**Exhibit10.7****[EXECUTION COPY]**ASSET PURCHASE AGREEMENTby and amongOMNICARE, INC.,STANDARD MANAGEMENT CORPORATION,RAINIER HOME HEALTH CARE PHARMACY, INC.,HOLLAND COMPOUNDING PHARMACY, INC.andHOLLAND DRUG STORE, INC.Dated as of July 28, 2006
 

 
**TABLE OF CONTENTS**               Page Article I DEFINITIONS AND DEFINED TERMS  1   Section 1.1 Definitions and Defined Terms  1          Article II PURCHASE OF ASSETS  1   Section 2.1 Purchase and Sale of Transferred Assets  1   Section 2.2 Excluded Assets  3          Article III ASSUMPTION OF LIABILITIES  3   Section 3.1 Assumed Liabilities  3   Section 3.2 Retained Liabilities  3          Article IV PURCHASE PRICE  4   Section 4.1 Purchase Price  4   Section 4.2 Post-Closing Purchase Price Adjustment  4   Section 4.3 Contingent Payment  5   Section 4.4 Allocation of Consideration  6   Section 4.5 Prorations  7   Section 4.6 Withholding Taxes  7          Article V CLOSING  7   Section 5.1 Closing  7   Section 5.2 Deliveries at Closing  8   Section 5.3 Conditions Precedent to Obligations of Each Party  10   Section 5.4 Conditions Precedent to Obligations of Purchaser  10   Section 5.5 Conditions Precedent to Obligations of Seller and/or Parent  12          Article VI REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT  13   Section 6.1 Organization and Good Standing  13   Section 6.2 Authorization and Effect of Agreement  13   Section 6.3 Consents and Approvals; No Violations  14   Section 6.4 No Third Party Options  14   Section 6.5 Permits; Compliance with Law  14   Section 6.6 Litigation  15   Section 6.7 Assets Necessary to Business  15 
i

 
               Page   Section 6.8 Financial Statements  15   Section 6.9 Absence of Certain Changes  15   Section 6.10 No Default  16   Section 6.11 Transactions with Affiliates  16   Section 6.12 Contracts  16   Section 6.13 Labor Relations  17   Section 6.14 Title to Assets  18   Section 6.15 Insurance  18   Section 6.16 Inventory  18   Section 6.17 Accounts Receivable  19   Section 6.18 Product Returns and Warranties  19   Section 6.19 Customers; Suppliers  19   Section 6.20 Absence of Certain Business Practices  19   Section 6.21 Certain Healthcare Legal Matters  20   Section 6.22 Real Property  21   Section 6.23 Environmental  21   Section 6.24 No Broker  23   Section 6.25 No Misleading Statements  23   Section 6.26 Employee Benefits  23   Section 6.27 Taxes  24   Section 6.28 Proprietary Rights  25   Section 6.29 Information Technology  27   Section 6.30 Solvency of Parent and Sellers  27          Article VII REPRESENTATIONS AND WARRANTIES OF PURCHASER  27   Section 7.1 Corporate Organization  27   Section 7.2 Authorization and Effect of Agreement  27   Section 7.3 Consents and Approvals; No Violations  28   Section 7.4 No Broker  28          Article VIII COVENANTS  28   Section 8.1 Conduct of Business  28   Section 8.2 Access  30   Section 8.3 Notification  30 
ii

 
               Page   Section 8.4 No Inconsistent Action  31   Section 8.5 Reasonable Best Efforts  31   Section 8.6 Further Assurances  31   Section 8.7 Transfer Taxes  32   Section 8.8 Release of Liens  32   Section 8.9 Consents to Transferred Assets  32   Section 8.10 Employment Matters  32   Section 8.11 Bulk Sales Laws  33   Section 8.12 No Solicitation  33   Section 8.13 Confidentiality  33   Section 8.14 No Solicitation of Employees  33   Section 8.15 Non-Competition  34   Section 8.16 Collection of Accounts Receivable  34   Section 8.17 Post-Closing Agreements  34   Section 8.18 Change of Name  35   Section 8.19 Payment of Indebtedness  35   Section 8.20 Satisfaction of Leases  35          Article IX TERMINATION  36   Section 9.1 Termination  36   Section 9.2 Procedure and Effect of Termination  36          Article X SURVIVAL; INDEMNIFICATION  37   Section 10.1 Survival of Indemnification Rights  37   Section 10.2 Indemnification Obligations of Seller and Parent  37   Section 10.3 Indemnification Obligations of Purchaser  38   Section 10.4 Indemnification Procedure  39   Section 10.5 Calculation of Indemnity Payments  40   Section 10.6 Tax Treatment of Indemnification  40   Section 10.7 Relation of Indemnity to Holdback Payment  40   Section 10.8 Exclusive Remedy  40          Article XI MISCELLANEOUS PROVISIONS  41   Section 11.1 Notices  41   Section 11.2 Expenses  42   Section 11.3 Successors and Assigns  42 
iii

 
               Page   Section 11.4 Extension; Waiver  42   Section 11.5 Entire Agreement; Disclosure Schedules  42   Section 11.6 Amendments, Supplements, Etc.  42   Section 11.7 Applicable Law; Waiver of Jury Trial  43   Section 11.8 Actions by Seller or Parent  43   Section 11.9 Execution in Counterparts  43   Section 11.10 Titles and Headings  43   Section 11.11 Invalid Provisions  43   Section 11.12 Publicity  44   Section 11.13 Specific Performance  44   Section 11.14 No Third Party Beneficiaries  44          Exhibits              Exhibit A — Definitions and Defined Terms    Exhibit B — Form of Bill of Sale    Exhibit C — Form of Assignment and Assumption Agreement    Exhibit D — Form of Power of Attorney    Exhibit E — Form of Pharmacy Letter    Exhibit F — Form of Trademark Assignment Agreement       Schedule 1 — Contingent Facilities    
iv

 
**ASSET PURCHASE AGREEMENT**     This ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of July28, 2006 by and among Omnicare, Inc., a Delaware corporation (“Purchaser”), StandardManagement Corporation, an Indiana corporation (“Parent”), and Rainier Home Health CarePharmacy, Inc., Holland Compounding Pharmacy, Inc. and Holland Drug Store, Inc., each a Washingtoncorporation and each an indirect wholly owned subsidiary of Parent (each a “Seller” andcollectively “Seller”).**RECITALS:**     WHEREAS, Seller is engaged in the business of (a) providing (i) pharmaceutical products,including, without limitation, prescription and non-prescription drugs, infusion medication andrelated medical products and pharmacy-related services, including, without limitation, consultantpharmacists, services to nursing homes, assisted living facilities and other long-term carefacilities (collectively, “Facilities”) and (ii) durable medical equipment and respiratoryequipment and supplies to Facilities and the retail public and (b) operating related compoundingpharmacies (collectively, the “Business”); and     WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to purchase, certain ofthe rights, properties and assets relating to the Business.     NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants andagreements herein contained, the parties hereto agree as follows:**ARTICLE I****DEFINITIONS AND DEFINED TERMS**     Section 1.1 Definitions and Defined Terms. Unless the context otherwise requires oras otherwise defined herein, capitalized terms used in this Agreement shall have the meanings setforth in Exhibit A hereto.**ARTICLE II****PURCHASE OF ASSETS**     Section 2.1 Purchase and Sale of Transferred Assets. On the terms and subject to theconditions set forth herein, at the Closing as described in Article V hereto, Seller shall,and Parent shall cause Seller to, sell, transfer, convey, assign and deliver to Purchaser (or oneor more direct or indirect subsidiaries of Purchaser as Purchaser may designate), and Purchaser (orone or more designees of Purchaser) shall purchase and acquire from Seller, good and valid titleto, and all rights and interests in, all of the rights, properties and assets used in or held foruse in, necessary for or otherwise relating to the Business, other than the Excluded Assets(collectively, the “Transferred Assets”), free
 

 
and clear of all Liens (other than Permitted Liens), including, without limitation, good andvalid title to, and all rights and interests in, the following:     (a) All assets reflected on the balance sheet as of and for the five (5) months ended May 31,2006 relating to the Business (the “Balance Sheet”) and all assets used to generate revenueand income reflected on the income statement relating to the Business for the five (5) months endedMay 31, 2006 (the “Income Statement”), which Balance Sheet and Income Statement are setforth in Section 6.8(a) of the Disclosure Schedule, other than, in each case, assets disposed ofafter the date of such Balance Sheet and Income Statement and on or prior to the Closing in theordinary course of business consistent with past practice as permitted under Section 8.1hereto.     (b) All assets used, or held for use in, necessary for or otherwise relating to the Businessacquired in the ordinary course of business consistent with past practice after May 31, 2006 and onor prior to the Closing Date.     (c) All Contracts relating to the Business, including, without limitation, Contracts relatingto the provision of services to (i) Facilities, (ii) to hospice agencies and home health carecompanies and (iii) insurers, managed care organizations and other payor organizations (includingMedicare Part D Plans).     (d) Subject to Section 8.20 hereto, all leases, including, without limitation, realproperty leases for the operating facilities, relating to the Business and any improvementsthereunder.     (e) All rights under Contracts relating to the Business to the extent that such rights relateto non-competition, confidentiality or non-solicitation obligations enforceable against a thirdparty.     (f) All inventory, accounts receivable, rebates receivable earned after May 31, 2006, othercurrent, fixed or prepaid assets, prepaid items and plant, property and equipment used or held foruse in, necessary for or otherwise relating to the Business.     (g) All intangibles and intangible property, including, without limitation, all ProprietaryRights and agreements relating thereto that are used or held for use in, necessary for or otherwiserelating to the Business, including, without limitation, all of the Seller’s Rights and goodwillincluded in any of the foregoing.     (h) All Permits used or held for use in, necessary for or otherwise relating to the Business,except to the extent that the transfer thereof would violate or would not be permitted or effectiveunder applicable Law.     (i) Subject to applicable Law, all patient medical records relating to the Business; providedthat Purchaser shall promptly provide Seller with copies thereof as reasonably requested by Sellerin writing after the Closing.     (j) Except to the extent solely related to an Excluded Asset, all books and records relatingto the Business or the Transferred Assets.
2

 
     (k) All manufacturer or vendor warranties, service life policies, customer support agreementsand similar items relating to the Business or the Transferred Assets (or to the extent such itemsare not assignable, subrogation rights to such items).     (l) All motor vehicles and other rolling stock, including, without limitation, those itemslisted in Section 2.1(l) of the Disclosure Schedule (collectively, the “Motor Vehicles”).     (m) All Trade Names.     The Contracts included in the Transferred Assets, all of which are listed on Section 6.12(a),and include, without limitation, those listed above, are hereinafter collectively referred to asthe “Assumed Contracts.”     Section 2.2 Excluded Assets. Notwithstanding anything contained in this Agreement tothe contrary, the rights, properties and assets identified in Section 2.2 of the DisclosureSchedule (collectively, the “Excluded Assets”) will not be included in the TransferredAssets, and all right, title and interest thereto shall be retained by Seller or Parent, asapplicable.**ARTICLE III****ASSUMPTION OF LIABILITIES**     Section 3.1 Assumed Liabilities. At the Closing, Purchaser will not assume or agreeto undertake to pay, satisfy, discharge or perform, and will not be deemed by virtue of theexecution and delivery of this Agreement or any document delivered at the Closing pursuant to thisAgreement, or as a result of the consummation of the transactions contemplated by this Agreement,to have assumed, or to have agreed to pay, satisfy, discharge or perform, any liability,obligation, indebtedness or Taxes (except as expressly set forth in Section 4.5(b) hereto) ofSeller or of any other Person or in any way relating to the Business (whether primary or secondary,direct or indirect, known or unknown, absolute or contingent, matured or unmatured, or otherwise),other than the following obligations and liabilities of Seller: (a) the obligations andliabilities from and after the Closing Date pursuant to the terms of the Assumed Contracts, to theextent, and only to the extent, that such Assumed Contracts are actually assigned to Purchaser andsuch obligations and liabilities relate to the period from and after the Closing and (b) $750,000of current liabilities, which would not otherwise be Assumed Liabilities, of Seller, which may bepaid off by Purchaser at the Closing or at the time such current liabilities become due, in itssole discretion (clauses (a) and (b) together, the “Assumed Liabilities”).     Section 3.2 Retained Liabilities. Notwithstanding anything contained in thisAgreement to the contrary, Purchaser does not assume or agree or undertake to pay, satisfy,discharge or perform, and will not be deemed by virtue of the execution and delivery of thisAgreement or any document delivered at the Closing pursuant to this Agreement, or as a result ofthe consummation of the transactions contemplated by this
3

