


 









 





	 	 	 
	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