exv10w38



 






Exhibit 10.38




 

 






ASSET PURCHASE AGREEMENT




by and between



SUPER RX, INC.




and



CALIFORNIA PHARMACY SYSTEMS, INC.




Dated as of July __, 2005



 

 








 









 





ASSET PURCHASE AGREEMENT




TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	RECITALS
	 	 	 	 	1	 
	 
	 	 	 	 	 	 
	ARTICLE I
	 	 	 	 	 	 
	ACQUISITION OF THE ASSETS	 	 	1	 
	1.1
	 	Delivery of Assets	 	 	1	 
	1.2
	 	Purchase Price Allocation	 	 	2	 
	1.3
	 	Purchase Price for Assets	 	 	2	 
	1.4
	 	No Assumption of Liabilities	 	 	2	 
	1.5
	 	Inventory	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE II
	 	 	 	 	 	 
	CLOSING AND POSSESSION	 	 	4	 
	2.1
	 	Closing and Possession	 	 	4	 
	2.2
	 	Delivery of Purchase Price	 	 	4	 
	 
	 	 	 	 	 	 
	ARTICLE III
	 	 	 	 	 	 
	REPRESENTATIONS AND WARRANTIES OF SELLER	 	 	4	 
	3.1
	 	Organization and Qualification of Seller	 	 	4	 
	3.2
	 	Authorized Capitalization	 	 	4	 
	3.3
	 	Authorization	 	 	4	 
	3.4
	 	Accrued Employee Benefits	 	 	5	 
	3.5
	 	Bulk Sales Transfer; Pharmacy Permits Transfer;Escrow	 	 	5	 
	3.6
	 	No Conflicting Agreements	 	 	7	 
	3.7
	 	Compliance with Applicable Law	 	 	7	 
	3.8
	 	Material Misstatements or Omissions	 	 	7	 
	3.9
	 	No Known Adverse Effects	 	 	7	 
	3.10
	 	Consents and Approvals	 	 	7	 
	3.11
	 	Intentionally Omitted	 	 	8	 
	3.12
	 	Litigation	 	 	8	 
	3.13
	 	Brokers	 	 	8	 
	3.14
	 	Taxes	 	 	8	 
	3.15
	 	Ownership	 	 	8	 
	3.16
	 	Accounts	 	 	8	 
	3.17
	 	Contracts	 	 	9	 
	3.18
	 	Financial Statements	 	 	9	 
	3.19
	 	Absence of Undisclosed or Contingent Liabilities	 	 	9	 
	3.20
	 	No Material Adverse Changes	 	 	9	 
	3.21
	 	Absence of Developments	 	 	9	 
	3.22
	 	Title to Properties	 	 	10	 






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	 	 	 	 	Page	 
	3.23
	 	Tax Matters	 	 	10	 
	3.24
	 	Employee Benefit Plans	 	 	10	 
	3.25
	 	Representations as to Knowledge	 	 	10	 
	3.26
	 	Representations Concerning Solvency	 	 	10	 
	 
	 	 	 	 	 	 
	ARTICLE IV
	 	 	 	 	 	 
	TERMINATION OF STATER AGREEMENT; TEMPORARY USE OF PERMITS	 	 	11	 
	4.1
	 	Termination of Stater Agreement	 	 	11	 
	 
	 	 	 	 	 	 
	ARTICLE V
	 	 	 	 	 	 
	POST-POSSESSION COVENANTS	 	 	11	 
	5.1
	 	Further Assurances	 	 	11	 
	5.2
	 	Litigation Support	 	 	11	 
	 
	 	 	 	 	 	 
	ARTICLE VI
	 	 	 	 	 	 
	REPRESENTATIONS AND WARRANTIES OF PURCHASER	 	 	11	 
	6.1
	 	Organization and Qualification of Purchaser	 	 	11	 
	6.2
	 	Authorization	 	 	11	 
	6.3
	 	No Conflicting Agreements	 	 	12	 
	6.4
	 	Compliance with Applicable Law	 	 	12	 
	6.5
	 	Litigation	 	 	12	 
	6.6
	 	Material Misstatements or Omissions	 	 	12	 
	6.7
	 	Consents and Approvals	 	 	12	 
	6.8
	 	Brokers	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE VII
	 	 	 	 	 	 
	CONDITIONS TO POSSESSION AND CLOSING	 	 	13	 
	7.1
	 	Deliverables on or Prior to Possession	 	 	13	 
	7.2
	 	Conduct of Business Prior to Closing	 	 	13	 
	7.3
	 	Conditions Precedent to Closing	 	 	14	 
	7.4
	 	Reserved	 	 	14	 
	7.5
	 	Allocations	 	 	14	 
	7.6
	 	Seller’s Deliveries at Closing and Possession	 	 	15	 
	7.7
	 	Purchaser’s Deliveries at Possession	 	 	16	 
	7.8
	 	Forwarding of Receivables	 	 	16	 
	7.9
	 	Consulting Agreement	 	 	17	 
	7.10
	 	Stater Agreement	 	 	17	 
	 
	 	 	 	 	 	 
	ARTICLE VIII
	 	 	 	 	 	 
	SURVIVAL OF REPRESENTATIONS AND WARRANTIES	 	 	17	 
	 
	 	 	 	 	 	 
	ARTICLE IX
	 	 	 	 	 	 
	INDEMNIFICATION	 	 	17	 
	9.1
	 	Indemnification	 	 	17	 
	9.2
	 	Method of Asserting Claims	 	 	18	 
	9.3
	 	Payment of Claim	 	 	19	 






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	 	 	 	 	Page	 
	9.4
	 	Other Rights and Remedies Not Affected	 	 	19	 
	9.5
	 	Tail Coverage Insurance	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE X
	 	 	 	 	 	 
	AMENDMENT, TERMINATION AND BREACH	 	 	19	 
	10.1
	 	Amendment and Modification	 	 	19	 
	10.2
	 	Termination and Abandonment	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE XI
	 	 	 	 	 	 
	MISCELLANEOUS	 	 	20	 
	11.1
	 	Notice	 	 	20	 
	11.2
	 	Entire and Sole Agreement	 	 	20	 
	11.3
	 	Successors and Assigns	 	 	20	 
	11.4
	 	Expenses	 	 	21	 
	11.5
	 	Severability	 	 	21	 
	11.6
	 	Governing Law	 	 	21	 
	11.7
	 	Counterparts	 	 	21	 
	11.8
	 	Amendments	 	 	21	 
	11.9
	 	No Third Party Beneficiary	 	 	21	 
	11.10
	 	Headings	 	 	21	 
	11.11
	 	Disputes	 	 	21	 
	11.12
	 	Delivery of Exhibits	 	 	22	 






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ASSET PURCHASE AGREEMENT




     THIS ASSET PURCHASE AGREEMENT (“Agreement”) is made and entered into this 11th day
of July, 2005, by and between Super Rx, Inc., a California corporation (“Purchaser”), and
California Pharmacy Systems, Inc., a California corporation (“Seller”). Purchaser and Seller are
sometimes hereinafter referred to individually as “party” and collectively as “parties.”



RECITALS




     WHEREAS, in September 2000, Seller entered into an Agreement to Operate Pharmacies with Stater
Bros Markets, the sole shareholder of Purchaser (“Stater Agreement”); and



     WHEREAS, Seller presently operates sixteen (16) pharmacies in Stater Bros. Markets throughout
Southern California listed on the Schedule of Pharmacies attached hereto and by this reference made
a part hereof (hereinafter referred to individually as “Pharmacy” and collectively as
“Pharmacies”); and



     WHEREAS, Seller no longer wishes to be bound under the Stater Agreement; and




     WHEREAS, Purchaser desires to purchase, and Seller desires to sell, the assets of Seller,
consisting of pharmaceutical products and records related to the sale thereof, including controlled
substances, pharmaceuticals, over the counter items, vitamins, durable medical equipment, and other
equipment necessary to operate the Pharmacies (the “Assets”); and



     WHEREAS, the parties wish to cooperate in the transition of the Pharmacy operations from
Seller to Purchaser;



     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and
in reliance upon the representations and warranties contained herein, the parties hereto agree as
follows:



ARTICLE I

ACQUISITION OF THE ASSETS




     Subject to the terms and conditions set forth in this Agreement:



     1.1 Delivery of Assets. The transfer of title to the Assets shall occur at the
Closing, as defined below, unless otherwise provided in this Agreement. At or prior to the
Closing, both as defined below, Seller shall endorse and deliver such instruments, documents,
certificates or instructions as may be necessary to vest title to the Assets in Purchaser. Upon
receipt of such documents, instruments, certificates or instructions, and upon the Closing,
Purchaser shall become the beneficial and record holder of the Assets and entitled to all of the
rights, benefits and privileges with respect thereto. The Assets shall be delivered by Seller to
Purchaser free of all encumbrances, liens, security interests or other claims. At the Closing,
title to the Assets shall
be transferred to




1









 







Purchaser. The actual date of Closing shall be referred to herein as the
“Closing Date”. The Assets do not include Seller’s accounts receivable for prescriptions that have
been filled and billed to insurance or paid by the customer as of the Possession Date, as defined
in Section 2.1 below. Prescriptions that have been filled, but not billed to insurance or paid by
the customer shall be counted in inventory and paid by Purchaser in accordance with Section 1.5
below. Prior to the Closing Date, Purchaser and Seller agree that Purchaser shall take
“possession” of the Pharmacies and all related assets as defined herein and shall have sole and
complete operational and monetary control and responsibility for pharmacy business operations,
employee functions and assets being purchased, except those specifically delegated to Seller by way
of the consulting agreement with Purchaser in the form attached hereto as Exhibit 7.9. The
Pharmacies employees being retained by the Purchaser shall become employees of the Purchaser on the
Possession Date. The actual date of possession shall be referred to herein as the “Possession
Date”.



     1.2 Purchase Price Allocation. The Purchase Price shall be allocated among the Assets
in accordance with Exhibit 1.2 attached hereto and by this reference made a part hereof. Each of
Seller and Purchaser covenant that it will not take a position on any income tax return or before
any governmental agency or in any judicial proceeding that is inconsistent in any way with the
allocation set forth on Exhibit 1.2.



     1.3 Purchase Price for Assets. The aggregate purchase price for the Assets shall be
$2,060,502, plus inventory at cost as described in Section 1.5 below, which shall be delivered to
Seller through Escrow on the Possession Date in the form of bank cleared funds or a wire transfer
to a financial institution designated by the Seller (“Purchase Price”), provided that there are no
liens or creditor obligations to be satisfied through Escrow, as defined in Section 3.5 below. If
such liens or obligations exist, the provisions of Section 3.5 below shall govern. It is
understood and acknowledged by Seller that Purchaser is purchasing all of Seller’s equipment
necessary to operate the Pharmacies and such equipment is included in the Purchase Price. As an
additional part of the Purchase Price, concurrently with the Closing, Purchaser shall cause Stater
Bros. Markets to forgive debt owed by Seller to Stater Bros. Markets in the amount of $564,488.