 
Agreement, to have assumed, or to have agreed to pay, satisfy, discharge or perform, and, asbetween Purchaser and Seller, Seller shall retain any liability, obligation, indebtedness or Taxes(except as expressly set forth in Section 4.5(b) hereto) of Seller or of any other Personor in any way relating to the Business or the Transferred Assets (whether primary or secondary,direct or indirect, known or unknown, absolute or contingent, matured or unmatured, or otherwise)other than the Assumed Liabilities (such liabilities and obligations retained by Seller, including,without limitation, all liabilities and obligations with respect to the Excluded Assets, beingreferred to herein as the “Retained Liabilities”). It is specifically agreed that Sellershall be and remain liable for all of the Retained Liabilities.**ARTICLE IV****PURCHASE PRICE**     Section 4.1 Purchase Price. In consideration of the conveyance to Purchaser of allright, title and interest in and to the Transferred Assets and the other rights granted toPurchaser hereunder, and subject to the terms and conditions hereof, Purchaser shall:     (a) at Closing, assume the Assumed Liabilities; and     (b) pay an aggregate purchase price (the “Purchase Price”) of up to $13,520,000,adjusted in accordance with the terms of this Article IV and Section 10.6 hereto,which shall be delivered as follows:     (i) at Closing, Purchaser shall pay to Seller an aggregate of $12,000,000 in cash (the“Closing Date Cash Payment”);     (ii) Subject to the terms of Section 4.2 hereto, Purchaser shall pay toSeller, within thirty (30) calendar days of the four (4) month anniversary of the ClosingDate (the “Four Month Anniversary”) (or such later date as set forth in Section4.2 hereto), an aggregate amount of $1,000,000, or such lesser amount as determined inaccordance with Section 4.2(b) and Section 10.6 hereto, in immediatelyavailable funds (the “Holdback Payment”); and     (iii) Subject to the terms of Section 4.3 hereto, Purchaser shall pay toSeller the Contingent Payment.     Section 4.2 Post-Closing Purchase Price Adjustment.     (a) The parties agree that, on the Closing Date, the Net Asset Value of the Business should beno less than $6,000,000. “Net Asset Value,” as used herein, shall be defined as the valueof the tangible assets of the Business, including the inventory, accounts receivable, rebatesreceivable, prepaid expenses, Motor Vehicles (net of depreciation) and fixed assets (lessaccumulated depreciation, depletion and amortization) net of the Assumed Liabilities. In the eventthe actual Net Asset Value as of the Closing
4

 
Date, as finally determined pursuant to the terms of this Section 4.2(a) (the “Actual NetAsset Value”), is less than $6,000,000, the Purchase Price shall be adjusted downward,dollar-for-dollar, by the extent to which $6,000,000 exceeds the Actual Net Asset Value (the“Purchase Price Adjustment”). The balance sheet establishing the Actual Net Asset Value,as finally determined pursuant to the terms of this Section 4.2(a), is hereinafter referredto as the “Final Closing Date Statement.” All items on the Final Closing Date Statementshall be (i) determined consistent with the methodology of Net Asset Value used to calculate the$6,000,000 base number, (ii) computed in accordance with this Section 4.2(a) and U.S.generally accepted accounting principles, consistently applied (“GAAP”), and (iii) auditedor reviewed by an independent accounting firm at Purchaser’s expense. Purchaser, in conjunctionwith its independent accountants (and in concurrence with Seller’s independent accountants), shallprepare and present to Seller a draft of the Final Closing Date Statement (the “PreliminaryClosing Date Statement”) promptly, but not more than sixty (60) calendar days after the ClosingDate. Seller, together with its representatives and accountants, shall have the right to reviewthe workpapers of Purchaser and Purchaser’s accountants utilized in preparing the PreliminaryClosing Date Statement for purposes of verifying the accuracy and fairness of the presentation ofthe Preliminary Closing Date Statement. Seller shall notify Purchaser of any dispute with thePreliminary Closing Date Statement promptly, but not more than thirty (30) calendar days after itsreceipt by Seller (“Dispute Notice”). If Seller timely delivers a Dispute Notice toPurchaser, Seller and Purchaser shall, for a period of thirty (30) calendar days from the date theDispute Notice is delivered to Purchaser, attempt in good faith to resolve the items in dispute.The Preliminary Closing Date Statement, together with any adjustments or corrections agreed upon byPurchaser and Seller, shall comprise the Final Closing Date Statement. If the parties cannot agreeon the Final Closing Date Statement within thirty (30) calendar days after the later of (x) thedelivery of the Preliminary Closing Date Statement to Seller by Purchaser and (y) the delivery of aDispute Notice to Purchaser by Seller, as applicable, the parties shall submit the dispute to amutually acceptable “Big Four” accounting firm (the “Reviewing Accountants”), whosedetermination shall be binding on the parties. The fees of such Reviewing Accountants shall bedivided equally between Purchaser and Seller.     (b) In satisfaction of the Purchase Price Adjustment, if any, as finally determined pursuantto Section 4.2(a) hereto, Purchaser shall reduce accordingly any amount otherwise payableto Seller pursuant to Section 4.1(b)(ii) hereto. If the amount of the Purchase PriceAdjustment exceeds the amount otherwise payable to Seller pursuant to Section 4.1(b)(ii)hereto, Purchaser shall not be obligated to pay the Holdback Payment and Seller shall pay toPurchaser such amount in excess of the Holdback Payment in immediately available funds withinthirty (30) calendar days of the Four Month Anniversary or, if there is a disagreement with respectto the Final Closing Date Statement which is not resolved prior to the Four Month Anniversary,within thirty (30) calendar days after such disagreement is finally resolved pursuant to the termsof Section 4.2(a) hereto, and subject to the terms of this Article IV andSection 10.6.     Section 4.3 Contingent Payment. Purchaser shall deliver to Seller promptly, but notmore than thirty (30) calendar days, after December 31, 2006 (the “Contingent Payment DeterminationDate”) a detailed calculation of the Contingent
5

 
Payment. Seller shall notify Purchaser of any dispute with such calculation of the ContingentPayment promptly, but not more than thirty (30) calendar days, after its receipt by Seller. IfSeller timely delivers a notice of disagreement to Purchaser, Seller and Purchaser shall, for aperiod of thirty (30) calendar days from the date notice is delivered to Purchaser, attempt in goodfaith to resolve the dispute with respect to the Contingent Payment. If the parties cannot agreeon the Contingent Payment within thirty (30) calendar days after the delivery of a notice ofdisagreement to Purchaser by Seller, the parties shall submit the dispute to a mutually acceptablethird party, whose determination shall be binding on the parties. The fees of such reviewing thirdparty shall be divided equally between Purchaser and Seller. Purchaser shall pay the ContingentPayment promptly, but not more than five (5) Business Days, after final resolution of thecalculation of the Contingent Payment. Purchaser agrees to operate the Business after the Closingthrough and including December 31, 2006 in the ordinary course and consistent with past practice tomaximize the potential Contingent Payment.The “Contingent Payment” shall be equal to:  ($520,000) x (# of Contingent Beds)                     520“Contingent Beds” for purposes of the above formula shall mean the number of licensed beds inthe Contingent Payment Facilities that are being serviced by the Business as of the ContingentPayment Determination Date.     Section 4.4 Allocation of Consideration. All capitalizable costs and other amountsconstituting consideration within the meaning of, and for the purposes of, Section 1060 of the Codeand the regulations thereunder shall be allocated among the Transferred Assets, thenon-solicitation obligations contained in Section 8.14 hereto, the non-competitionobligations contained in Section 8.15 hereto and any other assets or rights acquired byPurchaser hereunder, as applicable, in the manner required by Section 1060 of the Code and theregulations thereunder and all applicable Laws. Within sixty (60) calendar days after the ClosingDate, Purchaser shall provide Seller with a proposed schedule (the “Allocation Schedule”)allocating all such amounts as provided herein. The Allocation Schedule shall become final andbinding on the parties hereto fifteen (15) calendar days after Purchaser provides such schedule toSeller, unless Seller objects in writing to Purchaser, specifying the basis for its objection andpreparing an alternative allocation. If Seller does object, Purchaser and Seller shall in goodfaith attempt to resolve the dispute within fifteen (15) calendar days of receipt by Purchaser ofwritten notice of Seller’s objection. Any such resolution shall be final and binding on theparties hereto. Any unresolved disputes shall be promptly submitted to the Reviewing Accountantsfor determination, which determination shall be final and binding on the parties hereto. Purchaserand Seller will each pay one-half of the fees and expenses of the Reviewing Accountants. Sellerand Purchaser shall cooperate with each other and the Reviewing Accountants in connection with thematters contemplated by this Section 4.3, including, without limitation, by furnishing suchinformation and access to books, records (including, without limitation, accountants work papers),personnel and properties as may be reasonably requested. Each of the parties hereto agrees to (a)prepare and timely file
6

 
all Tax Returns, including, without limitation, Form 8594 (and all supplements thereto) in amanner consistent with the Allocation Schedule as finalized and (b) act in accordance with theAllocation Schedule for all tax purposes. The parties hereto will revise the Allocation Scheduleto the extent necessary to reflect any Purchase Price Adjustment, any payment made underArticle X hereto or other post-Closing payment made pursuant to or in connection with thisAgreement. In the case of any such payment, Purchaser shall propose a revised Allocation Schedule,and the parties hereto shall follow the procedures outlined above with respect to review, disputeand resolution in respect of such revision.     Section 4.5 Prorations.     (a) All payments under or pursuant to the Assumed Contracts relating to periods both beforeand after the Closing Date, whether payable before or after the Closing Date, shall be proratedbetween Purchaser and Seller, on the basis of a 365-day year and the number of days elapsed incalendar year 2006 as of the Closing Date. With respect to any products sold (or servicesrendered) to Seller pursuant to the Assumed Contracts or other obligations pursuant to which Sellerpurchases products (for example, purchase orders), Seller and Purchaser shall use reasonablecommercial efforts to arrange for vendors to bill Seller directly on or prior to the Closing Dateand Purchaser directly after the Closing Date. Notwithstanding anything to the contrary containedin this Agreement or any Collateral Agreement, amounts due for supplies received from or servicesrendered by third-party vendors to Seller on or prior to the Closing Date shall be for the accountof and paid by Seller, except to the extent such amounts are Assumed Liabilities as contemplated inSection 3.1(b).     (b) After the Closing, any ad valorem, use, real and personal property and similar Taxes,installments or special assessments arising from, or relating to, the Transferred Assets or theconduct of the Business, which become due and payable on or after the Closing Date and relate toperiods both before and after the Closing Date, shall be prorated and adjusted between Seller andPurchaser as of the Closing Date on a per diem basis and Seller shall be responsible for and, inany case where payment to the applicable taxing authority is to be made by Purchaser, shall paysuch amount to Purchaser, the portion of such amounts allocable to the period or portion thereofending on the Closing Date for which payment is due after the Closing Date at least ten (10)Business Days prior to the date such Taxes become due and payable.     Section 4.6 Withholding Taxes. All payments made by Purchaser pursuant to or inconnection with this Agreement shall be net of applicable withholding taxes, if any.**ARTICLE V****CLOSING**     Section 5.1 Closing. Upon the terms and subject to the conditions of this Agreement,the closing of the transactions contemplated by this Agreement (the
7

 
“Closing”) will take place at the offices of Dewey Ballantine LLP, 1301 Avenue of theAmericas, New York, New York 10019, on the later of August 7, 2006 or the date that is two (2)Business Days following the satisfaction or waiver of all of the conditions to the Closing (otherthan those conditions that by their nature are to be satisfied at the Closing, but subject to thesatisfaction or waiver of those conditions) or at such other time and place and on such other dateas Purchaser and Seller shall agree in writing (the “Closing Date”); provided thatthe effective time of the Closing shall be 12:01 a.m. on the Closing Date.     Section 5.2 Deliveries at Closing. At the Closing:     (a) Seller shall, and Parent shall cause Seller to, deliver or cause to be delivered toPurchaser, the following:     (i) a Bill of Sale, duly executed by Seller and Parent, in substantially the formattached hereto as Exhibit B (the “Bill of Sale”);     (ii) an Assignment and Assumption Agreement, duly executed by Seller and Parent, insubstantially the form attached hereto as Exhibit C (the “Assignment andAssumption Agreement”);     (iii) a Power of Attorney from Seller, duly executed by Seller and duly notarized, insubstantially the form attached hereto as Exhibit D (the “Power ofAttorney”);     (iv) a Pharmacy Letter from each pharmacy of Seller, each duly executed by Seller andduly notarized, in substantially the form attached hereto as Exhibit E (the“Pharmacy Letter”);     (v) releases, in form and substance reasonably satisfactory to Purchaser, evidencingdischarge, removal and termination of all Liens (other than Permitted Liens) to which anyTransferred Assets being conveyed at the Closing are subject, which releases shall beeffective at or prior to the Closing;     (vi) the officer’s certificate referenced in Section 5.4(c) hereto;     (vii) a certification from Seller in accordance with United States Treasury RegulationSection 1.1445-2(b)(2)(i) and in the form provided in United States Treasury RegulationSection 1.1445-2(b)(2)(iii)(B) (the “FIRPTA Certificate”);     (viii) Certificates of Title to the Motor Vehicles, duly endorsed, completed andacknowledged for transfer;     (ix) copies of the “pay-off” letters in connection with the repayment of theindebtedness of Seller pursuant to Section 8.19(a) and Section 8.20 heretoand the letters confirming that all Liens relating to such indebtedness will be removedeffective upon payment of the amount set forth in the pay-off letters;
8

 
     (x) a Trademark Assignment Agreement, duly executed by Seller and Parent and dulynotarized, in substantially the form attached hereto as Exhibit F (the“Trademark Assignment Agreement”);     (xi) the Employment Agreements contemplated in Section 5.4(l) hereto;     (xii) the Non-Competition Agreements contemplated in Section 5.4(m) hereto;and     (xiii) such other duly executed documents and certificates as may be required to bedelivered by Seller pursuant to the terms of this Agreement or as may be reasonablyrequested by Purchaser prior to the Closing.     (b) Parent shall deliver, or cause to be delivered to Purchaser, the following:     (i) the certificates referenced in Section 5.4(d) hereto; and     (ii) such other duly executed documents and certificates as may be required to bedelivered by Parent pursuant to the terms of this Agreement or as may be reasonablyrequested by Purchaser prior to the Closing.     (c) Purchaser shall deliver, or cause to be delivered to Seller, the following:     (i) the Closing Date Cash Payment by wire transfer of immediately available funds tothe account or accounts of Seller designated by Seller no later than twenty-four (24) hoursprior to the Closing;     (ii) the Bill of Sale, duly executed by Purchaser (or any wholly owned, direct orindirect subsidiaries of Purchaser to which an Assumed Contract is assigned);     (iii) the Assignment and Assumption Agreement, duly executed by Purchaser (or anywholly owned, direct or indirect subsidiaries of Purchaser to which an Assumed Contract isassigned);     (iv) the Power of Attorney, duly executed by Purchaser;     (v) the officer’s certificate referenced in Section 5.5(c) hereto;     (vi) the Trademark Assignment Agreement, duly executed by Purchaser; and     (vii) such other duly executed documents and certificates as may be required to bedelivered by Purchaser pursuant to the terms of this Agreement or as may be reasonablyrequested by Seller prior to the Closing.
9

 
     (d) Purchaser shall deliver, or cause to be delivered to Parent, the following:     (i) the officer’s certificate referenced in Section 5.5(c) hereto; and     (ii) such other duly executed documents and certificates as may be required to bedelivered by Purchaser pursuant to the terms of this Agreement or as may be reasonablyrequested by Parent prior to the Closing.     Section 5.3 Conditions Precedent to Obligations of Each Party. The respectiveobligation of each party to effect the transactions contemplated by this Agreement is subject tothe satisfaction or waiver of the following conditions:     (a) All necessary Consents of any Governmental Authority required for consummation of thetransactions contemplated by this Agreement, which are set forth in Section 5.3(a) of theDisclosure Schedule, shall have been obtained.     (b) There shall not be in effect any Law of any Governmental Authority of competentjurisdiction restraining, enjoining or otherwise preventing the consummation of the transactionscontemplated by this Agreement.     Section 5.4 Conditions Precedent to Obligations of Purchaser. The obligation ofPurchaser to effect the transactions contemplated by this Agreement is subject to the satisfactionor waiver of the following conditions (in addition to those set forth in Section 5.3above):     (a) The representations and warranties of Seller and Parent in this Agreement shall be trueand correct in all material respects (without regard for any materiality qualifiers therein) as ofthe date hereof and at and as of the Closing with the same effect as though such representationsand warranties had been made at and as of such time, other than representations and warranties thatspeak as of another specific date or time prior to the date hereof (which need only be true andcorrect as of such date or time).     (b) All of the terms, covenants and conditions to be complied with and performed by Seller andParent on or prior to the Closing Date shall have been complied with or performed in all materialrespects.     (c) Purchaser shall have received a certificate, dated as of the Closing Date, executed onbehalf of Seller, by an authorized executive officer thereof, certifying in such detail asPurchaser may reasonably request that the conditions specified in Section 5.4(a) andSection 5.4(b) hereto have been fulfilled.     (d) Purchaser shall have received a certificate, dated as of the Closing Date, executed byParent, certifying in such detail as Purchaser may reasonably request that the conditions specifiedin Section 5.4(a) and Section 5.4(b) hereto have been fulfilled.
10

 
     (e) All Consents necessary for the assignment of any Contracts Requiring Consent thatPurchaser has agreed to assume shall have been obtained (“Required Third Party Consents”)(without any limitation, restriction or condition not already applicable to Seller or Parent beingimposed on Purchaser or its ownership or use of any of the Transferred Assets or the conduct oroperation of the Business) in written instruments reasonably satisfactory to Purchaser, unlessotherwise agreed to by Purchaser and subject to the terms of Section 8.9 hereto.     (f) All Liens (other than Permitted Liens) on the Transferred Assets shall have been releasedand evidence thereof delivered to Purchaser.     (g) Purchaser shall have obtained all Permits necessary to own or use the Transferred Assetsand operate the Business.     (h) All notifications, applications and other documents required under applicable Law to begiven, made or filed prior to Closing in connection with any Permits necessary for Purchaser’sownership or use of the Transferred Assets and the conduct or operation of the Business shall havebeen given, made or filed and all periods which are required to pass between the giving, making orfiling of such notifications, applications and other documents and the Closing in connection withsuch Permits under applicable Law shall have passed.     (i) There shall not have occurred any events that have had, or are, individually or in theaggregate, reasonably likely to have a Material Adverse Effect.     (j) Seller shall have delivered to Purchaser, on or prior to the Closing Date, the CollateralAgreements and the FIRPTA Certificate, in each case, duly executed, and, in the case of the Powerof Attorney, the FIRPTA Certificate and the Trademark Assignment Agreement, duly notarized, and infull force and effect.     (k) Each pharmacy of Seller shall have delivered to Purchaser and the National Council forPrescription Drug Programs, on or prior to the Closing Date, the Pharmacy Letter, in each case dulyexecuted and notarized and in full force and effect.     (l) Seller shall have delivered to Purchaser, on or prior to the Closing Date, employmentagreements on the terms and with the individuals specified by Purchaser (the “EmploymentAgreements”), which shall be in full force and effect as of the Closing Date.     (m) Seller and Parent shall have delivered to Purchaser, on or prior to the Closing Date,non-competition agreements on the terms and with the individuals specified by Purchaser (the“Non-Competition Agreements”), which shall be in full force and effect as of the ClosingDate.     (n) Seller shall have, on or prior to the Closing Date, entered into a new lease, or Parentshall have, on or prior to the Closing Date, entered into a sublease with Purchaser providing forthe on-going operations of the long-term care pharmacies
11

 
located at 5415 Rainier Avenue, Seattle, WA and 1600 and 1618 South Lane Street, Seattle, WA98144, on terms acceptable to the Purchaser.     (o) Seller shall have, on or prior to the Closing Date, filed with the appropriateGovernmental Authority the necessary documentation for the transfer of any Trade Names.     (p) An opinion delivered to Seller, as of the Closing Date, stating that Seller is receivingfair and reasonably equivalent value for the Transferred Assets has not been withdrawn.     (q) The board of directors of Purchaser shall, on or prior to the Closing Date, have approvedconsummation of the transactions contemplated hereby. Without limiting the condition to Closingset forth in the immediately preceding sentence, Purchaser shall call a meeting of its board ofdirectors, or a sub-committee of its board of directors with authority to act on the board ofdirector’s behalf for matters such those contemplated by this Agreement and to consider thetransaction contemplated by this Agreement at the earliest practical date, but in any event on orprior to August 3, 2006.     Section 5.5 Conditions Precedent to Obligations of Seller and/or Parent. Theobligation of each of Seller and Parent to effect the transactions contemplated by this Agreementare subject to the satisfaction or waiver of the following conditions (in addition to those setforth in Section 5.3 above):     (a) The representations and warranties of Purchaser in this Agreement shall be true andcorrect in all material respects (without regard for any materiality qualifiers therein) as of thedate hereof and at and as of the Closing with the same effect as though such representations andwarranties had been made at and as of such time, other than representations and warranties thatspeak as of another specific date or time prior to the date hereof (which need only be true andcorrect as of such date or time).     (b) All of the terms, covenants and conditions to be complied with and performed by Purchaseron or prior to the Closing Date shall have been complied with or performed in all materialrespects.     (c) Seller and Parent shall have received a certificate, dated as of the Closing Date,executed on behalf of Purchaser by an authorized executive officer thereof, certifying in suchdetail as Seller may reasonably request that the conditions specified in Section 5.5(a) andSection 5.5(b) hereto have been fulfilled.     (d) Purchaser shall have delivered to Seller and/or Purchaser, as applicable, on or prior tothe Closing Date the Collateral Agreements, in each case duly executed and in full force andeffect.     (e) Seller shall have, on or prior to the Closing Date, entered into a new lease, or Parentshall have, on or prior to the Closing Date, entered into a sublease with Purchaser providing forthe on-going operations of the long-term care pharmacies
12

 
located at 5415 Rainier Avenue, Seattle, WA, and 1600 and 1618 South Lane Street, Seattle, WA98144, on terms acceptable to the Purchaser.     (f) All Liens (other than Permitted Liens) on the Transferred Assets shall have been releasedand evidence thereof delivered to Purchaser.**ARTICLE VI****REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT**     Except as otherwise disclosed to Purchaser in a schedule delivered to Purchaser by Seller andParent prior to the execution of this Agreement (with specific reference to the representations andwarranties in this Article VI to which the information in such schedule relate) (the“Disclosure Schedule”), each Seller and Parent, jointly and severally, represent andwarrant to Purchaser as follows:     Section 6.1 Organization and Good Standing. Each Seller is a corporation dulyorganized, validly existing and in good standing under the Laws of the State of Washington. Parentis a corporation duly organized and validly existing under the Laws of the State of Indiana. Eachof Seller and Parent has all requisite corporate power and authority to own, lease, operate andotherwise hold its properties and assets and to carry on its business (including, withoutlimitation, the Business) as presently conducted. Each Seller is duly qualified or licensed to dobusiness as a foreign corporation and is in good standing in every jurisdiction in which the natureof the business conducted by it (including, without limitation, the Business) or the assets orproperties owned or leased by it requires qualification, except where the failure to be soqualified, licensed or in good standing would not, individually or in the aggregate, be reasonablylikely to have a Material Adverse Effect.     Section 6.2 Authorization and Effect of Agreement. Each Seller and Parent has allrequisite corporate power and authority to execute and deliver this Agreement and the CollateralAgreements to which they are or are proposed to be a party and to perform their respectiveobligations hereunder and under any such Collateral Agreements. The execution and delivery of thisAgreement and the Collateral Agreements by each Seller and Parent and the performance by eachSeller and Parent of their respective obligations hereunder and thereunder, as the case may be, andthe consummation by each Seller and Parent of the transactions contemplated hereby and thereby, asthe case may be, have been duly authorized by their boards of directors and no other corporate orother action on the part of any of each Seller or Parent is necessary to authorize the executionand delivery of this Agreement and the Collateral Agreements to which they are or are proposed tobe a party or the consummation of the transactions to which they are or are proposed to be a partycontemplated hereby or thereby. This Agreement has been duly and validly executed and delivered byeach Seller and Parent and constitutes a legal, valid and binding obligation of Seller and Parent,enforceable against each Seller and Parent in accordance with its terms, subject to applicablebankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar lawsaffecting creditors’ rights and remedies generally.
13

 
     Section 6.3 Consents and Approvals; No Violations. No filing with, and no Permit orConsent of any Governmental Authority or any other Person is necessary for consummation of thetransactions contemplated by this Agreement or any Collateral Agreement. Neither the execution anddelivery of this Agreement or any Collateral Agreement by each Seller or Parent who is or isproposed to be a party nor the consummation by each Seller or Parent of the transactionscontemplated by this Agreement or any Collateral Agreement to which they are or are proposed to bea party nor compliance by each Seller or Parent with any of the provisions hereto or thereto will(a) conflict with or result in any breach of any provision of the certificate or articles ofincorporation or by-laws of each Seller or Parent, (b) result in a violation or breach of, orconstitute (with or without due notice or lapse of time or both) a default (or give rise to anyright of termination, modification, cancellation or acceleration or loss of material benefits)under, any of the terms, conditions or provisions of any Contract to which each Seller or Parent isa party or may be subject or which is included in the Transferred Assets or the Assumed Liabilitiesor (c) violate any Permit or Law applicable to each Seller or Parent, the Transferred Assets, theAssumed Liabilities or the Business.     Section 6.4 No Third Party Options. There are no existing agreements, options,commitments or other rights granting any Person the right to acquire Seller’s or Parent’s right,title or interest in or to any of the Transferred Assets or any interest therein.     Section 6.5 Permits; Compliance with Law.     (a) Section 6.5(a) of the Disclosure Schedule lists all Permits held by Seller that are used,or held for use in, necessary for or otherwise relating to the Business. Seller holds all Permitsnecessary for the lawful conduct of the Business under and pursuant to all applicable Laws. AllPermits have been legally obtained and maintained and are valid and in full force and effect.Seller is duly licensed to conduct the Business as presently conducted in all states in which theBusiness is conducted and is in compliance in all material respects with all of the terms andconditions of such licenses. There has been no material change in the facts or circumstancesreported or assumed in the application for or granting of any Permits. No outstanding violationsare or have been recorded in respect of any of the Permits. No proceeding is pending or, toSeller’s and Parent’s Knowledge, threatened to suspend, revoke, withdraw, modify or limit anyPermit, and, to Seller’s and Parent’s Knowledge, there is no fact, error or admission relevant toany Permit that would permit the suspension, revocation, withdrawal, modification or limitation of,or result in the threatened suspension, revocation, withdrawal, modification or limitation of, orin the loss of any Permit.     (b) The Business is being, and has been conducted in compliance, in all material respects,with all Permits and applicable Laws. To the Knowledge of Seller and Parent, there are no Lawsproposed, as of the date of this Agreement, which are reasonably likely, individually or in theaggregate, to have an adverse impact on the Business or the timely consummation of the transactionscontemplated hereby.
14