     1.4 No Assumption of Liabilities. The Purchaser does not and shall not assume, pay,
perform or discharge any liability of Seller. Specifically, and without any limitation whatsoever,
Seller shall remain liable for all payables and obligations arising prior to the Possession Date,
all claims resulting from improperly filled prescriptions, improper delivery of controlled
substances or other pharmacist error occurring prior to the Possession Date and failure to maintain
records as required by law applicable to the time period prior to the Possession Date. Seller will
pay off all equipment leases and loan obligations, including all amounts due for controlled
substances and pharmaceuticals purchased on terms, relating to the Pharmacies prior to the Closing
Date and tender the Assets to the Purchaser free and clear of liens and encumbrances and will
provide Purchaser with recorded UCC-3 Termination Statements to evidence such payoffs prior to the
Possession Date, including without limitation, the payoff of all amounts owed to Amerisource/Bergen
Drug Corporation.



     1.5 Inventory. In accordance with this Section 1.5, a qualified inventory service,
mutually acceptable to Purchaser and Seller, shall take an inventory of the Assets, including
controlled substances and pharmaceuticals at each of the Pharmacies, including whether or not



2









 







Assets are “saleable merchandise.” “Saleable merchandise” shall mean controlled substances, other
pharmaceuticals, vitamins and over-the-counter items having a shelf life exceeding thirty (30)
days.



          (a) The inventory service shall take inventory in accordance with customary pharmacy inventory
procedures in California, including without limitation the following: (i) controlled substances
shall be counted in actual numbers and all other pharmaceuticals shall be counted in estimated
tenths of bottles; (ii) all pharmaceuticals and controlled substances that expire in thirty (30)
days or less shall be identified; (iii) outdated pharmaceuticals and controlled substances shall be
identified; and (iv) pharmaceuticals and controlled substances that may be subject to a one time
“sweep” shall be identified and Seller shall be responsible for requesting that Seller’s
wholesaler(s) accept returns of items not wanted by Purchaser, or shall ensure that Purchaser is
entitled to return such items, with full credit.




          (b) Inventory shall be taken on the Possession Date, which cost of taking such inventory shall
be shared equally by the parties. The Closing shall occur upon Purchaser obtaining all necessary
permits, registrations, provider numbers and any other documents required by law or regulation to
operate the Pharmacies without Seller’s permits, registrations, and provider numbers (“Closing
Date”). The inventory service shall provide both Purchaser and Seller copies of each inventory for
approval, which approval shall not be unreasonably withheld. In addition to the purchase price set
forth in Section 1.3 above, Purchaser shall also pay Seller for the saleable merchandise, valued at
Seller’s cost, on the Possession Date.




          (c) The inventory service shall take an inventory of all other Assets, including equipment
utilized in the operation of the Pharmacies. Each Pharmacy shall have sufficient equipment to
operate a pharmacy as required under California law. The equipment shall be included in the
Purchase Price.




          (d) On the date the saleable merchandise is transferred to Purchaser, Seller shall also
transfer to Purchaser all records associated with the saleable merchandise, as required by
California law. Upon the Closing, Seller shall remain responsible for the accuracy of all such
records and Purchaser shall be responsible for the retention of such records as required by law.




          (e) On or prior to the Possession Date, Seller shall pay all payables outstanding for
Inventory to be sold to Purchaser. Seller shall provide Purchaser with evidence reasonably
required by Purchaser to prove that the outstanding Inventory payables have been paid prior to the
disbursement of the Purchase Price.




          (f) On both the Possession Date and the Closing Date, representatives of the Purchaser and
Seller agree to take an inventory of all controlled substances (C-II–C-V). Representatives of the
parties will sign off on the inventory as accurate and each shall retain a copy for their records.
Controlled substances shall be transferred to the Purchaser on the Closing Date. The inventory of
controlled substances taken on the Closing Date should indicate the drug name, dosage form,
strength, quantity, date of transfer and the name, address and DEA numbers of both Purchaser and
Seller. Purchaser shall issue to Seller DEA 222 forms for all C-II controlled substances being
transferred.




3









 








ARTICLE II

CLOSING AND POSSESSION




     2.1 Closing and Possession. The Possession Date shall be on or before August 15,
2005. The Closing shall occur on or before October 1, 2005, provided that Purchaser shall have
obtained all necessary permits, registrations, provider numbers and any other documents required by
law or regulation to operate the Pharmacies as presently operated. The parties agree to cooperate
to ensure that Purchaser obtains such permits, registrations and provider numbers and shall extend
the Closing until such time.



     2.2 Delivery of Purchase Price. Upon the opening of the Escrow, Purchaser shall
deposit One Hundred Thousand Dollars ($100,000.00) into the Escrow. The balance of the Purchase
Price shall be delivered by Purchaser to Escrow on the Possession Date.



ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER




     Seller represents and warrants to Purchaser that the statements contained in this Article III
are true, correct and complete as of the date of this Agreement and will, except as otherwise
expressly provided in this Agreement be true, correct and complete on the Possession Date as
follows:



     3.1 Organization and Qualification of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of California. Seller has all
requisite corporate power and authority to own, lease and operate its properties and to carry on
its business as now being conducted. Seller is not in default under or in violation of any
provision of its Articles of Incorporation or Bylaws.



     3.2 Authorized Capitalization. The authorized capital stock of the Seller consists of
10,000 shares of common stock, of which all shares issued and outstanding as of the date of this
Agreement are owned by the Shareholders. All shares issued and outstanding as of the date of this
Agreement have been duly authorized and validly issued and are fully paid and nonassessable.
Seller has no authorized or outstanding stock or securities convertible into or exchangeable for,
or any authorized or outstanding option, warrant or other right to subscribe for or to purchase, or
convert any obligation into, any unissued shares. There are no authorized or outstanding stock
appreciation, phantom stock, profit participation or similar rights with respect to Seller. There
are no voting trusts, voting agreements, proxies or other agreements or understandings with respect
to the voting of the capital stock of the Seller.



     3.3 Authorization. This Agreement has been duly and validly executed and delivered by
Seller and Shareholders and the agreements, representations and warranties contained herein
constitute valid and binding obligations, representations and warranties of Seller enforceable in
accordance with their terms. Attached hereto as Exhibit 3.3(a) is a Certificate which shall
evidence the approval and authorization of the
Shareholders of Seller and which shall be attested to by the President of Seller. This
Agreement and the consummation of the transactions contemplated hereby and thereby have been duly
and unanimously approved by the board of directors of Seller. Attached hereto as Exhibit 3.3(b) is
a certified copy of the Directors’ Consent or a resolution passed pursuant



4









 







to a duly and validly
called meeting of the Board of Directors. This Agreement constitutes, and all other agreements
contemplated hereby to be executed and delivered by Seller will when executed and delivered
constitute, the legal, valid and binding obligations of, and be enforceable in accordance with
their respective terms against, the Seller.



     3.4 Accrued Employee Benefits. Seller has paid and or will pay all accrued employee
benefits, salaries, bonuses, vacation and sick as of the Possession Date. Purchaser shall not be
responsible for any accrued employee benefits accrued up to the Possession Date.



     3.5 Bulk Sales Transfer; Pharmacy Permits Transfer; Escrow. Unless the parties agree
on utilizing an exemption to applicable laws, Seller shall comply with the provisions of the
California Commercial Code Bulk Transfer Laws relating to the transfer of the Pharmacy equipment
and inventory. Unless otherwise agreed, the parties shall open escrow (“Escrow”) with First
American Title Insurance Company, Los Angeles, attention Lily Bachor (“Escrow Holder”), who shall
be engaged to facilitate the transfer of the Assets. The parties shall share equally in the costs
of such Escrow. The parties shall comply with all reasonable instructions required by the Escrow
Holder to consummate the transfer, including without limitation the following:



          (a) Within three (3) days after the opening of Escrow, Seller shall deliver to Purchaser a
list, in writing, of all business names used by Seller within three (3) years of the date prior to
the opening of Escrow along with all currently active business names;




          (b) After the Opening of Escrow, Escrow Holder shall give notice of the sale by:




               (i) Recording notice in the office of the county recorder of each county wherein Seller does
business, including the county of Seller’s principal place of business;



               (ii) Publishing notice in a newspaper of general circulation in each county wherein Seller
does business, including the county of Seller’s principal place of business; and



               (iii) Delivering or sending a copy of the notice by registered or certified mail to the county
tax collector in the county of Seller’s principal place of business.



          (c) Escrow Holder shall certify the date on which each notice was given.




          (d) Escrow shall not close for twelve (12) business days after the date of the giving of the
last notice provided for in subsection 3.5(c) or as otherwise provided for by law.




          (e) The Escrow Holder shall, within forty-five (45) days after the Purchaser takes legal title
to any of the Assets, either pay, to the extent of the cash consideration paid for the Assets, the
claims filed by Seller’s creditors and not disputed by Seller, or, in the event the cash
consideration
is insufficient to pay all claims filed by Seller’s creditors, pay the proration portion
thereof determined in accordance with this subsection, or institute an action in interpleader
pursuant to subdivision (b) of Section 386 of the Code of Civil Procedure and deposit the
consideration with the clerk of the court pursuant to subdivision (c) of that section. The
distributions shall be as follows:




5









 








               (i) If the Purchase Price, as adjusted, is equal to or more than the total amount of all
undisputed claims, all claims which are due and payable on or before the Possession Date and which
are received in writing on or prior to the date specified as the last date to submit claims.



               (ii) If Seller disputes whether a claim is due and payable on the date of the bulk sale, or
the amount of any claim, the Escrow Holder shall withhold an amount equal to one hundred
twenty-five percent (125%) of the first Seven Thousand Five Hundred Dollars ($7,500.00) of the
claim, and an amount equal to that portion of the claim in excess of Seven Thousand Five Hundred
Dollars ($7,500.00) or, if the sum of all claims exceeds the Purchase Price, a pro rata amount of
the total Purchase Price in accordance with this subsection, and shall send a written notice to the
claimant on or before two (2) business days after the distribution that the amount will be paid to
the Seller, unless that sum is attached within twenty-five (25) days of the mailing of the notice.
In the event the disputed sum is not attached within twenty-five (25) days, it shall be paid over
to the Seller, or, in the event the total claims exceed the Purchase Price, distributed in
accordance with this subsection.



               (iii) In the event that the total Purchase Price is insufficient to pay in full all of the
claims timely filed with the Escrow Holder, the Escrow Holder shall do each of the following:



                    (A) Delay the distribution of the consideration and the passing of legal title to the Assets
for a period of not less than twenty-five (25) days nor more than thirty (30) days from the date
the required notice is mailed;



                    (B) Within five (5) business days after the time the bulk sale would otherwise have been
consummated, send a written notice to each claimant who has filed a claim stating the total
consideration deposited or agreed to be deposited in the Escrow, the name of each claimant who
filed a claim against the Escrow and the amount of each claim, the amount proposed to be paid to
each claimant, the new date scheduled for the passing of legal title and the date on or before
which distribution will be made to claimants which shall not be more than five (5) days after the
new date specified for the passing of legal title.



               (iv) Distribute the consideration in the following
order of priorities:



                    (A) All obligations owing to the United States, to the extent given priority by federal law.



                    (B) Secured claims, including statutory and judicial liens, to the extent of the consideration
fairly attributable to the value of the properties securing the claims and in accordance with the
priorities provided by law. A secured creditor shall participate in the distribution pursuant to
this subdivision only if a release of lien is deposited by the secured creditor conditioned only
upon receiving an amount equal to the distribution.



                    (C) Escrow and professional charges and brokers’ fees attributable directly to the sale.



6









 





                    (D) Wage claims given priority by Section 1205 of the Code of Civil Procedure.



                    (E) All other tax claims.



                    (F) All other unsecured claims pro rata, including any deficiency claims of partially secured
creditors.



                    (G) All remaining funds shall be distributed to Seller.




     3.6 No Conflicting Agreements. The execution and delivery of this Agreement by Seller
does not, and the consummation by Seller of the transactions contemplated hereby will not, (a)
violate any existing term or provision of any law, regulation, order, writ, judgment, injunction or
decree applicable to Seller or the Assets, (b) conflict with or result in a breach of any of the
terms, conditions or provisions of the Articles of Incorporation or Bylaws of Seller or of any
agreement or instrument to which Seller is a party, or (c) result in the creation or imposition of
any lien, charge, security interest, encumbrance, restriction or claim upon the Assets.



     3.7 Compliance with Applicable Law. Except as set forth in Exhibit 3.7, Seller has
not received any notice or information of any violation, probable violation or default by Seller
under any applicable law, regulation or order of any governmental department, commission, board or
agency or instrumentality, domestic or foreign, having jurisdiction over Seller’s operations which
could materially adversely affect the business, operations, financial condition, properties or
assets of Seller, or the ability to consummate the transaction contemplated hereby. To the best of
Seller’s and the Shareholder’s knowledge after diligent inquiry, Seller has operated its business,
and will continue to operate its business, in compliance with the California Department of
Pharmacies, Drug Enforcement Agency, California state law and all other applicable laws,
ordinances, statutes and regulations. Additionally, Seller has given notice of the sale of Assets
to all government entities that require such notice.



     3.8 Material Misstatements or Omissions. Neither this Agreement nor any other
document, certificate or statement furnished to Purchaser by or on behalf of Seller in connection
with this Agreement contains any untrue statement of a material fact, or omits any material fact
necessary to make the statements contained herein or therein not misleading in light of the context
in which they were made.



     3.9 No Known Adverse Effects. There is no fact known to Seller, its officers,
directors or employees which materially adversely affects or will materially adversely affect the
Assets which has not been set forth in writing in this Agreement or disclosed in the other
documents, certificates or written statements furnished to Purchaser by or on behalf of Seller in
connection herewith.



     3.10 Consents and Approvals. The execution and delivery by Seller of this Agreement,
and the performance by Seller of its obligations hereunder, does not require Seller to obtain any
consent, approval, agreement, or action of, or make any filing with or give any notice to, any
corporation, person, entity, or firm or any public, governmental or judicial authority except (i)
such as have been duly obtained or made, as the case may be, and or will be duly obtained and made
and



7









 







in full force and effect as of the Possession Date, (ii) those as to which the failure to
obtain would have no material adverse effect on the Assets or the transactions contemplated hereby,
and (iii) approval of the Seller’s Shareholder, which shall be obtained prior to the execution
hereof.



     3.11 Intentionally omitted.



     3.12 Litigation. Except as described in Exhibit 3.12, there are no actions,
proceedings or investigations pending or threatened against Seller or the Assets before any court
or administrative agency which could result in any material adverse change in the operations or
financial condition of Seller other than as identified in Exhibit 3.12.



     3.13 Brokers. All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by Seller directly with representatives of Purchaser,
without the intervention of any person in such manner as to give rise to any valid claim by any
person against Purchaser for a finder’s fee, brokerage commission, or similar payment. All rights
of indemnity under Article X hereof shall apply to any claim relating to a Loss (as defined below)
arising out of this Agreement for any fee, commission or similar payment.



     3.14 Taxes. Purchaser shall pay all taxes arising out of the transfer of the Assets
and Seller shall be responsible for all personal property taxes for the business of Seller through
the Possession Date. Purchaser shall not be responsible for any business, occupation, withholding
or similar tax, or any taxes of any kind related to the Assets or the business of Seller for any
period prior to the Possession Date.



     3.15 Ownership. Seller is the owner, beneficially and of record, of all of the Assets
as identified on Exhibit 1.1 hereto, free and clear of all liens, encumbrances, security
agreements, equities, options, claims, charges and restrictions.



     3.16 Accounts. The list of customers and vendors attached hereto as Exhibit 3.16
represents the customers and vendors with which Seller does business or for which Seller provides
prescription medicines. The customers with which Seller maintains a contract or agreement are
identified on Exhibit 3.16(b) hereto. All such contracts or agreements are valid and enforceable
contracts or agreements and are not currently, and will not be on the Possession Date, in default,
invalid or unenforceable in any manner, nor is termination threatened or imminent to
the actual knowledge of Seller. Seller has performed all of its material obligations and
material responsibilities as described under each such contract or agreement, none of such
contracts or agreements are subject to any counterclaim or set-off and such contracts are in full
force and effect and will continue in full force and effect following the Possession Date (assuming
continuing performance by Purchaser following the Possession Date, which is not warranted or
represented by Seller). Seller has no reason to believe that amounts payable under such contracts
or agreements, assuming due performance by Purchaser in the future (which is not warranted or
represented by Seller), will not be paid in accordance with the terms of such contracts or
agreements. Seller has not received any notices of default, claims, or any other type of notice
with respect to each such contract or agreement or, if such notice has been received, a copy of any
such notice has been provided in writing to Purchaser.



8









 





     3.17 Contracts. Except as set forth in Exhibit 3.17, Seller is not a party to, nor is
the property of Seller bound by, any contract, distributorship agreement, license agreement, agency
agreement or output or requirements agreement, or any other agreement, indenture, mortgage, deed of
trust, lease, security agreement, loan agreement or instrument which Purchaser would succeed to by
its purchase of the Assets, nor will the purchase of the Assets by Purchaser create any default by
Seller as to any of such agreements which will materially adversely affect the Purchaser’s use of
the Assets.



     3.18 Financial Statements. Seller has delivered to Purchaser copies of Seller’s
balance sheet as of December 31, 2004 and the statements of income and retained earnings for the
two years then ended and for the interim period commencing January 1, 2005 and ending within thirty
30 days prior to the date hereof (collectively, the “Financial Statements”). The Financial
Statements are based upon the information contained in the books and records of Seller and fairly
and accurately present the financial condition of Seller as of the dates thereof and results of
operations for the periods referred to therein. The monthly financial statements generated by
Seller from and after the interim period delivered to Purchaser will be prepared on a basis
consistent with the methods and procedures used to prepare the Financial Statements.



     3.19 Absence of Undisclosed or Contingent Liabilities. Seller has no liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due,
whether known or unknown, and regardless of when asserted) except as otherwise set forth in the
Financial Statements.



     3.20 No Material Adverse Changes. Since the date of the most recent Financial
Statements, there has been no change materially adverse to Seller in its revenues, Assets,
financial condition, gross profit, operating results, customer, employee or supplier relations,
business condition or prospects.



     3.21 Absence of Developments. Since July 1, 2004, Seller has:




     (a) Conducted its business and operations only in the regular and ordinary course;
maintained reasonable business insurance; committed no waste of the Assets; has not disposed
or otherwise changed the nature of any Asset such that cash or accounts receivable are
increased (other than in the ordinary course of business), nor created or suffered to
exist any material lien, charge or encumbrance on any Asset or incurred any indebtedness for
borrowed money (other than in the ordinary course) which is secured by one or more of the
Assets; and has used its best efforts to maintain and preserve its business organization
intact and maintain its relationships with suppliers, employees, customers and others;




     (b) Refrained from making capital expenditures or commitments for additions to the
property, plant or equipment or entered into transactions which could materially alter or
affect operations, except as otherwise have been approved in writing by Purchaser;




     (c) Maintained title to, and refrained from making or permitting, any transfer, sale,
pledge, encumbrance on, lien or other disposition of the Assets of Seller except in the
ordinary course of business.



9









 





     3.22 Title to Properties. Seller does not own any real property on which the Assets
are operated. Seller operates in Stater Bros. Markets pursuant to the Stater Agreement. The fixed
assets necessary for the conduct of Seller’s business are in good condition and repair, ordinary
wear and tear excepted, and are usable in the ordinary course of business. There are no defects in
such fixed assets or other conditions relating thereto which, in the aggregate, materially
adversely affect the operation or value of such fixed assets. Seller owns, or leases under valid
leases, all equipment and other tangible assets necessary for the conduct of its business.



     3.23 Tax Matters. Seller has filed all state and federal tax returns that is was
required to file and to the best of Seller’s knowledge, there are no present or future claims or
encumbrances that may have a material adverse impact on the Assets.



     3.24 Employee Benefit Plans. The Purchaser is not assuming any obligations whatsoever
with respect to the Seller’s employee benefit plans or to the Seller’s employees individually.



     3.25 Representations as to Knowledge. The representations and warranties contained in
Article III hereof shall in each and every event whereby an exercise of discretion or a statement
to the “best knowledge”, “best of knowledge” or “knowledge” is required on behalf of any party to
this Agreement be deemed to require that such exercise of discretion or statement be in good faith,
with due diligence and after a reasonable investigation, to the best efforts of each such party and
be exercised always in a reasonable manner and within reasonable times.



     3.26 Representations Concerning Solvency. The Seller has not incurred, and does not
intend to incur, and has no reasonable basis to believe that it will incur, any debts beyond its
ability to pay such debts as they become due. Seller has, and will continue to have, assets
greater than Seller’s debts, based upon a fair valuation and has paid, and will pay, its debts as
they become due. Purchaser may rely on such representations in asserting that Purchaser has no
reasonable cause to believe that Seller is or will become insolvent as a result of the transactions
contemplated hereby. Seller has undertaken the
transactions described herein in good faith, considering its obligations to any person or
entity to whom Seller owes a right to payment, whether or not the right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured or unsecured and has undertaken the transaction described herein without any
intent to hinder, delay or defraud its creditors. Seller will not, and has not, concealed this
transaction or the proceeds of such transaction from any of its creditors. Seller has not removed
or concealed any assets from its creditors and will not incur debt in connection with the assets or
business that is significantly greater than the normal and customary debts of Seller in the
ordinary course. Seller does not contemplate and has no reason to contemplate it will seek
protection under the bankruptcy laws and believes in good faith that it will receive consideration
reasonably equivalent to the value of the Assets being purchased by the Purchaser.



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ARTICLE IV

TERMINATION OF STATER AGREEMENT; TEMPORARY USE OF PERMITS




     4.1 Termination of Stater Agreement. Except as otherwise set forth in this Agreement,
concurrently with the Possession Date, the Stater Agreement shall terminate, provided, however, any
terms and conditions of the Stater Agreement, which by its terms, survive the termination of the
Stater Agreement, shall remain in full force and effect.