 
     Section 6.6 Litigation. There is no action, proceeding, claim, suit, opposition,challenge, cancellation proceeding, charge or investigation (collectively, “Proceedings”)pending or, to Seller’s and Parent’s Knowledge, threatened, that questions the validity of thisAgreement or any Collateral Agreement or any action taken or to be taken in connection with thisAgreement or any Collateral Agreement. There are no Proceedings pending or, to Seller’s andParent’s Knowledge, threatened that relate to the Transferred Assets, the Assumed Liabilities orthe Business. There are no outstanding judgments, writs, injunctions, orders, decrees orsettlements that apply, in whole or in part, to the Transferred Assets, the Assumed Liabilities orthe Business that restrict the ownership or use of the Transferred Assets, the Assumed Liabilitiesor the Business in any way.     Section 6.7 Assets Necessary to Business. The Transferred Assets constitute all ofthe rights, properties and assets used, or held for use in, necessary for or otherwise relating tothe conduct or operation of the Business as presently conducted. Seller is the sole owner of theTransferred Assets and the sole obligor with respect to the Assumed Liabilities. Immediatelyfollowing the Closing, none of Seller or Parent (or any of their respective Affiliates) will own orlease any rights, properties or assets which are used or held for use in or necessary for theconduct of the Business as presently conducted, except for the Excluded Assets.     Section 6.8 Financial Statements.     (a) Section 6.8(a) of the Disclosure Schedule sets forth the audited consolidated balancesheets and statements of income for the Business as of the year ended December 31, 2005,respectively (the “Financial Statements”), and the unaudited consolidated balance sheetsand statements of income for the Business as of and for the five (5) months ended May 31, 2006,respectively (the “Interim Financial Statements”).     (b) The consolidated balance sheets (including, without limitation, the related notes)included in the Financial Statements and the balance sheet (including, without limitation, therelated notes) included in the Interim Financial Statements fairly present in all material respectsthe financial condition of the Business as of the respective dates thereof and the statements ofincome (including, without limitation, the related notes) included in the Financial Statements andthe statement of income (including, without limitation, the related notes) included in the InterimFinancial Statements fairly present in all material respects the financial condition and theresults of operations of the Business as of and for the respective periods then ended. Each of theFinancial Statements and the Interim Financial Statements (i) have been prepared in accordance withGAAP consistently applied during the periods involved, except as otherwise noted therein or in thenotes thereto and (ii) have been prepared in accordance with the books and records of the Businessconsistent with past practice.     Section 6.9 Absence of Certain Changes. Since December 31, 2005, (a) Seller hasoperated the Business in the ordinary course of business consistent with past practice, (b) Sellerhas not taken, or agreed to take, any of the actions set forth in Section 8.1 hereto, (c)there has not occurred any event or condition that, individually or
15

 
in the aggregate, has had or is reasonably likely to have a Material Adverse Effect, (d) theBusiness has not suffered the loss of service of any Personnel who are material, individually or inthe aggregate, to the operations or conduct of the Business, (e) there have been no cancellationsor terminations by any material supplier, customer or contractor with respect to any of theTransferred Assets or the Business and (f) there has been no material damage to or loss or theft ofany of the Transferred Assets.     Section 6.10 No Default. None of Seller or Parent has committed, or received noticeof, any default or violation (and no event has occurred which with notice or lapse of time or bothwould constitute a default or violation or loss of any material benefit) of any term, condition orprovision of (a) any Contract to which Seller or Parent is a party or may be subject that isincluded in the Transferred Assets or the Assumed Liabilities or otherwise relates to or affectsthe Business or (b) any order, writ or injunction, applicable to the Business or any of theTransferred Assets or the Assumed Liabilities, which in both cases, is or is reasonably likely tobe materially adverse to the Business.     Section 6.11 Transactions with Affiliates. There are no outstanding liabilities orobligations for amounts owing or other commitments to or from or Contracts, and within the pastyear there have been no transactions, between any Affiliates of Seller or Parent or any of Seller’sdirectors (whether a current or former director), officers or employees on the one hand, andSeller, Parent, on the other hand, relating to the Business, the Transferred Assets or the AssumedLiabilities.     Section 6.12 Contracts.     (a) Section 6.12(a) of the Disclosure Schedule sets forth a complete and accurate list of allContracts relating to the Business.     (b) Section 6.12(b) of the Disclosure Schedule sets forth a complete and accurate list of allAssumed Contracts requiring consent to the assignment thereof to Purchaser (individually, a“Contract Requiring Consent” and collectively, the “Contracts Requiring Consent.”     (c) (i) Each Assumed Contract is legal, valid, binding and enforceable against Seller orParent, as the case may be, and to Seller’s and Parent’s Knowledge, against each other partythereto, is in full force and effect and, subject to obtaining all Required Third Party Consents,will continue to be so legal, valid, binding and enforceable and in full force and effect followingthe assignment of such Contract at the Closing or pursuant to other arrangements in accordance withSection 8.9 hereto, as the case may be, and (ii) none of Seller or Parent and, to Seller’sand Parent’s Knowledge, no other party, is in breach or default, and no event has occurred whichwould constitute (with or without notice or lapse of time or both) a breach or default (or giverise to any right of termination, modification, cancellation or acceleration) or loss of anybenefits under any such Contract, except in each case as would not, individually or in theaggregate, be reasonably likely to have a Material Adverse Effect.
16

 
     (d) Seller has delivered to Purchaser complete and accurate copies of each Contract, or wherethey are oral, complete and accurate written summaries thereof, listed in Section 6.12(a) of theDisclosure Schedule. Since December 31, 2005, there has been no material modification, waiver,breach or termination of any such Contract or any material provision thereto. To the Knowledge ofSeller and Parent, no modification, waiver, breach or termination of any Contract listed in Section6.12(a) of the Disclosure Schedule is contemplated and no Contract listed in Section 6.12(a) of theDisclosure Schedule (other than those so noted in the Disclosure Schedule) is terminable orcancelable as a result of the consummation of the transactions contemplated in this Agreement.     (e) There are no non-competition or non-solicitation agreements or any similar agreements orarrangements that would restrict or hinder the operation or conduct of the Business or use of anyof the Transferred Assets or any “earn-out” agreements or arrangements to which Seller or Parent isa party or to which Seller, Parent, the Business or the Transferred Assets is or may be subject(other than this Agreement or pursuant to this Agreement).     Section 6.13 Labor Relations.     (a) Seller is not a party to any collective bargaining agreement with respect to any currentor former employee of the Business and there is no collective bargaining agreement which relates tothe Business.     (b) There is no unfair labor practice, charge or complaint or other proceeding pending or, tothe Knowledge of Seller and Parent, threatened, against any of the Transferred Assets or Seller orotherwise relating to the Business before the National Labor Relations Board or any otherGovernmental Authority.     (c) There is no labor strike, slowdown or stoppage pending or, to the Knowledge of Seller andParent, threatened, against or affecting the Transferred Assets or Seller or otherwise relating tothe Business, nor has there been any such activity within the past two (2) years affecting theTransferred Assets or Seller or relating to the Business.     (d) There are no pending collective bargaining negotiations relating to any employees of theBusiness.     (e) (i) There are no agreements with, or pending petitions for recognition of, a labor unionor association as the exclusive bargaining agent for any or all of the employees of the Business,(ii) to the Knowledge of Seller and Parent, no such petitions have been pending within the pastfive (5) years and (iii) to the Knowledge of Seller and Parent, there has not been any generalsolicitation of representation cards by any union seeking to represent the employees of Seller orof the Business as their exclusive bargaining agent at any time within the past five (5) years.     (f) Seller is in compliance, in all material respects, with all applicable Laws, rules andregulations respecting employment, employment practices, terms and
17

 
conditions of employment, health and safety, classification of employment or service status,withholding and wages and hours, in each case, with respect to current and former employees andservice providers of the Business.     Section 6.14 Title to Assets. Seller is the lawful owner of, or has the right to use,and has good, valid and marketable title to, the Transferred Assets free and clear of any Liens(other than Permitted Liens). Seller has good, legal and valid title to all of its assets(including, without limitation, its investment assets) free and clear of all Liens (except forPermitted Liens). Seller owns, has valid leasehold interests in or valid contractual rights touse, all of the properties and assets, tangible and intangible, used or held for use in, necessaryfor or relating to the conduct or operation of, the Business. All of the property referenced inthis Section 6.14, and to the extent applicable, is in good operating condition (subject toordinary wear and tear) and has been maintained in a manner consistent with industry standards.     Section 6.15 Insurance. Seller or its Affiliates have in place insurance policieswith respect to the Transferred Assets and the Business in amounts and types that are customary inthe industry for similar assets and sufficient to cover the full value of the Transferred Assetsand the Business, and all such policies are valid and in full force and effect. Section 6.15 ofthe Disclosure Schedule contains a complete and accurate list and an accurate summary (including,without limitation, the named insured, whether occurrence or claims made policy, premiums,coverage, deductibles and expiration dates, broker and carrier) of all insurance policies currentlymaintained or maintained for the past year relating to the Transferred Assets or the Business.Seller has delivered to Purchaser complete and accurate copies of all such policies together with(a) all riders and amendments thereto. Such policies, as are current, are valid and in full forceand effect, all premiums due thereon have been paid, and Seller and, if applicable, its Affiliates,have complied in all material respects with the provisions of such policies, and all such policieseither specifically include Seller as named insured or include omnibus named insured language whichgenerally includes Seller. If requested by Purchaser prior to, from and after the Closing, suchpolicies shall specifically include Purchaser as a named insured without any modifications of anyof the terms of such policies. In addition, if requested by Purchaser prior to the Closing, Sellershall procure, at its expense, a “tail” policy for any claims-made malpractice policies, whichpolicy shall specifically include Purchaser as a named insured. No Proceedings are pending or, tothe Knowledge of Seller and Parent, threatened, or during the prior year were instituted orthreatened, to revoke, cancel, limit or otherwise modify such policies and no notice ofcancellation of any of such policies has been received. Seller is, and for the past year has been,in full compliance with all material recommendations for the prevention of loss made by allinsurance carriers and is in compliance with all warranties contained in all insurance policies, ineach case with respect to the Transferred Assets and the Business.     Section 6.16 Inventory. At the Closing, the inventory included in the TransferredAssets (the “Inventory”), will be items of good quality and usable or saleable by theBusiness in the ordinary course of business consistent with past practice. The Inventory deliveredat the Closing will be of a quantity and quality that is reasonable and warranted in thecircumstances of the Business. All of the pharmaceuticals, drugs and
18

 
biologicals included in Inventory have been properly stored in a manner consistent withindustry standards and are in date and are properly labeled and packaged.     Section 6.17 Accounts Receivable. All accounts receivable, rebates receivable earnedafter June 30, 2006, notes receivable and other indebtedness owed to Seller included in theTransferred Assets (the “Accounts Receivable”) represent bona fide sales actually made orservices actually delivered in the ordinary course of business consistent with past practice and,in the case of Accounts Receivable, have been billed or invoiced in the ordinary course of businessconsistent with past practice in accordance with all applicable Laws. Except to the extentexpressly reserved against or reflected on the Interim Financial Statements, to the Knowledge ofSeller and Parent there is no reason why such Accounts Receivable would not be collectible in theordinary course of business consistent with past practice.     Section 6.18 Product Returns and Warranties. To the Knowledge of Parent and Seller,there are no liabilities for product returns other than those arising in the ordinary course of theBusiness consistent with past practice. To the Knowledge of Seller and Parent, there are nothreatened claims for (a) product returns, (b) warranty obligations or (c) product services, otherthan in the ordinary course of the Business consistent with past practice. Seller has not made anyexpress or implied warranties with respect to products sold or distributed by Seller (other thanpassing on warranties made by the manufacturers thereof) and, to the Knowledge of Seller andParent, no other warranties have been made by the officers, directors, employees, consultants oragents of Seller (collectively, “Personnel”). None of Seller or Parent has any Knowledgeof any presently existing circumstances that would constitute a valid basis for any voluntary orgovernmental recall of any pharmaceutical or other product sold or distributed by Seller inconnection with or otherwise relating to the Business.     Section 6.19 Customers; Suppliers. Section 6.19 of the Disclosure Schedule contains acomplete and accurate list of all Facilities, and the number of licensed beds in such Facilitiesthat are provided products and services by the Business under any Contract or other arrangement.During the six (6) months ended June 30, 2006, not more than 5% of the revenues of the Businessduring such period was attributable to patients serviced by any single customer or group of relatedcustomers. None of Seller or Parent has received any notice (or are otherwise aware) that anyparty intends to cancel any Contract or materially reduce the level of business it conducts withthe Business.     Section 6.20 Absence of Certain Business Practices. None of Seller or Parent, nor anyAffiliate, director, officer, employee or agent of Seller or Parent, nor any other Person acting onbehalf of Seller or Parent, directly or indirectly, have given or agreed to give any gift orsimilar benefit to any customer, supplier, governmental employee or other Person which (a) couldreasonably be expected to subject the Business, the Transferred Assets, the Assumed Liabilities orPurchaser to any damage or penalty in any civil, criminal or governmental litigation or proceeding,(b) if not given in the past, might have been reasonably likely to, individually or in theaggregate, have had a Material Adverse Effect or (c) if not continued in the future, might bereasonably likely
19