ARTICLE V

POST- POSSESSION COVENANTS




     The parties agree as follows with respect to the period following the Possession Date.



     5.1 Further Assurances. In case at any time after the Possession Date any further
action is necessary or desirable to carry out the purposes of this Agreement, each of the parties
will take such further action (including the execution and delivery of such further instruments and
documents) as any other party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification therefor under Article
IX).



     5.2 Litigation Support. In the event and for so long as any party actively is
contesting or defending against any action, suit, proceedings, hearing, investigation, charge,
complaint, claim or demand in connection with (a) any transaction contemplated by this Agreement,
or (b) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence,
event, incident, action, failure to act or transaction on or prior to the Possession Date involving
the Seller, each of the other parties will cooperate with each other and counsel in the contest or
defense, make available their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending party (unless the contesting or defending party is entitled
to indemnification therefor under Article IX).



ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF PURCHASER




     Purchaser represents and warrants to Seller that the statements contained in this Article VI
are true, correct and complete as of the date of this Agreement and will, except as otherwise
expressly provided in this Agreement be true, correct and complete on the Possession Date as
follows:



     6.1 Organization and Qualification of Purchaser. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of California.



     6.2 Authorization. This Agreement has been duly and validly executed by Purchaser and
the agreements, representations, and warranties contained herein constitute valid and binding
obligations, representations, and warranties of Purchaser enforceable in accordance with their
terms.



11









 





     6.3 No Conflicting Agreements. The execution and delivery of this Agreement by
Purchaser does not, and the consummation by Purchaser of the transactions contemplated hereby will
not, (a) violate any existing term or provision of any law, regulation, order, writ, judgment,
injunction or decree applicable to Purchaser, (b) conflict with or result in a breach of any of the
terms, conditions or provisions of the Articles of Incorporation or Bylaws of Purchaser or of any
agreement or instrument to which Purchaser is a party, or (c) result in the creation or imposition
of any lien, charge, security interest, encumbrance, restriction or claim upon Purchaser or any of
its assets.



     6.4 Compliance with Applicable Law. Purchaser has not received any notice or
information of any violation, probable violation or default by Purchaser under any applicable law,
regulation or order of any governmental department, commission, board or agency or instrumentality,
domestic or foreign, having jurisdiction over Purchaser’s operations which could materially
adversely affect the business, operations, financial condition, properties or assets of Purchaser
or the ability to consummate the transaction contemplated hereby.



     6.5 Litigation. There are no material actions, proceedings or investigations pending,
or to the knowledge of Purchaser, threatened against Purchaser or its officers or directors, before
any court or administrative agency or administrative officer.



     6.6 Material Misstatements or Omissions. Neither this Agreement nor any other
document, certificate or statement furnished to Seller by or on behalf of Purchaser in connection
with this Agreement contains any untrue statement of a material fact, or omits any material fact
necessary to make the statements contained herein and therein not misleading in light of the
context in which they were made.



     6.7 Consents and Approvals. The execution and delivery by Purchaser of this
Agreement, and the performance by Purchaser of Purchaser’s obligations hereunder, do not require
Purchaser to obtain any consent, approval or action of, or make any filing with or give any notice
to, any corporation, person or firm or any public, governmental or judicial authority except (i)
such as have been duly obtained or made, as the case may be, and are in full force and effect on
the date hereof and will continue to be in full force and effect on the Possession Date, and (ii)
those which the failure to obtain would have no material adverse effect on the transactions
contemplated hereby.



     6.8 Brokers. All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by representatives of Purchaser directly with Seller,
without the intervention of any person on behalf of Purchaser in such manner as to give rise to any
valid claim by any person against Seller for a finder’s fee, brokerage commission or
similar payment. All rights of indemnity under Article X hereof shall apply to any claim
relating to a Loss (hereinafter defined) arising out of this Agreement for any fee, commission or
similar payment.



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ARTICLE VII

CONDITIONS TO POSSESSION AND CLOSING




     7.1 Deliverables on or Prior to Possession. On or before the Possession Date, Seller
shall provide Purchaser with the following:



          (a) a Sellers Certification as required by the California Board of Pharmacy attached hereto as
Exhibit 7.1(a) and by this reference made a part hereof;




          (b) a copy of Seller Quality Assurance Policy, as required by the California Board of
Pharmacy, along with all other written policies currently utilized in the operation of the
Pharmacies;




          (c) Copies of all state permits and DEA registrations for each Pharmacy;




          (d) Seller shall ensure that the Pharmacies are in compliance with all applicable laws, rules
and regulations governing the operation of pharmacies in the State of California on the Possession
Date. Seller agrees to complete, and each Pharmacy must satisfactorily pass, a Community Pharmacy
and Practice Self-Assessment in the form attached hereto and provided by the California Board of
Pharmacy. If within twelve (12) months of the Possession Date, Purchaser discovers that any of the
Pharmacies were not in compliance with applicable laws, rules and regulations set forth in Section
3.7 as of the Possession Date, Seller shall pay all fees, costs and expenses necessary to bring the
Pharmacies into compliance, including any fines or penalties;




          (e) a list of all third party insurance providers for which Seller is authorized to fill
prescriptions;




          (f) all current phone numbers utilized by Seller at the Pharmacies shall be transferred to
Purchaser;




          (g) a list of all wholesalers and vendors which Seller utilizes to obtain products and
supplies for the Pharmacies;




          (h) Seller shall assist Purchaser in setting up accounts with wholesalers and vendors to the
extent requested by Purchaser; and




          (i) Seller shall deliver to Purchaser the executed Non-Compete and Confidentiality Agreement
in substantially the forms attached hereto as Exhibit 7.1(i) and by this reference made a part
hereof.




     7.2 Conduct of Business Prior to Closing. Seller and Purchaser shall cooperate from
the date of execution of this Agreement to Closing to provide for the efficient transfer of the
Assets from Seller to Purchaser including without limitation the following:



          (a) Seller shall cooperate with Purchaser to facilitate the transfer of each Pharmacy’s
existing NCPDP provider number. Seller shall execute and notarize a letter in the form

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attached
hereto as Exhibit 7.2(a) and by this reference made a part hereof evidencing Seller’s agreement to
cooperate;




          (b) Seller shall retain all responsibility for record keeping and security of controlled
substances as required by the DEA until such time as Purchaser has become duly registered with DEA
to handle controlled substances;




          (c) Seller shall assist Purchaser with the negotiation of new contracts with Screen America
Wellness and Computerized Screening, Inc., but only if requested by Purchaser.




          (d) Seller shall assist and cooperate with Purchaser in the billing of Medi-Cal, for
prescriptions dispensed by the Pharmacies, under the Medi-Cal Provider Number received by Purchaser
for its pharmacy located in Store number 6175 once Purchaser has obtained Medi-Cal “Provisional
Provider Status”, as defined in CA Senate Bill 857.




          (e) Seller authorizes Purchaser and its designated agents to utilize Seller’s current permits,
licenses and other such authorizations and permissions used by Seller in the operation of the
pharmacies so Purchaser is able to continue the current on-going, customary and normal operation of
the pharmacy businesses until Closing. Concurrently with the execution of this Agreement, the
parties shall execute a Power of Attorney for each Pharmacy in substantially the form attached
hereto as Exhibit 7.2(e) and incorporated herein by this reference. The Power of Attorney shall
give Purchaser the ability to obtain and execute Official Order Forms with the Drug Enforcement
Administration.




     7.3 Conditions Precedent to Closing. The Closing is conditioned upon the following:



          (a) Purchaser shall have been issued permits to operate each of the Pharmacies;




          (b) Purchaser shall been issued DEA registration certificates for each Pharmacy;




          (c) Purchaser shall have received necessary provider numbers to bill third party insurance
providers and Medi-Cal licenses;




          (d) Seller shall forward all of Seller’s discontinued Drug Enforcement Agency (“DEA”)
certificates (marked “DISCONTINUED”) and corresponding unused forms (marked “VOID”) to the regional
DEA office upon consummation of the transfer of the saleable merchandise, as required by the DEA.
Seller shall not discontinue Seller’s DEA registration until notified by Purchaser, in writing,
that Purchaser shall no longer use Seller’s DEA registration numbers.




     7.4 Reserved.



     7.5 Allocations. On the Possession Date or as soon thereafter as is reasonably
practicable (i) the Seller will pay its employees for all vacation pay accrued
for employees as of the Possession Date; and (ii) the parties shall allocate or prorate all
the portion attributable to Seller of the utilities paid by Seller through the Possession Date and
Purchaser shall reimburse Seller for any security deposits or costs paid in advance by Seller. For
purposes of income and expense all income and



14









 







expenses incurred on or before the Possession Date
shall be billed and collected by, and paid for, by Seller.



     7.6 Seller’s Deliveries at Closing and Possession. At the Closing or Possession Date,
Seller and Shareholder will deliver the following documents to the Purchaser all of which shall be
reasonably satisfactory in form and substance to the Purchaser and its counsel:



     AT CLOSING:




     (a) Bill of Sale and Assignment. Bill of Sale and Assignment for the Assets in
the form described in Exhibit 7.6 hereto, together with such deeds, instruments,
conveyances, certificates of title, assignments, assurances and other documents as may be
required to sell, convey and transfer title to the Assets from Seller to the Purchaser free
and clear of any and all liens, claims, charges, taxes, encumbrances, pledges, security
interests, options or other restrictions of any kind.




     (b) Assignment of Intellectual Property. Assignment of intellectual property
described in Exhibit 3.18 together with assurances and other documents as may be required to
transfer all of Seller’s right, title and interest in the intellectual property. This
Assignment shall be deemed included within the Bill of Sale and Assignment described in (a)
above and shall not be a separate document.




     (c) Assignment of Contracts, Leases and Other Agreements. Assignment of
contracts, leases and other agreements, described in Exhibit 3.17, to the extent requested
by Purchaser, together with assurances and other documents as may be required to transfer
all of Seller’s right, title and interest in the contracts, leases and other agreements.
This Assignment shall be deemed included within the Bill of Sale and Assignment described in
(a) above and shall not be a separate document.




     (d) Consents and Approvals. All consents, approvals and authorizations, all
notices and all registrations and filings required to be obtained, given or made under any
law, statute, rule, regulation, judgment, order, injunction, contract, agreement or other
instrument to which Seller is subject, bound or a party, or by which Seller or any of its
properties is bound or subject, in each case which is required to permit the consummation of
the transactions contemplated by the Agreement without contravention, violation or breach by
the Seller of any of the terms thereof.



     AT POSSESSION:



     (e) Certificates. Certificate of good standing for Seller and Purchaser from
the Secretary of State of the state of incorporation of Seller and Purchaser, respectively,
dated as of a date reasonably prior to the Possession Date.



     (f) Resolutions. Certified copy of resolutions of the Board of Directors and
the Shareholder of Seller authorizing, inter alia, the execution and delivery of this
Agreement, the sale of the Assets and the other transactions contemplated under this
Agreement.



15









 





     (g) Non-Compete and Confidentiality Agreement. The non-compete agreement of
the Seller and the principal of Seller in the form set forth in Exhibit 7.1(i) hereto.