 
to, individually or in the aggregate, have a Material Adverse Effect or which might subjectSeller, Parent or Purchaser to suit or penalty in any private or governmental litigation orproceeding.     Section 6.21 Certain Healthcare Legal Matters. With respect to the Business, theTransferred Assets and the Assumed Liabilities:     (a) Seller, all of its Personnel and Parent have complied in all material respects with allapplicable statutes, regulations, rules, orders, ordinances and other laws of any GovernmentalAuthority to which they are subject with respect to healthcare regulatory matters (including,without limitation, The Social Security Act, as amended, Sections 1128, 1128A and 1128B, 42 U.S.C.Sections 1320a-7, 7(a) and 7(b), including, without limitation, Criminal Penalties InvolvingMedicare or State Health Care Programs, commonly referred to as the “Federal Anti-Kickback Statute”and The Social Security Act, as amended, Section 1877, 42 U.S.C. Section 1395nn (ProhibitionAgainst Certain Referrals), commonly referred to as the “Stark Statute,” the statute commonlyreferred to as the “Federal False Claims Act,” the Health Insurance Portability and AccountabilityAct of 1996, and the regulations issued pursuant thereto and all statutes and regulations relatingto the possession, distribution, maintenance and documentation of controlled substances)(collectively, “Healthcare Laws”). Seller has maintained all records required to bemaintained by the Food and Drug Administration, Drug Enforcement Administration and State Board ofPharmacy and the Medicare and Medicaid programs and the laws of all other applicable federal, stateand local Governmental Authorities as required by applicable Healthcare Laws. To the Knowledge ofParent and Seller, there are no presently existing circumstances which would result or would bereasonably likely to result in violations of any such Healthcare Laws.     (b) Seller is qualified for participation in the Medicare and Medicaid programs. None ofSeller or Parent has received any notice indicating that such qualification may be terminated orwithdrawn nor have any reason to believe that such qualification may be terminated or withdrawn.Seller has timely filed all claims or other reports required to be filed with respect to thepurchase of products or services by third-party payors (including, without limitation, Medicare andMedicaid), except where the failure to file such claims and reports would not, individually or inthe aggregate, be reasonably likely to have a Material Adverse Effect, and all such claims orreports are complete and accurate in all material respects. Seller and Parent have no liability toany payor with respect thereto, except for liabilities incurred in the ordinary course of businessconsistent with past practice. There are no pending appeals, overpayment determinations,adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claimdeterminations or other reports required to be filed by Seller.     (c) None of Seller or Parent, or the directors and officers of each of Seller or Parent or, tothe Knowledge of Seller or Parent, any employee, consultant or agent of each of Seller or Parent,have been convicted of, charged with or investigated for a Medicare, Medicaid or other FederalHealth Care Program (as defined in 42 U.S.C. § 1320a-7b(f)) related offense, or convicted of,charged with or investigated for a violation of federal or state law relating to fraud, theft,embezzlement, breach of fiduciary
20

 
responsibility, financial misconduct, obstruction of an investigation or controlledsubstances. None of Seller or Parent, or the directors and officers of each of Seller or Parentor, to the Knowledge of Seller or Parent, any employee, consultant or agent of each of Seller orParent, have been excluded or suspended from participation in Medicare, Medicaid or any otherFederal Health Care Program, or have been debarred, suspended or are otherwise ineligible toparticipate in federal programs. None of Seller or Parent, or the directors and officers of eachof Seller or Parent or, to the Knowledge of Seller or Parent, any employee, consultant or agent ofeach of Seller or Parent have committed any offense which may reasonably serve as the basis for anysuch exclusion, suspension, debarment or other ineligibility. To the Knowledge of each of Selleror Parent, neither Seller nor Parent has arranged or contracted with any individual or entity thatis suspended, excluded or debarred from participation in, or otherwise ineligible to participatein, a Federal Health Care Program or other federal program.     (d) There are no pharmaceutical or other products now being sold or distributed or servicesprovided by Seller that would require any approval of any governmental or administrative body,whether federal, state, local or foreign, prior to commercial distribution of such products, forwhich approval has not been obtained. All pharmaceutical or other products now being distributedor services provided by Seller and all products included in the inventory of Seller comply, in allmaterial respects, with all applicable legal requirements of all jurisdictions in which suchpharmaceutical or other products are now being distributed or such services are now being provided.     (e) None of Seller or Parent or any of their respective Affiliates, or, to the Knowledge ofParent and Seller, any relatives of any officers, directors or employees of Seller, (i) have orhave had any ownership, leasehold or other interest, whether direct or indirect, in any customer ofthe Business, (ii) are or have been employed in any sales or management position, whether directlyor indirectly, by any customer of the Business or (iii) are or have been able to influence thepurchase or procurement of any pharmacy services or related products by any customer from theBusiness.     Section 6.22 Real Property. Section 6.22 of the Disclosure Schedule sets forth thelocation and a description of the leased real property included in the Transferred Assets or theAssumed Liabilities and the general nature of the facilities located on the properties. Sellerdoes not own any real property. Seller owns, has valid leasehold interests in or valid contractualrights to use, all real property used or held for use in, necessary for or relating to the conductor operation of, the Business.     Section 6.23 Environmental.     (a) (i) Seller, the Transferred Assets and the Business comply and at all times have compliedin all material respects with all applicable Environmental Laws, (ii) except in material compliancewith applicable Environmental Laws, as required in the ordinary course of the Business and as couldnot reasonably be expected to have a Material Adverse Effect, no Hazardous Substances are presentat or have been Released or, to the Knowledge of Parent and Seller, threatened to be Released from,onto or under any of the properties (including, without limitation, soils, groundwater, surfacewater,
21

 
buildings or other structures) currently owned, leased, operated or otherwise used by Selleror the Business, (iii) none of Seller or the Business have received any notice, demand, letter,claim or request for information alleging that Seller in connection with the Business, theTransferred Assets or the Business are or may be in violation of or liable under any EnvironmentalLaw, (iv) none of Seller or Parent in connection with the Business, the Transferred Assets or theBusiness are subject to any order, decree, injunction or other directive of any GovernmentalAuthority and none of Seller or Parent in connection with the conduct of the Business, theTransferred Assets or the Business are subject to any indemnity or other agreement with any Personor entity relating to Hazardous Substances, (v) there are no circumstances or conditions involvingSeller or Parent in connection with the Business, the Transferred Assets or the Business, anyassets (including, without limitation, real property) or businesses previously owned, leased,operated or otherwise used by Seller or Parent, or any of the assets (including, withoutlimitation, real property) or businesses of any predecessors of Seller in connection with theBusiness that could reasonably be expected to result in any restriction on the ownership, use ortransfer of any of the Transferred Assets arising under or pursuant to any Environmental Law and(vi) Seller has provided to Purchaser the following: (A) a copy of each Permit or pendingapplication for any Permit and each order, judgment, decree, consent agreement or similar documentimposing material obligations on Seller issued pursuant to or in connection with any EnvironmentalLaw and relating to the Business or the Transferred Assets; (B) copies of all material reports inthe custody or control of Seller, including, without limitation, “Phase I,” “Phase II,”“environmental assessment” and similar reports, relating to the environmental condition of theBusiness or the Transferred Assets or the compliance of Seller, the Business or the TransferredAssets with Environmental Laws; (C) documentation, if applicable, showing the compliance of Sellerwith any material financial responsibility requirements of any applicable Environmental Law inconnection with the Business or the Transferred Assets; and (D) documentation, if applicable,demonstrating the compliance of Seller with any applicable Environmental Laws that condition,restrict, or prohibit the transfer, sale, lease, assignment or closure of any of the Business orthe Transferred Assets, including, without limitation, any so-called “environmental propertytransfer laws.”          (b) As used herein, the term “Environmental Law” means any Law relating to theprotection, investigation or restoration of the environment (including, without limitation, naturalresources) or the health or safety of human or other living organisms, including, withoutlimitation, the manufacture, introduction into commerce, export, import, handling, use, presence,disposal, Release or threatened Release of any Hazardous Substance.          (c) As used herein, the term “Hazardous Substance” means any element, compound,substance or other material (including, without limitation, any pollutant, contaminant, hazardouswaste, hazardous substance, chemical substance, or product) that is listed, classified or regulatedpursuant to any Environmental Law, including, without limitation, any petroleum product, by-productor additive, asbestos, presumed asbestos-containing material, asbestos-containing material, medicalwaste,
22

 
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive material or radon.          (d) As used herein, the term “Release” means any release, pumping, pouring, emptying,injecting, escaping, leaching, migrating, dumping, seepage, spill, leak, flow, discharge, disposalor emission.          Section 6.24 No Broker. No agent, broker, investment banker, financial advisor orother firm or Person is or will be entitled to any broker’s or finder’s fee payable by Seller orParent or any other commission or similar fee in connection with any of the transactionscontemplated by this Agreement, except for Capital Development Services, the fees of which shall bethe responsibility of Parent and/or Seller.          Section 6.25 No Misleading Statements. The representations and warranties made bySeller and Parent in this Agreement, including, without limitation, the exhibits and scheduleshereto, do not include any untrue statement of a material fact or omit to state any material factnecessary to make the statements made herein or therein, in light of the circumstances under whichthey were made, not misleading.          Section 6.26 Employee Benefits.          (a) Section 6.26(a) of the Disclosure Schedule sets forth a list of all “employee pensionbenefit plans” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,as amended (“ERISA”)), “employee welfare benefit plans” (as defined in Section 3(1) ofERISA), any bonus, deferred compensation, stock bonus, stock purchase, restricted stock, stockoption, employment, termination, change in control, retention, consulting, severance or otheremployee or fringe benefit plan, program, policy, arrangement and contract (all the foregoing beingherein called “Benefit Plans”) sponsored, maintained or required to be contributed to, bySeller for the benefit of any current or former directors, officers, employees or independentcontractors of the Business. Seller has made available to Purchaser complete and accurate copiesof (i) each Benefit Plan (or, in the case of any unwritten Benefit Plan, a brief descriptionthereof), (ii) the most recent annual report on Form 5500 filed with the IRS with respect to anyBenefit Plan (if any such report was required) and (iii) each trust agreement and group annuitycontract relating to any Benefit Plan.          (b) Each Benefit Plan has been administered in compliance, in all material respects, with itsterms and the applicable provisions of ERISA, the Code and all other applicable Laws. NeitherSeller nor any entity that is treated with Seller as a single employer under Section 414 of theCode (“ERISA Affiliate”) maintains or contributes to any benefit plan that is subject tothe provisions of Title IV of ERISA. Neither Seller nor any ERISA Affiliate has any unsatisfiedmaterial liability under the Code, ERISA or any foreign law in respect of any Benefit Plan. Eachemployee pension benefit plan that is intended to be qualified under Section 401(a) of the Code issubject to an opinion letter from the IRS stating it is so qualified and Seller and Parent have noKnowledge of facts that would be reasonably likely to cause revocation of such letter. There areno material
23

 
pending or, to the Knowledge of Seller and Parent, threatened claims, suits or arbitrationsinvolving any Benefit Plan except any routine claim for benefits under a Benefit Plan.          (c) No director, officer, employee or consultant of Seller will be entitled to any additionaleconomic benefit (including, without limitation, the acceleration of the time of payment or vestingof any economic benefit) as a result of the consummation of the transactions contemplated by thisAgreement.          (d) None of Seller or Parent is a party to any Contract, agreement, plan or arrangement that,individually or in the aggregate, or when taken together with any payment that may be made underthis Agreement or any agreements contemplated by this Agreement, could give rise to the payment ofany “excess parachute payment” within the meaning of Section 280G of the Code.          Section 6.27 Taxes.          (a) All Tax Returns required to be filed and relating in any manner to any of the TransferredAssets or the Business have been timely filed. All such Tax Returns (i) were prepared in themanner required by applicable Law and (ii) are true, correct and complete in all material respects.          (b) Seller has paid, or caused to be paid, all Taxes due with respect to any of theTransferred Assets or the Business whether or not shown (or required to be shown) on a Tax Return;and such Taxes paid include those for which Seller may be liable in its own right, or as thetransferee of the assets of, or as successor to, any other entity.          (c) There has been no notice of a deficiency or assessment or other claim relating in anymanner to any of the Transferred Assets or the Business from any Taxing Authority which has notbeen fully paid or finally settled. There are no current audits or examinations of, and no noticeof audit or examination of, any Tax Return that relates to any of the Transferred Assets or theBusiness. Seller has not given nor has there been given on Seller’s behalf a waiver or extensionof any statute of limitations relating to the payment of Taxes relating to any of the TransferredAssets or the Business.          (d) Seller has complied in all material respects with all applicable Laws, rules andregulations relating to the withholding of Taxes and the payment thereof to the appropriate TaxingAuthority, including, without limitation, Taxes required to have been withheld and paid inconnection with amounts paid or owing to any employee or independent contractor.          (e) No claim has ever been made by any Taxing Authority with respect to any of the TransferredAssets or the Business in a jurisdiction where Seller does not file Tax Returns that Seller may besubject to taxation in that jurisdiction.          (f) There are no encumbrances or security interests on any of the Transferred Assets thatarose in connection with any failure (or alleged failure) to pay any Taxes and, except for Liensfor real and personal property Taxes that are not yet due
24

 
and payable, there are no Liens for any Tax upon any Transferred Asset. Purchaser will not beliable for, and none of the Transferred Assets will be subject to a Lien (other than Liens for realand personal property Taxes that are not yet due and payable) with respect to, any Taxes arisingout of, relating to or in respect of the Business or any of the Transferred Assets for any taxperiod or portion thereof ending on or before the Closing Date.          (g) None of the Transferred Assets is (i) “tax-exempt use property” within the meaning ofSection 168(h) of the Code, (ii) “tax-exempt bond financed property” within the meaning of Section168(g)(5) of the Code or (iii) property that is required to be treated as owned by another Personpursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended,and in effect immediately prior to the enactment of the Tax Reform Act of 1986.          (h) The Transferred Assets do not include any shares of capital stock of, or any otherinterest in, any Affiliate of Seller, or any other Person.     (i) For purposes of this Agreement:     (i) “Tax” and “Taxes” mean any and all federal, state, local andforeign taxes, assessments and other governmental charges, duties, impositions, levies andliabilities, including, without limitation, taxes based upon, measured by, or with respectto income, net income, gross income, earnings, profits or gross receipts, or any sales,use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise,severance, stamp, occupation, premium, property, windfall profits, environmental,alternative, add-on minimum, custom duties, capital stock, social security (or similar),unemployment, disability, gains, recapture, estimated, or other taxes, fees, assessments orcharges of any kind whatsoever, together with any interest, penalty, and addition thereto.     (ii) “Tax Return” means any return, declaration, report, claim, election,notice or information return or statement or other document (including, without limitation,any related or supporting information, schedules, or exhibits) filed or required to befiled with any federal, state, local or foreign Governmental Authority or other authorityin connection with any Tax or estimated Tax.     Section 6.28 Proprietary Rights. (a)     (i) Seller is the sole owner of, free and clear of all Liens (other than PermittedLiens), or has a valid right to use, without the payment of any royalty, except withrespect to off-the-shelf software licensed on commercially reasonable terms, andimmediately following the Closing, Purchaser will be the sole owner of, free and clear ofall Liens (other than Permitted Liens), or will have a valid right to use on the same termsas Seller (without the payment of any sublicense or other payment relating to thetransactions contemplated by this Agreement) to, all U.S. and non-U.S. trademarks, servicemarks, logos, designs, trade names, internet domain names and corporate names, and thegoodwill of the business
25

 
connected therewith and symbolized thereby, patents, registered designs, copyrights,computer software (including, without limitation, all information systems, patient andother data files and databases, source and object codes, user interfaces, manuals and otherspecifications and documentation related thereto and all intellectual property andproprietary rights incorporated therein), web sites and web pages and related items (andall intellectual property and proprietary rights incorporated therein) and all tradesecrets, research and development information, formulae, proprietary data and know-how(“Trade Secrets”) and all other proprietary and intellectual property rights andinformation, including, without limitation, all grants, registrations and applicationsrelating thereto (all of the foregoing to be collectively referred to as the“Proprietary Rights”) used or held for use in, necessary or advisable for orotherwise relating to the conduct of the Business as now conducted or as contemplated to beconducted (such Proprietary Rights, the “Seller’s Rights”);     (ii) the Seller’s Rights are valid and enforceable, and, immediately following theClosing, Purchaser’s rights in such Seller’s Rights will be valid and enforceable;     (iii) no action or proceeding is outstanding or pending, or to the Knowledge of Selleror Parent, threatened, that seeks to cancel, limit or challenge the ownership, use, value,validity or enforceability of any Seller’s Rights;     (iv) none of Seller or Parent has received any demand, claim, notice or inquiry fromany Person in respect of any Seller’s Rights which challenges, threatens to challenge orinquires as to whether there is any basis to challenge, the validity of, or the rights ofSeller in, any Seller’s Rights, and none of Seller or Parent have Knowledge of any basisfor any such challenge;     (v) neither Seller nor the Business as presently conducted by Seller is in violationor infringement of, nor have Seller nor the Business as currently or in the past conductedby Seller violated or infringed, any Proprietary Rights of any other Person;     (vi) to the Knowledge of Seller and Parent, no Person is violating or infringing anySeller’s Rights; and     (vii) to the Knowledge of Seller and Parent, none of Seller or Parent has divulged,furnished to or made accessible to any Person, any Trade Secrets without prior theretohaving obtained an enforceable agreement of confidentiality from such Person; or withoutsuch Person being otherwise under an obligation of confidentiality.     (b) Section 6.28(b) of the Disclosure Schedule contains a complete and accurate list ofSeller’s Rights, other than non-material unregistered copyrights and Trade Secrets, and alllicenses and other agreements relating thereto.
26

 
          Section 6.29 Information Technology. (a) (i) the IT Systems are in good workingcondition to effectively perform all information technology operations necessary for the conduct ofthe Business as now conducted or as contemplated to be conducted; (ii) none of Seller or Parent hasexperienced within the past twelve (12) months any material disruption to, or material interruptionin, its conduct of the Business attributable to a defect, bug, breakdown or other failure ordeficiency on the part of the IT Systems; (iii) Seller has taken commercially reasonable steps toprovide for the backup and recovery of the data and information critical to the conduct of theBusiness; and (iv) Seller has taken commercially reasonable actions, consistent with standards inthe Business, with respect to the IT Systems to detect and prevent the disclosure to unauthorizedPersons of, and keep secure, any and all confidential information, Trade Secrets, or otherproprietary information stored on the IT Systems.          (b) As used herein, “IT Systems” means any and all information technology and computersystems (including, without limitation, software, hardware and other equipment, firmware andembedded software) relating to the transmission, storage, maintenance, organization, presentation,generation, processing or analysis of data and information whether or not in electronic format,which technology and systems are used in or necessary or advisable to the conduct of the Business.          Section 6.30 Solvency of Parent and Sellers. Parent is not insolvent, or will not berendered insolvent by any of the transactions contemplated by this Agreement. As used herein,“insolvent” means that the sum of the debts and other probable liabilities of the Parent exceedsthe fair present value of Parent’s assets. Immediately after giving effect to the consummation ofthe transaction contemplated by this Agreement: (i) Parent will be able to pay its liabilities asthey become due in the ordinary course of business of Parent; and (ii) Parent will not haveunreasonably small capital with which to conduct its present or proposed business.**ARTICLE VII****REPRESENTATIONS AND WARRANTIES OF PURCHASER**          Purchaser represents and warrants to Seller and Parent as follows:          Section 7.1 Corporate Organization. Purchaser is a corporation duly organized,validly existing and in good standing under the laws of the State of Delaware. Purchaser has fullpower and authority to own, lease, operate and otherwise hold its properties and assets and tocarry on its business as presently conducted. Purchaser is duly qualified or licensed to dobusiness as a foreign corporation and is in good standing in every jurisdiction in which the natureof the business conducted by it or the assets or properties owned or leased by it requiresqualification, except where the failure to be so qualified, licensed or in good standing would not,individually or in the aggregate, be reasonably likely to have a Material Adverse Effect.          Section 7.2 Authorization and Effect of Agreement. Purchaser has the full power andauthority to execute and deliver this Agreement and the Collateral
27

 
Agreements and to perform its obligations hereunder and thereunder. The execution anddelivery by Purchaser of this Agreement and the Collateral Agreements to which it is a party andthe performance by it of the transactions contemplated hereby and thereby have been duly authorizedby all necessary corporate action on the part of Purchaser. This Agreement has been duly executedand delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser,enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy,reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally.          Section 7.3 Consents and Approvals; No Violations. No filing with, and no Permit orConsent of any Governmental Authority is necessary for the consummation by Purchaser of thetransactions contemplated by this Agreement and any Collateral Agreements. Neither the executionand delivery of this Agreement and any Collateral Agreement by Purchaser nor the consummation byPurchaser of the transactions contemplated by this Agreement and any Collateral Agreements, norcompliance by Purchaser with any of the provisions hereof or thereof will (a) conflict with orresult in any breach of any provision of the certificate of incorporation or by-laws of Purchaser,(b) result in a violation or breach of, or constitute (with or without due notice or lapse of timeor both) a default (or give rise to any right of termination, cancellation or acceleration or lossof material benefits) under, any of the terms, conditions or provisions of any Contract to whichPurchaser is a party or by which Purchaser or any of their properties or assets may be bound or (c)violate any order, writ, injunction, decree, statute, treaty, rule or regulation applicable toPurchaser, or any of its properties or assets, except in the case of clauses (b) or (c) forviolations, breaches or defaults which would not, in the aggregate, prevent or materially delay theconsummation of the transactions contemplated by this Agreement.          Section 7.4 No Broker. No agent, broker, investment banker, financial advisor orother firm or Person is or will be entitled to any broker’s or finder’s fee or any other commissionor similar fee payable by Purchaser in connection with any of the transactions contemplated by thisAgreement.**ARTICLE VIII****COVENANTS**          Section 8.1 Conduct of Business. During the period from the date hereof through andincluding the Closing, except as otherwise expressly provided in this Agreement or as agreed to byPurchaser in writing, Seller shall, and Parent shall cause Seller to, operate the Business only inthe ordinary course of business consistent with past practice. Seller shall use its reasonablecommercial efforts to preserve intact the Inventory, the Transferred Assets and presentorganization of the Business, keep available the services of the present officers and employees ofSeller that are associated with the Business and preserve relationships with customers, suppliers,licensors, licensees, contractors, distributors and others having business dealings with theBusiness. Without limiting the generality of the foregoing, from the date of this Agreementthrough
28

 
and including the Closing, Seller shall not, and Parent shall not permit Seller to, withoutthe prior written consent of Purchaser:          (a) sell, lease, encumber, transfer or dispose of any assets or rights or acquire any assetsor rights which would be included in the Transferred Assets, other than the sale or purchase ofinventory in the ordinary course of business, consistent with past practice;          (b) engage in any trade loading, including, without limitation, sales of products (i) withpayment terms longer than terms customarily offered by the Business for such product, (ii) at agreater discount from listed prices than customarily offered for such products, other than pursuantto a promotion of a nature previously used in the normal course of business by Seller in connectionwith the Business for such products, (iii) at a price which does not give effect to any previouslyannounced general increase in the list price for such products, (iv) with shipment terms morefavorable to the customer than shipment terms customarily offered by Seller in connection with theBusiness for such products, (v) in a quantity greater than the reasonable retail or wholesale (asthe case may be) resale requirement of the particular customer or (vi) in conjunction with otherbenefits to the customer not in the ordinary course of business consistent with past practice withsuch customer;          (c) collect any accounts receivables or rebates receivables or fail to pay any accountspayable, other than in the ordinary course of business consistent with past practice;          (d) enter into any material commitment or transaction;          (e) permit any Transferred Asset to become encumbered by a Lien (other than Permitted Liens);          (f) change (or permit to be changed) any accounting or Tax procedure, election or practice orfinancial structure or make (or permit to be made) any Tax election or settle or compromise anyliability for Taxes, in each case, relating to the Business or any of the Transferred Assets;          (g) enter into, adopt, amend, modify or terminate any employee benefit plan, program orarrangement, increase in any manner the compensation or benefits of any officer or employee of orassociated with the Business or pay any benefit not required by any existing employee benefit plan,or enter into any Contract to do any of the foregoing, except for normal periodic increases incompensation in the ordinary course of the Business consistent with past practice;          (h) enter into or offer to enter into any employment or consulting arrangement with any Personin connection with the Business, except as contemplated in clause (i) below;
29