     (h) Delivery of Business Records. Such other business records related to the
Assets as may be reasonably requested by the Purchaser.



     (i) Other documents. Such other documents, instruments, certificates and
agreements as Purchaser and its counsel may reasonably request.



     7.7 Purchaser’s Deliveries at Possession. On the Possession Date, Purchaser shall
deliver the following documents to Seller all of which shall be in a form reasonably acceptable to
Seller and their counsel:




     (a) Purchase Price. The purchase price for the Assets referred to in Section
1.3, to the extent not already paid in accordance with this Agreement.




     (b) Consents and Approval. All consents, approvals and authorizations, all
notices and all registrations and filings required to be obtained, given or made under any
law, statute, rule, regulation, judgment, order, injunction, contract, agreement or other
instrument to which the Purchaser is a party, or by which it or any of its properties is
bound or subject, in each case which is required to permit the consummation of the
transactions contemplated by this Agreement without contravention, violation or breach by
the Purchaser of any of the terms thereof.




     (c) Resolutions. Certified copy of resolutions of the Board of Directors of
the Purchaser authorizing, inter alia, the execution and delivery of this Agreement, the
purchase of the Assets, and the other transactions contemplated hereby.




     (d) Non-Compete and Confidentiality Agreements. The non-compete agreements of
the Seller and the Shareholders in the form set forth in Exhibit 7.1(i) hereto.




     (e) Other Documents. Such other documents, instruments, certificates and
agreements including without limitation, if assumed, the assumption of the lease, as Seller
and its counsel may reasonably request.



     7.8 Forwarding of Receivables. Following the Possession Date and for a period of
thirty (30) days thereafter, Seller shall have access to the mail delivered to the Pharmacies. To
the extent any payments received at the Pharmacies relates to Purchaser’s business after the
Possession Date, such payments shall be immediately turned over to Seller. If payments relating to
the operations of both Seller and Purchaser are received, Seller shall process the payment and
shall take prompt action (defined to mean not less than every seven (7) calendar days) to deliver
payment to Purchaser that portion of the payment relating to Purchaser’s
business. In the event the Purchaser receives payment of receivables which were billed by
Seller, and are the property of Seller, the Purchaser shall take prompt action (defined to mean not
less than every seven (7) calendar days), to forward to Seller such checks or other remittances as
Purchaser shall have received and which are the property of Seller. Likewise, in the event
payments are received by Seller which are the property of Purchaser and which relate to receivables
created after the purchase of the Assets, the Seller shall



16









 







promptly forward (not later than seven
(7) calendar days after receipt thereof) such checks or other remittances to the Purchaser
representing payments on receivables which are the property of Purchaser.



     7.9 Consulting Agreement. Concurrently with the Possession Date, Seller shall enter
into a consulting agreement with Purchaser in the form attached hereto as Exhibit 7.9 and by this
reference made a part hereof.



     7.10 Stater Agreement. On or prior to the Possession Date, Seller shall execute and
Purchaser shall cause Stater Bros. Markets to execute the Termination Agreement attached hereto as
Exhibit 7.10 and by this reference made a part hereof.



ARTICLE VIII

SURVIVAL OF REPRESENTATIONS AND WARRANTIES




     Except as otherwise stated below, the representations, warranties, covenants and agreements
made by the respective parties in this Agreement or in a certificate executed and delivered in
connection with the transactions contemplated hereby shall survive the Closing for a period of one
(1) year. All covenants, agreements, representations and warranties made herein or pursuant hereto
shall be deemed to be material and to have been relied upon by the parties hereto, notwithstanding
any investigation heretofore or hereinafter made by or on behalf of the parties prior to the
Possession Date, provided, however, that no legal remedy, at law or in equity, shall be available
with respect to any loss, liability, or breach of agreement or warranty or misrepresentation if the
party alleging such loss, liability, breach, or misrepresentation had actual knowledge of the
existence, nature and extent thereof on the Possession Date and, despite such knowledge, proceeded
with the Possession Date without objection.



ARTICLE IX

INDEMNIFICATION




     9.1 Indemnification. Subject to the provisions of Article VIII and this Article IX,
Seller agrees to indemnify in respect of, and hold Purchaser harmless against, any and all damages,
claims, deficiencies, losses, and expenses, including reasonable attorneys’ fees, (collectively
“Damages”) resulting from (i) any misrepresentation, breach of warranty, or nonfulfillment or
failure to perform any covenant or agreement on the part of Seller made as a part of or contained
in this Agreement or in any certificate executed and delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby, except for Damages resulting from any such
misrepresentations, breach of warranty or nonfulfillment or failure to perform any such covenant or
agreement known to Purchaser and waived in writing by Purchaser as of the Possession Date and (ii)
claims of third parties from Seller’s operation of its business through the date of
Possession Date. Subject to the provisions of Article VIII and this Article IX, Purchaser
agrees to indemnify in respect of, and hold Seller harmless against, any and all Damages resulting
from (i) any misrepresentation, breach of warranty, or nonfulfillment or failure



17









 







to perform any
covenant or agreement on the part of Purchaser made as a part of or contained in this Agreement or
in any certificate executed and delivered pursuant to this Agreement or in connection with the
transactions contemplated hereby except for Damages resulting from any such misrepresentations,
breach of warranty or nonfulfillment or failure to perform any such covenant or agreement known to
Seller and waived in writing by Seller as of the Possession Date and (ii) third party claims from
Purchaser’s operation of the purchased business after the date of Possession Date. The party
claiming indemnification hereunder is hereinafter referred to as the “Indemnified Party” and the
party against whom such claims are asserted hereunder is hereinafter referred to as the
“Indemnifying Party”. Damages for which a claim or action may be asserted hereunder are hereinafter
referred to as a “Loss”.



     9.2 Method of Asserting Claims. All claims for indemnification by any Indemnified
Party under this Article IX shall be asserted and resolved as follows:




     (a) In the event that any claim or demand for which an Indemnifying Party would be
liable to an Indemnified Party hereunder is asserted against or sought to be collected from
such Indemnified Party by a third party, said Indemnified Party shall, within twenty (20)
days of such claim or demand being made, notify the Indemnifying Party of such claim or
demand, specifying the nature of and specific basis for such claim or demand and the amount
or the estimated amount thereof to the extent then feasible (the “Claim Notice”). The
estimate of Loss contained in the Claim Notice shall not limit the amount of the
Indemnifying Party’s ultimate liability under the claim. The Indemnifying Party shall not
be obligated to indemnify the Indemnified Party with respect to any such claim or demand if
the Indemnified Party fails to notify the Indemnifying Party thereof in accordance with the
provisions of this Agreement within said twenty (20) day period. The Indemnifying Party
shall have 30 days from the personal delivery or mailing of the Claim Notice (the “Notice
Period”) to notify the Indemnified Party (i) whether or not the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to such claim or demand
is disputed, and (ii) whether or not the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend the Indemnified Party against such claim or
demand; provided, however, that any Indemnified Party is hereby authorized prior to and
during the Notice Period to file any motion, answer or other pleading which it shall deem
necessary or appropriate to protect its interest or those of the Indemnifying Party and not
unreasonably prejudicial to the Indemnifying Party. In the event that the Indemnifying
Party notifies the Indemnified Party within the Notice Period that it desires to defend the
Indemnified Party against such claim or demand, then, except as hereinafter provided, the
Indemnifying Party shall have the right to defend by all appropriate proceedings, which
proceedings shall be promptly settled or prosecuted by it to a final conclusion. If the
Indemnified Party desires to participate in, but not control, any such defense or settlement
it may do so at its sole cost and expense. If requested by the Indemnifying Party, the
Indemnified Party agrees to cooperate with the Indemnifying Party and its counsel in
contesting any claim or demand which the Indemnifying Party elects to contest, or, if
appropriate and related to the claim in question, in making any counterclaim against the
person asserting the third party claim or demand, or any cross complaint against
any person but in any such case at the sole cost and expense of the Indemnifying Party.
No claim may be settled without the consent of the Indemnifying Party, unless such
settlement includes the complete release of the Indemnifying Party.




     (b) In the event any Indemnified Party should have a claim against any Indemnifying
Party hereunder which does not involve a claim or demand being asserted against or sought to
be collected from it by a third party, the Indemnified Party shall send a Claim Notice with
respect to such claim to the Indemnifying Party. If the Indemnifying Party



18









 






does not notify
the Indemnified Party within the Notice Period that it disputes such claim, the amount of
such claim shall be conclusively deemed a liability of the Indemnifying Party hereunder. If
the Indemnifying Party has disputed such claim, as provided above, such dispute shall be
resolved by arbitration as provided in Section 11.11.



     9.3 Payment of Claim. Upon the determination of the liability of Seller or Purchaser
under Section 9.1 and 9.2, as the case may be, after payment by the Indemnified Party of, or upon
entry of final judgment or reaching of a settlement in respect of, an Indemnifiable Claim, or
determination of a Loss to the Indemnified Party, and notice thereof to the Indemnifying Party, the
Indemnifying Party shall within thirty (30) days after receipt of such notice pay to the
Indemnified Party the amount of the payment, judgment, settlement or Loss, as the case may be.



     9.4 Other Rights and Remedies Not Affected. The indemnification rights of the parties
under this Article IX are independent of and in addition to such rights and remedies as the parties
may have at law or in equity or otherwise for any misrepresentation, breach of warranty or failure
to fulfill any agreement or covenant hereunder on the part of any party hereto including without
limitation the right to seek specific performance, rescission or restitution, none of which rights
or remedies shall be affected or diminished hereby.



     9.5 Tail Coverage Insurance. From the Possession Date, Seller shall obtain tail
coverage for all currently held insurance policies and, to the extent all commercially reasonable
insurance is not presently carried by Seller, Seller shall obtain such insurance. All tail
coverage insurance held by Seller shall cover any Indemnifiable Claim. Seller shall provide
Purchaser with evidence of such coverage naming Purchaser as an additional insured on the policies
prior to the Possession Date.



ARTICLE X

AMENDMENT, TERMINATION AND BREACH




     10.1 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by an instrument in writing, executed after the date hereof, making specific
reference to this Article and to each Article and paragraph hereof to which such amendment,
modification or supplement applies, which document shall be signed by an authorized officer of
Purchaser and by Seller.



     10.2 Termination and Abandonment. This Agreement may be terminated and the
transaction provided for by this Agreement may be abandoned without liability on the part of any
party to any other party:




     (a) At any time before the Possession Date, by mutual consent of Purchaser and Seller;




     (b) Automatically if the Possession Date has not occurred by December 31, 2005.



     In the event of the termination and abandonment of this Agreement by any party as above
provided in this Article X, written notice shall forthwith be given to the other party, and each
party



19









 







shall be solely responsible to pay its own expenses incident to preparation for the
consummation of this Agreement and the transactions contemplated hereunder (except as otherwise
provided herein).



ARTICLE XI

MISCELLANEOUS




     11.1 Notice. All notices and communications required or permitted to be given
hereunder shall be in writing, signed by the sender, and delivered by personal delivery, overnight
courier service or by registered or certified mail to:



	 	 	 	 	 
	 

	 	If to Purchaser:
	 	Super Rx, Inc.
	 

	 	 	 	P.O. Box150
	 

	 	 	 	21700 Barton Road
	 

	 	 	 	Colton, California 92324
	 

	 	 	 	Attention: President
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Sean S. Varner, Esq.
	 

	 	 	 	Varner, Saleson & Brandt LLP
	 

	 	 	 	P.O. Box 12014
	 

	 	 	 	Riverside, California 92502-2214
	 
	 	 	 	 
	 

	 	If to Seller:
	 	John E. Tilley, President
	 

	 	 	 	California Pharmacy Systems, Inc.
	 

	 	 	 	11411 Brookshire Avenue #107
	 

	 	 	 	Downey, California 90241
	 
	 

	 	With a copy to:
	 	Allen K. Brown, Esq.
	 

	 	 	 	7901 Painter Avenue, Suite 5
	 

	 	 	 	Whittier, California 90602





or such other address as shall have been furnished in writing. Receipt by, or filing with, the
respective parties of any communications shall be deemed to have occurred for the purpose of this
Agreement, when personally delivered, or next business day if sent by overnight courier, or two
days after deposit thereof, postage prepaid, properly addressed, in the United States mail.




     11.2 Entire and Sole Agreement. This Agreement, including all Exhibits hereto (which
by this reference shall incorporate herein all such Exhibits as if more fully set forth herein),
constitutes the entire agreement between the parties and as of Possession Date supersedes all
agreements, representations, warranties, statements, promises and understandings, whether oral or
written, with respect to the subject matter hereof. After the Possession Date neither party shall
be bound by or charged with any oral or written agreements, representations, warranties,
statements, promises or understandings not specifically set forth in this Agreement or in the
certificates or documents delivered in connection herewith.



     11.3 Successors and Assigns. Except as otherwise provided in this Agreement, all
covenants and agreements of the parties contained in this Agreement shall be binding upon and inure



20









 







to the benefit of the respective successors and permitted assigns of the parties hereto and the
heirs, personal representatives, executors and assigns of the Shareholder. This Agreement may not
be assigned by any party hereto without the prior express written consent of the other parties
hereto.



     11.4 Expenses. Whether or not the transactions contemplated hereby shall be
consummated, each party shall be solely responsible for payment of all expenses incurred by it in
connection with the consummation of this Agreement and the transactions contemplated hereunder
except as otherwise provided herein.



     11.5 Severability. Should any one or more of the provisions of this Agreement be
determined to be illegal or unenforceable, all other provisions of this Agreement shall be given
effect separately from the provision or provisions determined to be illegal or unenforceable and
shall not be affected thereby.



     11.6 Governing Law. This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of California without regard to conflicts of laws principles.



     11.7 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be an original, but all of which together shall constitute one
and the same Agreement.



     11.8 Amendments. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated orally, but only by an instrument in writing in accordance with Section
10.1 hereof.



     11.9 No Third Party Beneficiary. The terms and provisions of this Agreement are
intended solely for the benefit of the parties hereto, and it is not the intention of the parties
to confer third-party beneficiary rights upon any other person or entity.



     11.10 Headings. The headings in this Agreement are for purposes of convenience and
easy reference only and shall not limit or otherwise affect the meaning hereof.



     11.11 Disputes. In the event of any dispute which arises between the parties and
which relates to the subject matter of this Agreement, the parties acknowledge and agree that any
such dispute shall be submitted for binding arbitration in San Bernardino, California in accordance
with the Arbitration Commercial Rules procedures established by the American Arbitration
Association or, if such association is not then in existence, an independent association of
arbitrators which may be designated by agreement of the parties. In the event the parties are
unable to agree on an independent association of arbitrators from which arbitrators may be drawn,
either party may apply to a court of competent jurisdiction for appointment of arbitrators,
however, such application will only be made in the event the American Arbitration Association is
not then in existence. The arbitrator(s) shall make detailed written findings to support their
award. The prevailing party in any such arbitration proceeding shall be awarded such costs and
expenses (including reasonable attorney’s and expert witness’ fees) as were incurred by the
prevailing party as a result of the institution and prosecution of the arbitration proceeding
including all costs and expenses (including



21









 







reasonable attorney’s and expert witness fees) to enter
judgment upon or enforce any such award including all appellate proceedings.



     11.12 Delivery of Exhibits. All Exhibits to be delivered by either of the parties
hereto shall be delivered to the other party prior to the execution of this Agreement.



     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.



	 	 	 	 	 	 	 
	 	 	PURCHASER:
	 
	 	 	 	 	 	 
	 	 	SUPER RX, INC.
	 
	 	 	 	 	 	 
	 	 	By:	 	     /s/ Donald I. Baker
	 	 	 	 	 
	 

	 	Its:
	 	 	 	Donald I. Baker


Executive Vice President
	 
	 	 	 	 	 	 
	 	 	By:	 	     /s/ Phillip J. Smith
	 	 	 	 	 
	 

	 	Its:
	 	 	 	Phillip J. Smith

Senior Vice President and Chief Financial Officer
	 
	 	 	 	 	 	 
	 	 	SELLER:
	 
	 	 	 	 	 	 
	 	 	CALIFORNIA PHARMACY SYSTEMS, INC.
	 
	 	 	 	 	 	 
	 	 	By:	 	     /s/ John E. Tilley
	 	 	 	 	 
	 

	 	 	 	 	 	John E. Tilley
	 

	 	Its:
	 	 	 	President






22









 






TABLE OF ATTACHMENTS




	 	 	 	 
	Exhibit	 	 Description
	 

	 	Schedule of Pharmacies
	1.2

	 	Purchase Price Allocation
	3.1(a)

	 	Certificate of Incorporation of Seller
	3.1(b)

	 	Bylaws of Seller
	3.3(a)

	 	Certificate of Seller re: Shareholder Approval
	3.3(b)

	 	Directors’ Consent of Seller
	3.7

	 	Governmental Notices
	3.12

	 	Litigation
	3.16

	 	Customer Accounts
	 

	 	Customer Contracts or Agreements
	 

	 	Impaired Customer Contracts
	 

	 	Delinquent Contracts or Agreements
	3.17

	 	Contracts
	7.1(a)

	 	Seller’s Certification
	7.1(i)

	 	Non-Compete and Confidentiality Agreements
	7.2(a)

	 	Notarized Letter
	7.2(e)

	 	Power of Attorney
	7.6

	 	Bill of Sale and Assignment
	7.9

	 	Consulting Agreement
	7.10

	 	Termination Agreement






 









 






Exhibit 1.2

Purchase Price Allocation




	 	 	 	 	 
	1. Inventory
	 	 	tbd by Inventory Service
	 
	 	 	 	 
	2. Equipment and Pharmacy Records:
	 	 	$160,000	 
	 
	 	 	 	 
	3. Goodwill
	 	 	$1,850,512	 
	 
	 	 	 	 
	4. Covenant Not to Compete
	 	 	$50,000	 






 









 






Exhibit 3.3(a)

Certificate of Seller re: Shareholder Approval




 









 








Exhibit 3.3(b)

Directors’ Consent of Seller




 









 








Exhibit 3.7

Governmental Notices




 









 








Exhibit 3.12

Litigation




 









 








Exhibit 3.16

Customer Accounts

Customer Contracts or Agreements

Impaired Customer Contracts

Delinquent Contracts or Agreements




 









 








Exhibit 3.17

Contracts




 









 








Exhibit 7.1(a)

Seller’s Certification




 









 








Exhibit 7.1(i)

Non-Compete and Confidentiality Agreements




[see attached]



 









 








NON-COMPETE AND CONFIDENTIALITY AGREEMENT




     THIS NON-COMPETE AND CONFIDENTIALITY AGREEMENT (the “Agreement”) is dated as of the
11th day of July, 2005 by and between Super Rx, Inc. (the “Company”) and John E. Tilley
and California Pharmacy Systems, Inc., a California corporation (collectively “Tilley”).



     WHEREAS, on or about the date of this Agreement, the Company entered into an Asset Purchase
Agreement (the “Purchase Agreement”) with Tilley; and



     WHEREAS, Tilley has agreed to enter into this Agreement to induce the Company to consummate
the purchase of the assets of California Pharmacy Services, Inc. (“CPS”), a company owned by
Tilley; and



     WHEREAS, the Company will close on the Purchase Agreement, effective as of July
11th, 2005 (the “Closing”) and wishes to enter into this Agreement so that (i) Tilley
will refrain from certain activities which would be competitive with the Company’s business
following the Closing, and (ii) Tilley will become bound by confidentiality provisions relating to
its receipt and possession of information concerning the Company.



     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, CPS
and the Company hereby agree as follows:



     1. Term. The term of this Agreement shall be for a period of three (3) years
following Closing of the Purchase Agreement.



     2. Consideration. Tilley acknowledges that it is a direct and an indirect beneficiary
of amounts paid to Tilley and further acknowledges that such consideration is being paid
contemporaneously with the sale of the assets of CPS to the Company, of which Tilley shall receive
a direct benefit, and that, accordingly, such non-compete and confidentiality agreement is given in
connection with the sale of the assets of CPS to the Company. Tilley acknowledges both the receipt
of such consideration and the sufficiency thereof.



     3. Description of Business, Trade Secrets and Proprietary Information. Tilley
acknowledges that the Company is or intends to be in the pharmacy business. For purposes of this
Agreement, the terms “Trade Secrets” and “Proprietary Information” shall mean all materials and
information in any media (whether or not reduced to writing and whether or not patentable) relating
to the business of the Company which Tilley to which Tilley obtains access as a direct or indirect
result of his dealings with the Company from the date of this Agreement, including but not limited
to materials and information on operations or proposed operations; service development procedures,
marketing techniques, purchasing information, price lists, pricing policies, quoting procedures,
financial information, customer or customer prospect names, requirements and other data, and other
materials or information relating to the manner in which the Company does business; discoveries,
concepts and ideas, whether patentable or not, including without limitation the nature and results
of research and



 









 







development activities, processes, formulas, techniques, “know-how,” designs, drawings and
specifications, whether copyrightable or not; and all inventions and ideas which are derived from
or relate to Tilley’s access to or knowledge of any of the above enumerated materials and
information. Notwithstanding the Company acknowledges that Tilley has developed certain
procedures, methods and sales of pharmaceuticals in conjunction with CPS. Tilley acknowledges that
the Company intends to develop business procedures, methods, sales techniques and other Proprietary
Information for the business of the Company commencing on the Closing. Nothing in this Agreement
prevents Tilley from continuing to operate his existing and on-going pharmacies and develop and
maintain his pharmacy businesses in the manner operated, provided, however, Tilley shall not use
any Proprietary Information of the Company developed from the Closing forward.



     4. Title to Trade Secrets and Proprietary Information. Tilley agrees that the Trade
Secrets and Proprietary Information are and shall at all times remain the sole and exclusive
property of the Company. Tilley will always hold inviolate and confidential any and all Trade
Secrets and Proprietary Information of the Company now or hereafter existing.