 
          (i) except in the ordinary course of business consistent with past practice, hire or terminatethe employment or contractual relationship of any officer, employee, consultant, registeredrepresentative or agent of the Business;          (j) except in the ordinary course of business consistent with past practice, make, or becomeobligated to make any capital expenditures with respect to the Business or the Transferred Assets;          (k) enter into, amend, modify or terminate any Contract, except in the ordinary course ofbusiness consistent with past practice;          (l) enter into any transaction or any Contract with any Affiliate relating to the Business;          (m) assign, license, sublicense, abandon, fail to maintain or, except in the ordinary courseof business consistent with past practice, enter into, amend or terminate any Contract with respectto, any Seller’s Rights;          (n) waive any material rights with respect to the Transferred Assets, Assumed Liabilities ofthe Business; or          (o) take, or agree to take, any of the foregoing actions or any affirmative action whicheither intentionally would or is reasonably likely to make any representation or warranty of Sellerand Parent contained in this Agreement untrue or incorrect as of any future date (as if made as ofsuch date) or which could prevent the satisfaction of any condition to Closing set forth inArticle V hereto.          Section 8.2 Access. Subject to applicable law, Seller shall, and Parent shall causeSeller to, afford to officers, employees, accountants, counsel and other representatives ofPurchaser reasonable access to all of the assets, properties, personnel, books and records ofSeller relating to the Business, the Transferred Assets and the Assumed Liabilities.          Section 8.3 Notification.          (a) Seller and Parent shall promptly notify Purchaser, and Purchaser shall promptly notifySeller and Parent, of any litigation, arbitration or administrative proceeding pending or, to theirKnowledge, threatened against Seller, Parent or Purchaser, as the case may be, which challenges thetransactions contemplated by this Agreement or any Collateral Agreement.          (b) Seller shall, and Parent shall cause Seller to, provide prompt written notice to Purchaserof any change in any of the information contained in the representations and warranties made bySeller and Parent in Article VI hereto or any exhibits or schedules referred to herein orattached hereto and shall promptly furnish any information which Purchaser may reasonably requestin relation to such change; provided that such notice shall not operate to in any waymodify or cure any breach of the
30

 
representations and warranties made by Seller and Parent in Article VI hereto or anyexhibits or schedules referred to herein or attached hereto.          Section 8.4 No Inconsistent Action. None of Purchaser, Seller or any of Parent willtake any action which is inconsistent with its respective obligations under this Agreement.          Section 8.5 Reasonable Best Efforts.          (a) Upon the terms and subject to the conditions of this Agreement, each of the parties heretoshall use its reasonable best efforts to take, or cause to be taken, all actions, and to do, orcause to be done, all things necessary, proper or advisable under applicable Laws to consummate andmake effective the transactions contemplated by this Agreement and the Collateral Agreements aspromptly as practicable, including, without limitation, (i) the prompt preparation and filing ofall forms, registrations and notices required to be filed to consummate the transactionscontemplated by this Agreement and the Collateral Agreements and the taking of such commerciallyreasonable actions as are necessary to obtain any requisite Consents, orders, exemptions or waiversby any Governmental Authority or any other Person and (ii) using its reasonable best efforts tocause the satisfaction of all conditions to Closing. Each party shall promptly consult with theothers with respect to, provide any necessary information with respect to and provide the other (orits counsel) copies of, all filings made by such party with any Governmental Authority or any otherPerson or any other information supplied by such party to a Governmental Authority or any otherPerson in connection with this Agreement and the transactions contemplated by this Agreement.          (b) Each party hereto shall promptly inform the others of any communication from or with anyGovernmental Authority regarding any of the transactions contemplated by this Agreement and theCollateral Agreements. If any party or Affiliate thereof receives a request for additionalinformation or documentary material from any such Governmental Authority with respect to thetransactions contemplated by this Agreement, then such party will endeavor in good faith to make,or cause to be made, as soon as reasonably practicable and after consultation with the other party,an appropriate response in compliance with such request.          Section 8.6 Further Assurances. From time to time after the Closing, withoutadditional consideration, each party hereto will (or, if appropriate, cause its Affiliates to)execute and deliver such further instruments and take such other action as may be necessary orreasonably requested by the other party to make effective the transactions contemplated by thisAgreement and the Collateral Agreements and to provide the other party with the intended benefitsof this Agreement and the Collateral Agreements. Without limiting the foregoing, upon reasonablerequest of Purchaser, Seller shall, Parent shall cause Seller to, and Seller and Parent shall causetheir respective Affiliates to, as applicable, execute, acknowledge and deliver all such furtherassurances, deeds, assignments and other instruments and paper as may be required to sell,transfer, convey, assign and deliver to Purchaser all right, title and interest in, to and underthe Transferred Assets. If any party to this Agreement shall, following the Closing, have in
31

 
its possession any asset or right (including, without limitation, with respect to any Seller’sRights) which under this Agreement should have been delivered to the others, such party shallpromptly deliver such asset or right to the others.          Section 8.7 Transfer Taxes. Notwithstanding any other provision of this Agreement,all transfer, registration, stamp, documentary, sales, use and similar taxes (including, withoutlimitation, all applicable real estate transfer or gains taxes), and any penalties, interest andadditions to tax, incurred in connection with this Agreement or the transfer of the Business andthe Transferred Assets shall be the responsibility of and be timely paid by Seller. Seller, Parentand Purchaser shall cooperate in the timely making of all filings, returns, reports and forms asmay be required in connection therewith.          Section 8.8 Release of Liens. At or prior to the Closing, if release of all Liens(other than Permitted Liens) have not previously occurred, Seller shall, and Parent shall causeSeller to, cause the release of all Liens (other than Permitted Liens) on the Transferred Assets,so that such Transferred Assets and rights are free and clear of any Liens (other than PermittedLiens).          Section 8.9 Consents to Transferred Assets. Seller and Parent agree that if anyRequired Third Party Consent to the assignment of any Transferred Asset to Purchaser as providedfor herein is not obtained prior to the Closing, and is not otherwise provided for in thisAgreement, Seller shall, and Parent shall cause Seller to reasonably cooperate with Purchaser sothat Purchaser enjoys all of the benefits of such Transferred Asset as though the Required ThirdParty Consents had been obtained (but only to the extent that Seller may provide Purchaser withsuch benefits without violating the terms of such Contract Requiring Consent), and, to the extent,but, notwithstanding anything herein to the contrary, only to the extent, such benefits areprovided, Purchaser shall assume the corresponding obligations under such Assumed Contract. Afterthe Closing, Seller shall reasonably cooperate with Purchaser to obtain any Required Third PartyConsents not obtained prior to the Closing. Purchaser agrees to perform at its sole expense all ofthe obligations of Seller to be performed after the Closing Date under such Assumed Contracts thebenefits of which Purchaser is receiving after the Closing Date, and to reimburse Seller for anyrequired expenses incurred by Seller on Purchaser’s behalf in keeping such Assumed Contracts ineffect.          Section 8.10 Employment Matters.          (a) Seller shall, and Parent shall cause Seller to, make available to Purchaser all employeesof the Business for the purposes of interviewing and, if desired by Purchaser, hiring at theClosing. Subject to applicable Law, Seller shall, and Parent shall cause Seller to, furnish toPurchaser copies of such employee information and records and such descriptions of personnelpolicies, procedures and benefits plans applicable to employees of the Business as Purchaser mayreasonably request. Seller shall reasonably cooperate with the efforts of Purchaser to cause suchemployees to accept any offers of employment by Purchaser and shall not make any competing offer ofcontinued employment to any individual whom Purchaser desires to employ in the Business. Sellershall be liable for any liability or obligations under the Consolidated
32

 
Omnibus Budget Reconciliation Act of 1985, as amended, with respect to employees of theBusiness (and their eligible dependents) arising in connection with their termination of employmentwith Seller.          (b) Effective as of the Closing Date, Seller shall, and Parent shall cause Seller to,terminate its employment of all of the employees providing substantial services to the Business.Seller shall be responsible for any severance payments, accrued payroll, vacation, sick pay andassociated payroll tax liabilities, pension or other retirement plan obligations, COBRA rights,WARN Act liability and any other liabilities associated with such terminations.          Section 8.11 Bulk Sales Laws. The parties hereto hereby waive compliance with theprovisions of any applicable bulk sales laws, including, without limitation, Article 6 of theUniform Commercial Code as it may be in effect in any applicable jurisdiction (“Bulk SalesLaws”). This provision shall not be deemed to in any way limit the indemnity provided for inArticle X hereto.          Section 8.12 No Solicitation.          (a) (i) Seller shall, and Seller shall cause its officers, directors, employees, subsidiaries,Affiliates, agents and other representatives to and (ii) Parent will, and Parent shall cause itsagents, representatives and Affiliates and Seller to, immediately cease any existing discussions ornegotiations with respect to any Alternative Proposal and will not, and shall cause such Personsnot to, directly or indirectly, encourage, solicit, participate in, initiate or facilitatediscussions or negotiations with, or provide any information to, any corporation, partnership,Person or other entity or group (other than Purchaser or its directors, officers, employees,subsidiaries, agents or other Affiliates) concerning any Alternative Proposal. Seller and Parentshall immediately communicate to Purchaser any such inquiries or proposals regarding an AlternativeProposal, including, without limitation, the terms thereof.          (b) “Alternative Proposal” shall mean any of the following involving Seller, theBusiness, the Transferred Assets or the Assumed Liabilities (other than the transactions expresslycontemplated by this Agreement): any inquiry or proposal relating to a sale of stock, merger,consolidation, share exchange, business combination, partnership, joint venture, disposition ofassets (or any interest therein) or other similar transaction.          Section 8.13 Confidentiality. The parties hereto agree that all information shall bekept confidential in accordance with the terms of the Confidentiality Agreement, dated as of June1, 2006, between Purchaser and Seller (the “Confidentiality Agreement”).          Section 8.14 No Solicitation of Employees. For a period of three (3) years after theClosing Date, Seller and Parent shall not, and shall cause their Affiliates not to, directly orindirectly, without the prior written consent of Purchaser, solicit, employ or contract with anyparty to an Employment Agreement or any employee of the
33

 
Business who has accepted employment with Purchaser pursuant to Section 8.10 hereto(each, a “Transferred Employee”); provided that nothing shall prohibit Seller andParent and their Affiliates from performing, or having performed on their behalf, a generalsolicitation for employees not specifically focused at the Transferred Employees through the use ofmedia, advertisement, electronic job boards or other general, public solicitations.          Section 8.15 Non-Competition. From the Closing and for a period of five (5) yearsthereafter, Seller and Parent shall not, and shall cause their Affiliates not to, directly orindirectly, lend funds to, or provide any management, consulting, financial, administrative orother services to, or own any interest or invest in, any business which, within the State ofWashington, engages in a business or businesses similar to the Business as presently conducted.          Section 8.16 Collection of Accounts Receivable.          (a) As of the Closing Date, Seller and Parent hereby authorize Purchaser to open any and allmail addressed to Seller and Parent relating to the Business and delivered to the offices of theBusiness or otherwise to Purchaser if received on or after the Closing Date, and hereby appointPurchaser their attorney-in-fact to endorse, cash and deposit any monies, checks or negotiableinstruments received by Purchaser after the Closing Date with respect to the Accounts Receivableand any accounts receivables or rebates receivables made payable or endorsed to Seller or Parent ortheir order, for Purchaser’s own account.          (b) As of the Closing Date, Seller and Parent agree that they promptly shall forward toPurchaser any monies, checks or negotiable instruments received by Seller and Parent after theClosing Date relating to the Accounts Receivable and any accounts receivables or rebatesreceivables for Purchaser’s own account.          Section 8.17 Post-Closing Agreements.          (a) The parties acknowledge that Purchaser may not have all required Permits to take title toall of the Transferred Assets at the Closing and thereafter operate all aspects of the Business.Seller agrees to reasonably cooperate with Purchaser in timely obtaining such Permits, and furtheragrees (i) to hold such of the Transferred Assets that cannot be transferred at the Closing in aconstructive trust for the benefit of Purchaser until such transfer is permissible and (ii) tooperate such aspects of the Business as may not be operated by Purchaser after the Closing for thebenefit of Purchaser until such operation by Purchaser is permissible.          (b) Notwithstanding the foregoing:     (i) Seller shall not be required to incur any costs or expenses or to expend any sumsin connection with the operation of the Business after the Closing; and
34

 
     (ii) Purchaser promptly shall pay all costs and expenses in connection with theoperation of the Business, and shall indemnify, defend and save harmless Seller from andagainst any and all liability, of every kind and nature in connection with the operation ofthe Business by Seller after the Closing.          (c) Section 8.17(b) hereto shall not be deemed to limit the representations,warranties, covenants and indemnification obligations therefore of Seller and Parent containedelsewhere in this Agreement.          Section 8.18 Change of Name. On the Closing Date, Seller and Parent shall discontinueany business operations under any trademarks, corporate names, internet domain names or trade namesowned or used by Seller, or any similar names (collectively, the “Trade Names”), other thansuch business as is in furtherance of the terms and provisions of this Agreement and as is for thebenefit of, or at the express request of, Purchaser. Seller and Parent agree that they shall causetheir Affiliates to refrain from conducting any business after the Closing Date under the TradeNames, other than such business as is in furtherance of the terms and provisions of this Agreementand as is for the benefit of, or at the express request of, Purchaser.          Section 8.19 Payment of Indebtedness.          (a) No fewer than one (1) Business Day prior to the Closing, Seller shall provide to Purchaser(i) copies of “pay-off” letters from the holders of all indebtedness for borrowed money of Sellerwho hold Liens on the Transferred Assets and (ii) copies of letters from such holders ofindebtedness confirming that all Liens relating to such indebtedness will be removed effective uponpayment of the amount set forth in the applicable pay-off letter, in each case in form andsubstance reasonably satisfactory to Purchaser. At the Closing Seller shall pay to the holders ofindebtedness of Seller those amounts set forth in the applicable pay-off letters. This Section8.19(a) shall not apply to any indebtedness and/or financing relating to the Motor Vehicles,which is subject to Section 8.19(b) hereto.          (b) As soon as is reasonably practical after the Closing, but in any event within fifteen (15)Business Days after the Closing, Seller shall pay off any and all indebtedness and/or financingrelating to the Motor Vehicles and shall provide to Purchaser (i) evidence, in form and substancereasonably satisfactory to Purchaser, that all Liens relating to such indebtedness and/or financinghave been removed and (ii) certificates of title to the Motor Vehicles, duly endorsed, completedand acknowledged for transfer.          Section 8.20 Satisfaction of Leases. No fewer than one (1) Business Day prior to theClosing, Seller shall present to Purchaser written statements prepared by the owner of anyequipment and other personal property (but not any real property) governed by any capital lease,providing the full amount to be paid to satisfy all liabilities and obtain good and marketabletitle to such equipment and property (the “Payoff Amount”). Simultaneous with the Closing,Seller shall pay such Payoff Amount in
35