     5. Covenant of Non-Disclosure. Tilley shall not sell, transfer, publish, disclose,
display or otherwise make available in any media to any third party any of the Trade Secrets and
Proprietary Information. Tilley agrees to secure and protect the Company’s Trade Secrets and
Proprietary Information in a manner consistent with the Company’s rights in the Trade Secrets and
Proprietary Information. Tilley shall not use the Trade Secrets and Proprietary Information for
any purpose.



     6. Non-Compete Covenant. Tilley has access to trade secrets and confidential
information about the business being sold to the Company, its business plans, its business
accounts, its business opportunities, and the Company’s expansion plans into other geographical
areas and its methods of doing business. Tilley agrees that for a period of three (3) years after
Closing of the Purchase Agreement, it will not, directly or indirectly, (including any business of
Tilley’s spouse), compete with the Company in the pharmacy business within three (3) miles of any
pharmacy owned, operated or developed by the Company in the the State of California (or two (2)
miles for any pharmacy operated within a medical building or office) during the term of this
Agreement (the “Territory”), and that it will not directly or indirectly participate in any
capacity (including as an officer, director, partner, employee, consultant or owner) in any entity
or business venture which is engaged in the pharmacy in any portion of the Territory, except on
behalf of the Company. Tilley will not during three (3) years after Closing of the Purchase
Agreement employ, assist in employing, or otherwise associate in business with any present, former
or future pharmacist, employee, officer or agent of the Company or any of the Company’s
subsidiaries; or induce any person who is an employee, officer or agent of the Company to terminate
said relationship.



     7. Enforcement by Injunctive Relief. Tilley acknowledges and agrees that any breach
of this Agreement by Tilley would cause immediate irreparable harm to the Company. Tilley agrees
that should it violate any of the terms and conditions of this Agreement, the Company, at its sole
discretion, shall be entitled to seek and obtain immediate injunctive relief and enjoin further and
future violations of this Agreement.



 









 





     8. Scope of Covenant. In the event a court of competent jurisdiction finds any
provision of this Agreement to be so overbroad as to be unenforceable, then such provision shall be
reduced in scope by the court, but only to the extent deemed necessary by the court to render the
provision reasonable and enforceable, it being Tilley’s intention to provide the Company with the
broadest protection possible against harmful competition. Tilley has carefully considered the
nature and extent of the restrictions upon it and the rights and remedies conferred upon the
Company under this Agreement, and hereby acknowledges and agrees that the same are reasonable in
time and territory, are designated to eliminate competition which otherwise would be unfair to the
Company, do not stifle the inherent skill and experience of Tilley, would not operate as a bar to
Tilley’s sole means of support, are fully required to protect the legitimate interests of the
Company and do not confer a benefit upon the Company disproportionate to the detriment to Tilley.



     9. Notices. All notices, demands or requests (however characterized or described)
required or authorized hereunder shall be deemed given sufficiently if in writing and sent by
registered or certified mail, return receipt requested and postage prepaid, or by tested facsimile,
telex, telegram or cable to, in the case of the Company:


Super Rx, Inc.

21700 Barton Road

P.O. Box 150

Colton, California 92324

Attention: President


and in the case of Tilley:



John E. Tilley

11411 Brookshire Avenue, #107

Downey, California 90241



     10. Assignment of Agreement; Successors. No party may assign or otherwise transfer
this Agreement or any of its rights or obligations hereunder without the prior written consent to
such assignment or transfer by the other party hereto.



     11. Further Instruments. The parties shall execute and deliver any and all such other
instruments and shall take any and all such other actions as may be reasonably necessary to carry
the intent of this Agreement into full force and effect.



     12. Waiver. All the rights and remedies of either party under this Agreement are
cumulative and not exclusive of any other rights and remedies provided by law. No delay or failure
on the part of either party in the exercise of any right or remedy under this Agreement shall
operate as a waiver of any subsequent right or remedy. The consent of any party where required
hereunder to any act or occurrence shall not be deemed to be a consent to any other act or
occurrence.



 









 





     13. Costs and Attorneys’ Fees. If litigation is commenced by either party to enforce
its rights under this Agreement, the party which the court determines to have prevailed in
litigation shall be entitled to recover all costs actually incurred in connection with the
litigation, including reasonable attorneys’ fees.



     14. Submission to Jurisdiction. The parties agree that any legal action or proceeding
with respect to this Agreement or any document relating hereto may be brought by CPS only in either
(i) the United States District Court for the District of California, or (ii) the state courts of
the State of California. The Company may bring action in any federal or state court of its choice,
assuming such court has jurisdiction. Each party hereby irrevocably waives any objection,
including without limitation, any objection to the laying of venue or based on the grounds of forum
non conveniens, which it may now or hereafter have to the bringing of any such action or proceeding
in any such respective jurisdiction.



     15. General Provisions. This Agreement shall be construed and enforced in accordance
with, and governed by, the laws of the State of California. This Agreement may not be modified or
amended or any term or provision hereof waived or discharged except in writing signed by the party
against whom such amendment, modification, waiver or discharge is sought to be enforced. This
Agreement may be executed in any number of counterparts, each of which shall be deemed an original
but all of which taken together shall constitute one and the same instrument.



     16. In the event Tilley shall violate any legally enforceable provision of this Agreement as
to which there is a specific time period during which it is prohibited from taking certain actions
or from engaging in certain activities, as set forth in such provision, then, in such event, such
violation shall toll the running of such time period from the date of such violation until such
violation shall cease.




 









 






          IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above
written.



	 	 	 	 	 	 	 
	 	 	SUPER RX, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Donald I. Baker	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	   Donald I. Baker	 	 
	 

	 	Its:
	 	   Executive Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Phillip J. Smith	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	   Phillip J. Smith	 	 
	 	 	Its:	 	   Senior Vice President and Chief Financial
	 

	 	 	 	   Officer	 	 
	 
	 	 	 	 	 	 
	 	 	TILLEY	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ John E. Tilley	 	 
	 	 	 	 	 
	 	 	John E. Tilley	 	 
	 
	 	 	 	 	 	 
	 	 	CALIFORNIA PHARMACY SYSTEMS, INC.,
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John E. Tilley	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	   John E. Tilley	 	 
	 

	 	Its:
	 	   President	 	 






 









 





Exhibit 7.2(a)

Notarized Letter




 









 








Exhibit 7(e)

Power of Attorney




[see attached]




 









 








Power of Attorney



California Pharmacy Systems, Inc. a California corporation (“CPS”), with respect to the
pharmacy(ies) listed on Schedule A hereto (the “Pharmacies”) located at the address set forth
opposite the name of the Pharmacy on Schedule A hereto, to the extent CPS is able to do so under
(a) any law, regulation, rule, order, judgment or decree, whether federal, state or local, the
which the Pharmacy or CPS or any other person is subject (collectively, “Applicable Law”) and (b)
the terms and conditions of CPS’ Drug Enforcement Agency registrations or other permits,
certificates, licenses, filings, approval and other authorizations of any issuing agency
(collectively, “Permits”), hereby makes, constitutes and appoints Super Rx, Inc., a California
corporation (“Super Rx”) as CPS’ true and lawful attorney-in-fact, in its name, place and stead, to
buy and sell controlled substances in connection with the operation of the Pharmacies, as it is
presently being operated, in accordance with Applicable Law, under the Pharmacies’ current Drug
Enforcement Agency registration and registration number.



This Power of Attorney shall become effective on the date the Pharmacies are delivered to Super Rx
pursuant to a sales agreement and will expire on the date Super Rx obtains all of the Permits
required to buy and sell controlled substances in connection with the operation of the Pharmacies.



This Power of Attorney may not be changed orally and shall be governed by and construed in
accordance with the laws of the State of California.




Dated: July 11th, 2005



California Pharmacy Systems, Inc., a California corporation



	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	By:

	 	/s/ John E. Tilley	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	     John E. Tilley	 	 	 	 
	Its:

	 	     President	 	 	 	 






Accepted by:



Super Rx, Inc., a California corporation



	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	By:

	 	/s/ Donald I. Baker	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	     Donald I. Baker	 	 	 	 
	Its:

	 	     Executive Vice President	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	     /s/ Phillip J. Smith	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	     Phillip J. Smith	 	 	 	 
	Its:	 	     Senior Vice President and Chief Financial Officer	 	 






 









 





Exhibit 7.6

Bill of Sale and Assignment




[see attached]




 









 








BILL OF SALE AND ASSIGNMENT




          In consideration of the execution of that certain Asset Purchase Agreement dated as of July
11th, 2005 (“Asset Purchase Agreement”), between the undersigned and SUPER RX,
INC., a California corporation (“Purchaser”), and the consideration provided therein, the
undersigned hereby sells, assigns, transfers, conveys, and delivers to Purchaser all of its right,
title and interest in and to the “Assets” (as that term is defined in the Recitals of the
Asset Purchase Agreement), otherwise pursuant to and in accordance with the terms and conditions
contained in the Asset Purchase Agreement, and Purchaser hereby accepts same.




	 	 	 
	Dated: 11, July, 2005

	 	CALIFORNIA PHARMACY SYSTEMS, INC.,
	 

	 	               a California corporation





	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John E. Tilley	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	     John E. Tilley	 	 
	 

	 	Its:
	 	     President	 	 






ACCEPTED:



SUPER RX, INC.,

a California corporation



	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	By:

	 	/s/ Donald I. Baker	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	    Donald I. Baker	 	 	 	 
	Its:

	 	    Executive Vice President	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Phillip J. Smith	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	    Phillip J. Smith	 	 	 	 
	Its:	 	    Senior Vice President and Chief Financial Officer	 	 






 









 






Exhibit 7.9

Consulting Agreement




[see attached]




 









 








CONSULTING AGREEMENT




     This Consulting Agreement (“Agreement”) is entered into as of July 11th, 2005,
between Super Rx, Inc., a California corporation (“Corporation”) and California Pharmacy Systems,
Inc., a California corporation (“Consultant”). Corporation and Consultant are sometimes
hereinafter individually referred to as “party” and collectively as “parties.”



Recitals




     A. Concurrently with the execution of this Agreement, the parties entered into an Asset
Purchase Agreement whereby the Corporation is purchasing sixteen (16) pharmacies operated by
Consultant in Stater Bros. Markets supermarkets (“Pharmacies”).



     B. The Corporation operates, or will operate pharmacies in Stater Bros. Markets supermarkets
throughout Southern California, including without limitation the Pharmacies.



     C. Consultant has unique knowledge and expertise in starting and operating pharmacies in
California.



     D. Corporation desires to engage Consultant and Consultant desires to be engaged by
Corporation to assist with the startup and operation of the Pharmacies.



Operative Provisions




     In consideration of the mutual covenants and conditions contained herein, Corporation and
Consultant agree as follows:



     1. Incorporation of Recitals. The Recitals are incorporated herein and by this
reference made a part hereof.



     2. Term. The term of this Agreement shall commence (“Commencement Date”) on the date
first written above and shall continue for a period of twelve (12) months, subject to termination
as set forth in Section 7 below.



     3. Services. During the term of this Agreement, Consultant shall perform the services
listed below (“Services”) as further specified and directed by a person designated by Corporation
in writing to Consultant:



          (a) Assist the Corporation with the transition of the Pharmacies from Consultant’s control to
the Corporation;




          (b) Assist with the management and operation of the Pharmacies;




 









 





          (c) Assist with the maintaining the Pharmacies current staffing levels through recruitment,
interviewing and training of staff and ensure that the Pharmacies are adequately staffed. It is
understood and acknowledged that Consultant may make recommendations for the hiring of pharmacists
and staff, but that the Corporation shall hire all pharmacists and staff unless otherwise approved
by the Corporation in writing.




          (d) Provide temporary pharmacists when necessary, provided, however, if Consultant provides
such temporary pharmacists, the Corporation shall pay Consultant an hourly wage of Seventy-One
Dollars ($71.00) per hour and Consultant shall pay all benefits and shall provide insurance
covering all acts and omissions of Consultant’s pharmacists with limits of Two Million Dollars
($2,000,000.00) per occurrence and Four Million Dollars ($4,000,000.00) in the aggregate;




          (e) Act as a liaison between the Corporation and the California State Board of Pharmacy as
directed by the Corporation, including without limitation new licenses and transfers of licenses;




          (f) Consult with PRS as directed by the Corporation;




          (g) Act as liaison, if requested by the Corporation, between the Corporation and the Pharmacy
employees;




          (h) Provide effective supervisory assistance and ensure that all required standards for
accuracy, productivity, and customer relations are maintained to the satisfaction of the
Corporation, including but not limited to legal compliance for record keeping;




          (i) Ensure that all current and future Pharmacies maintain compliance with all federal and
state, including the California State Board of Pharmacy, laws and regulations;




          (j) Ensure that inventory levels are maintained to satisfy customer demand and maintain
purchasing and inventory controls of pharmaceuticals, including without limitation, compliance will
all laws and regulations relating to controlled substances;




          (k) Review third party insurance adjudication and reconciliation with the Company to ensure
maximum reimbursement rates;




          (l) Maintain routine AWP, AAC and clinical updates;




          (m) Assist the Corporation with insurance providers and the processing covered
pharmaceuticals;




          (n) Recommend pharmacist managers for new Pharmacies; and




          (o) Assist with other duties reasonably requested by the Corporation to ensure the smooth
operation and timely management transfer of the Pharmacies.




 









 




John Tilley and Karen Tilley shall be designated by Consultant as the primary contacts and service
providers for Consultant.




     4. Compensation. As compensation for the Services to be rendered by Consultant under
this Agreement, Consultant shall receive Thirteen Thousand Dollars ($13,000.00) per month.



     5. Independent Contractor. In rendering the Services hereunder, Consultant shall be
an independent contractor and shall not be deemed an employee of the Corporation. Consultant
acknowledges and agrees that, as an independent contractor, it is solely responsible for the
payment of any and all taxes and/or assessments imposed on account of payment to Consultant or the
performance of services by Consultant pursuant to this Agreement, and Corporation shall not, by
reason of Consultant’s status as independent contractor, make any withholdings or payments of such
taxes or assessments with respect to any payments made to Consultant hereunder.



     6. Indemnification By Consultant. Consultant agrees to indemnify and hold harmless
Corporation from any and all liability, damages, expenses, penalties and/or judgments arising out
of Consultant’s failure to comply with Section 5 above.



     7. Termination.




	 	(a)	 	This Consulting Agreement shall terminate immediately upon the
occurrence of either (i) a material breach of duty by Consultant in the course
of his performance as reasonably determined by the Corporation; (ii) a failure
of Consultant to perform his obligation under this Agreement for a period of
ten (10) consecutive calendar days; or (iii) dissolution or the filing of
bankruptcy by Consultant.
	 
	 	(b)	 	In the event of the termination of this Consulting Agreement in
accordance with Subsection 7(a) prior to the completion of the term of this
Agreement, Consultant shall be entitled to all compensation earned by
Consultant prior to the date of termination as provided in this Consulting
Agreement.
	 
	 	(c)	 	Consultant shall have the right to terminate this Agreement
upon seven (7) days prior written notice. Upon notice of such termination,
Consultant shall receive no further compensation under this Agreement.





     8. Miscellaneous.



          (a) No Third-Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any person other than the parties and their respective successors and permitted
assigns.




 









 








          (b) Entire Agreement. This Agreement constitutes the entire agreement between the
parties and supersedes any prior understandings, agreements, or representations by or between the
parties, written or oral, to the extent they have related in any way to the subject matter hereof.




          (c) Succession and Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties named herein and their respective successors and permitted assigns.




          (d) Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will constitute one and the same
instrument.




          (e) Headings. The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation of this Agreement.




          (f) Notices. All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder
shall be deemed duly given two (2) business days after it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended recipient as set forth
below:




	 	 	 	 	 
	 

	 	If to Corporation:
	 	Super Rx, Inc.
	 

	 	 	 	21700 Barton Road
	 

	 	 	 	Colton, California 92324
	 

	 	 	 	Attn: President
	 
	 	 	 	 
	 

	 	If to the Consultant:
	 	California Pharmacy Systems, Inc.
	 

	 	 	 	11411 Brookshire Avenue, #107
	 

	 	 	 	Downey, California 90241
	 

	 	 	 	Attn: John E. Tilley






               Any party may send any notice, request, demand, claim, or other communication hereunder to the
intended recipient at the address set forth above using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended recipient. Any party may
change the address to which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other parties notice in the manner herein set forth.



 









 





          (g) Governing Law. This Agreement shall be governed by and construed in accordance
with the domestic laws of the State of California without giving effect to any choice or conflict
of law provision or rule (whether of the State of California or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of California.




          (h) Amendments and Waivers. No waiver by any party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder
or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.




          (i) Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.




          (j) Construction. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption
or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word “including” shall mean including without limitation.




 









 





     IN WITNESS WHEREOF, the parties hereby execute this Agreement on the date first written above.



	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Corporation:	 	 
	 
	 	 	 	 	 	 
	 	 	Super Rx, Inc., a California corporation
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Donald I. Baker	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	  Donald I. Baker	 	 
	 

	 	Its:
	 	  Executive Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Phillip J. Smith	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	  Phillip J. Smith	 	 
	 	 	Its:	 	  Senior Vice President and Chief
	 

	 	 	 	  Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Consultant:	 	 
	 
	 	 	 	 	 	 
	 	 	California Pharmacy Systems, Inc., a
	 	 	California corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John E. Tilley	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	John E. Tilley	 	 
	 

	 	Its:
	 	President	 	 






 









 





Exhibit 7.10

Termination Agreement




[see attached]




 









 








MUTUAL TERMINATION OF AGREEMENT




     THIS MUTUAL TERMINATION OF AGREEMENT (“Agreement”) made this ___day of July, 2005, between the
CALIFORNIA PHARMACY SYSTEMS, INC., a California corporation (“CPS”), and STATER BROS. MARKETS, a
California corporation (“Stater”). Landlord and Tenant are sometimes hereinafter referred to
individually as “party” and collectively as “parties.”



R E C I T A L S :




     A. CPS and Stater entered into an Agreement to Operate Pharmacies in September 2000, whereby
CPS operates pharmacies within Stater supermarkets in Southern California (“Pharmacy Agreement”).



     B. Concurrently herewith, CPS and Stater are entering into an Asset Purchase Agreement (“Asset
Purchase Agreement”), whereby Stater is purchasing substantially all of the assets utilized by CPS
in the operation of sixteen pharmacies in Stater supermarkets (“Pharmacies”).



     C. CPS and Stater desire to terminate the Pharmacy Agreement prior to the expiration date of
the Pharmacy Agreement on the terms and conditions set forth in this Agreement.



     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this
Agreement, CPS and Stater hereby agree as follows:



A G R E E M E N T :



     1. For the consideration set forth in the Asset Purchase Agreement, CPS and Stater mutually
agree to terminate the Pharmacy Agreement upon Stater taking possession of the Pharmacies in
accordance with the Asset Purchase Agreement.



     2. Except as otherwise set forth in the Asset Purchase Agreement and except for the
indemnification requirements in Section 2.9 and Section 11 of the Pharmacy Agreement, each party
(and any individual or entity acting through such party) hereby releases and discharges and agrees
to hold the other and its predecessors, successors, assigns, affiliates, shareholders, officers,
directors, agents and employees (collectively, “Released Parties”), jointly and severally, free and
harmless from any and all past, present and future claims, demands, causes of action, losses,
expenses, obligations, damages, attorneys’ fees, costs and liabilities of any nature whatsoever
(collectively “Claims”), whether or not now known, suspected or claimed, which each party (or any
individual or entity acting through such party) ever had, now has or may claim to have, against the
other party or any of the Released Parties resulting from, arising out of or related to



 









 




the Pharmacy Agreement (the “Release”). Each party expressly agrees to assume the risk of the
possible discovery of additional or different facts, and agrees that this release shall be and
remain effective in all respects regardless of such additional or different facts.




     Each party understands and agrees that it expressly waives and relinquishes all rights and
benefits, if any, it may have under Section 1542 of the California Civil Code with respect to the
Claims which are the subject of the Release set forth in this Paragraph 6. Civil Code Section 1542
reads as follows:




“§1542 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”



	 	 	 
	JET

	 	DIB PJS
	 

	 	 
	CPS’ Initials

	 	Stater’s Initials






     4. This Agreement contains all of the agreements of the parties hereto with respect to the
Pharmacy Agreement, except as otherwise set forth in the Asset Purchase Agreement, and no prior
agreement or understanding pertaining to any such matter shall be effective for any purpose. This
Agreement may not be amended except by an agreement in writing signed by the parties hereto or
their respective successors in interest.



     5. This Agreement shall be binding on and inure to the benefit of the parties hereto and their
successors.



     6. If either party commences an action against the other party arising out of or in connection
with this Agreement, the prevailing party in any such action shall be entitled to recover from the
non-prevailing party reasonable attorneys’ fees and costs of suit.



     7. This Agreement may be executed in multiple counterparts, including facsimile counterparts,
each of which shall be deemed an original, but all of which, together, shall constitute one and the
same instrument.



     8. This Agreement shall be governed by, construed and enforced in accordance with the laws of
the State of California.



     9. If any portion of this Agreement as applied to either party or to any circumstances shall
be adjudged by a court to be void or unenforceable, such portion shall be deemed severed from this
Agreement and shall in no way effect the validity or enforceability of the remaining portions of
this Agreement.



 









 





          IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.



	 	 	 	 	 	 	 
	 	 	STATER:	 	 
	 
	 	 	 	 	 	 
	 	 	STATER BROS. MARKETS,
	 	 	a California corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Donald I. Baker	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	  Donald I. Baker	 	 
	 	 	Its:	 	  Executive Vice President
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Phillip J. Smith	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	  Phillip J. Smith	 	 
	 	 	Its:	 	  Senior Vice President and Chief
	 

	 	 	 	  Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	CPS:	 	 
	 
	 	 	 	 	 	 
	 	 	CALIFORNIA PHARMACY SYSTEMS,
	 	 	INC., a California corporation
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John E. Tilley	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	  John E. Tilley	 	 
	 

	 	Its:
	 	  President