 
immediately available funds to the lessor under such capital lease, except to the extent suchPayoff Amount is an Assumed Liability as contemplated Section 3.1(b).**ARTICLE IX****TERMINATION**          Section 9.1 Termination. This Agreement may be terminated and the transactionscontemplated by this Agreement may be abandoned at any time prior to the Closing:     (a) by written consent of each of Seller, Parent and Purchaser;     (b) by either of Seller, Parent or Purchaser if:     (i) a Governmental Authority shall have issued an order, decree or ruling or taken anyother action (which order, decree or ruling the parties hereto shall use their reasonablebest efforts to lift), in each case permanently restraining, enjoining or otherwiseprohibiting the transactions contemplated by this Agreement and such order, decree, rulingor other action shall have become final and nonappealable; or     (ii) the Closing shall not have occurred on or before August 14, 2006 (other than dueprincipally to the failure of the party seeking to terminate this Agreement to perform anyobligations under this Agreement required to be performed by it at or prior to theClosing);          (c) by Purchaser if there is a default or breach by Seller or Parent with respect to the dueand timely performance of any of its covenants or agreements contained herein, or if therepresentations or warranties of Seller or Parent contained in this Agreement shall have becomeinaccurate, in either case such that the conditions set forth in Section 5.4 hereto wouldnot be satisfied and such breach or default or inaccuracy is not curable or, if curable, has notbeen cured or waived within fifteen (15) calendar days after written notice to Seller and Parentspecifying, in reasonable detail, such claimed default, breach or inaccuracy and demanding its cureor satisfaction; or          (d) Seller or Parent if there is a default or breach by Purchaser with respect to the due andtimely performance of any of its covenants or agreements contained herein, or if itsrepresentations or warranties of Purchaser contained in this Agreement shall have becomeinaccurate, in either case such that the conditions set forth in Section 5.5 hereto wouldnot be satisfied and such breach or default or inaccuracy is not curable or, if curable, has notbeen cured or waived within fifteen (15) calendar days after written notice to Purchaserspecifying, in reasonable detail, such claimed default, breach or inaccuracy and demanding its cureor satisfaction.          Section 9.2 Procedure and Effect of Termination. In the event of termination andabandonment of the transactions contemplated by this Agreement
36

 
pursuant to Section 9.1 hereto, written notice thereof shall forthwith be given to theother parties to this Agreement and this Agreement shall terminate (subject to the provisions ofthis Section 9.2) and the transactions contemplated by this Agreement shall be abandoned,without further action by any of the parties hereto. If this Agreement is terminated as providedherein:          (a) Upon the written request therefor, each party will (i) redeliver or (ii) destroy withcertification thereto in form and substance reasonably satisfactory to the other party, alldocuments, work papers and other materials of any other party relating to the transactionscontemplated by this Agreement, whether obtained before or after the execution hereof, to the partyfurnishing the same; and          (b) Subject to Article X hereto, in the event of the termination and abandonment ofthis Agreement pursuant to Section 9.1 hereto, this Agreement shall forthwith become voidand have no effect, without any liability on the part of any party hereto or its Affiliates,directors, officers or stockholders, other than the provisions of Sections 11.1,11.2, 11.3, 11.7 and 11.12 hereto. Nothing contained in thisSection 9.2 shall relieve any party from liability for any breach of this Agreement.**ARTICLE X****SURVIVAL; INDEMNIFICATION**          Section 10.1 Survival of Indemnification Rights. Survival of IndemnificationRights. Subject to the limitations and other provisions of this Agreement, the representationsand warranties of Seller and Parent contained in this Agreement and the Collateral Agreements shallsurvive the Closing and remain in full force and effect for a period of two (2) years following theClosing Date, at which time they shall expire and be of no further force or effect, and shall bethereafter forever barred; provided that, if a claims notice has been provided by suchdate, they shall remain in full force and effect until final resolution thereof; providedfurther that (i) the representations and warranties contained in Section 6.21 (CertainHealthcare Legal Matters) and Section 6.27 (Taxes) shall survive and remain in full forceand effect until sixty (60) calendar days after the expiration of the applicable statute oflimitations (including any extension thereof) and (ii) any representation or warranty that isfraudulently given shall remain in full force and effect indefinitely. The representations andwarranties of Purchaser contained in Article VII hereto shall survive and remain in fullforce and effect for two (2) years following the Closing Date. The covenants and agreements ofSeller, Parent and Purchaser contained in this Agreement shall survive and remain in full force andeffect for the applicable period specified therein, or if no such period is specified,indefinitely. The provisions of this Article X shall survive for so long as any otherSection of this Agreement shall survive. None of the Closing, Purchaser’s waiver of any conditionto the Closing or Purchaser’s knowledge of any breach prior to the Closing, shall constitute awaiver of any of the rights Purchaser may have hereunder.          Section 10.2 Indemnification Obligations of Seller and Parent. Subject to thelimitations set forth herein, Seller and Parent shall jointly and severally indemnify,
37

 
defend and hold harmless Purchaser and any subsidiary, associate, Affiliate, director,officer, stockholder or agent of Purchaser, and their respective representatives, successors andpermitted assigns (all of the foregoing are collectively referred to as the “PurchaserIndemnified Parties”) from and against and pay on behalf of or reimburse such party in respectof, as and when incurred, all out-of-pocket losses, liabilities, demands, claims, actions or causesof action, costs, damages, judgments, debts, settlements, assessments, deficiencies, Taxes,penalties, fines or expenses, whether or not arising out of any claims by or on behalf of a thirdparty, including, without limitation, interest, penalties, reasonable attorneys’ fees and expensesand all reasonable amounts paid in investigation, defense or settlement of any of the foregoing(collectively, “Losses”) which any such party may suffer, sustain or become subject to, asa result of, in connection with, or relating to or by virtue of:          (a) any inaccuracy in, or breach of, any representation or warranty made by Seller or Parentunder this Agreement or any Collateral Agreement;          (b) any breach or non-fulfillment of any covenant or agreement on the part of Seller or Parentunder this Agreement or any other Collateral Agreement;          (c) the ownership or operation of the Transferred Assets or the conduct or operation of theBusiness or the activities of Seller or Parent in connection with the Transferred Assets or theBusiness on or prior to the Closing Date;          (d) any applicable Bulk Sales Laws as a result of the actions contemplated by Section8.11 hereto;          (e) any fees, expenses or other payments incurred or owed by Seller or Parent to any agent,broker, investment banker or other firm or Person retained or employed in connection with thetransactions contemplated by this Agreement; or          (f) the Retained Liabilities;provided that none of Seller or Parent will have any liability (for indemnification orotherwise) with respect to the matters described in Section 10.2(a) or (b) hereto (A) untilthe aggregate of all Losses with respect to such matters exceeds $100,000, and then only to theextent the aggregate amount of such Losses exceeds $100,000, and (B) in excess of $1,650,000.          Section 10.3 Indemnification Obligations of Purchaser. Purchaser shall indemnify,defend and hold harmless Parent and Seller and any subsidiary, associate, Affiliate, director,officer, stockholder or agent of Parent or Seller, and their respective representatives, successorsand permitted assigns (all of the foregoing are collectively referred to as the “SellerIndemnified Parties”) from and against and pay on behalf of or reimburse such party in respectof, as and when incurred, all Losses which any such party may suffer, sustain or become subject to,as a result of, in connection with, or relating to or by virtue of:
38

 
          (a) any inaccuracy in, or breach of, any representation or warranty made by Purchaser underthis Agreement or any Collateral Agreement;          (b) any breach or non-fulfillment of any covenant or agreement on the part of Purchaser underthis Agreement or any other Collateral Agreement;          (c) any fees, expenses or other payments incurred or owed by Purchaser to any agent, broker,investment banker or other firm or Person retained or employed by Purchaser in connection with thetransactions contemplated by this Agreement;          (d) the ownership or operation of the Transferred Assets or the conduct or operation of theBusiness or the activities of Purchaser or any of its Affiliates and assigns in connection with theTransferred Assets or the Business after the Closing Date; or          (e) the Assumed Liabilities.          Section 10.4 Indemnification Procedure.          (a) If any Purchaser Indemnified Party or Seller Indemnified Party (each, an “IndemnifiedParty”) intends to seek indemnification pursuant to this Article X, such IndemnifiedParty shall promptly notify Seller and Parent, or Purchaser, as the case may be (the“Indemnifying Parties”) in writing of such claim. The Indemnified Party will provide theIndemnifying Parties with prompt notice of any third party claim in respect of whichindemnification is sought. The failure to provide either such notice will not affect any rightshereunder except to the extent the Indemnifying Parties are materially prejudiced thereby.          (b) If such claim involves a claim by a third party against the Indemnified Parties, theIndemnifying Parties may, within thirty (30) calendar days after receipt of such notice and uponnotice to the Indemnified Parties, assume, through counsel of their own choosing and at their ownexpense, the settlement or defense thereof, and the Indemnified Parties shall reasonably cooperatewith them in connection therewith; provided that the Indemnified Parties may participate insuch settlement or defense through counsel chosen by it; provided further that if theIndemnified Parties reasonably determine that representation by the Indemnifying Parties’ counselof the Indemnifying Parties and the Indemnified Parties may present such counsel with a conflict ofinterests, then the Indemnifying Parties shall be responsible for the reasonable fees and expensesof the Indemnified Parties’ counsel. Notwithstanding anything in this Section 10.4 to thecontrary, no Indemnifying Party may, without the prior written consent of the Indemnified Parties,settle or compromise any action or consent to the entry of any judgment, such consent not to beunreasonably withheld or delayed. So long as the Indemnifying Parties are contesting any suchclaim in good faith, the Indemnified Parties shall not pay or settle any such claim without theIndemnifying Parties’ consent, such consent not to be unreasonably withheld or delayed. If theIndemnifying Parties are not contesting such claim in good faith, then the Indemnified Parties mayconduct and
39

 
control, through counsel of their own choosing and at the expense of the Indemnifying Parties,the settlement or defense thereof, and the Indemnifying Parties shall cooperate with it inconnection therewith. The failure of the Purchaser Indemnified Parties to participate in, conductor control such defense shall not relieve the Indemnifying Parties of any obligation it may havehereunder.          Section 10.5 Calculation of Indemnity Payments. The amount of any Loss for whichindemnification is provided under this Article X shall be (a) increased to take account ofany net Tax cost actually incurred by the Purchaser Indemnified Party arising from the receipt oraccrual of indemnity payments hereunder (grossed up for such increase) and (b) reduced to takeaccount of any net Tax benefit actually realized by the Purchaser Indemnified Party arising fromthe incurrence of payment or accrual of any such indemnified amount. The amount of any Loss forwhich indemnification is provided under this Article X shall further adjusted so as to benet of all insurance proceeds actually received by an Indemnified Party from a third party relatingto the matter for which indemnification was claimed. Any liability for indemnification under thisAgreement shall be determined without duplication of recovery by reason of the state of factsgiving rise to such liability constituting a breach of more than one representation, warranty,covenant or agreement.          Section 10.6 Tax Treatment of Indemnification. For all Tax purposes, unless otherwiserequired by law, the parties hereto agree to treat (and shall cause each of their respectiveAffiliates to treat) any indemnity payment under this Agreement as an adjustment to the PurchasePrice.          Section 10.7 Relation of Indemnity to Holdback Payment. The amount of the HoldbackPayment shall be reduced by any amount that is owed hereunder by Parent or Seller to any PurchaserIndemnified Party at or prior to the time of payment thereof. The rights of any PurchaserIndemnified Party under the preceding sentence are in addition to any other rights and remediesthat such Purchaser Indemnified Party may have under this Agreement. For purposes of clarity, thePurchaser Indemnified Parties shall reduce the Holdback Payment before pursuing Parent or Sellerfor collection of amounts determined to be subject to indemnification by Parent or Sellerhereunder.          Section 10.8 Exclusive Remedy. The parties acknowledge that their sole and exclusiveremedy after the Closing for any breach of any representation, warranty or covenant contained inthis Agreement shall be the indemnification provisions set forth in this Article X. Inaddition, each party acknowledges that all of its obligations in this Agreement to indemnify anyother party are subject to and shall be in accordance with this Article X. Remedies inconnection with Losses arising from a representation or warranty that is fraudulently given shallnot be limited by this Section 10.8.
40

 
**ARTICLE XI****MISCELLANEOUS PROVISIONS**          Section 11.1 Notices. All notices and other communications required or permittedhereunder will be in writing and, unless otherwise provided in this Agreement, will be deemed tohave been duly given when delivered in person or when dispatched by electronic facsimile transfer(confirmed in writing by mail simultaneously dispatched) or one (1) Business Day after having beendispatched by a nationally recognized overnight courier service to the appropriate party at theaddress specified below:         (a) If to Purchaser, to:           Omnicare, Inc.