EX-10.2 STOCK PURCHASE AGREEMENT



 





Exhibit 10.2


 





STOCK PURCHASE AGREEMENT




 





By and Among




Universal HealthCare Company LLC,

an Indiana limited liability company,




In-House Pharmacies, Inc.,

a California corporation,




and




Jon R. Kurtin and Ralph M. Defay




 





Dated April 27, 2007




 





 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	ARTICLE I DEFINITIONS; CONSTRUCTION	 	 	1	 
	 	1.1	 	 	Definitions
	 	 	1	 
	 	1.2	 	 	Construction
	 	 	6	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE II PURCHASE AND SALE	 	 	6	 
	 	2.1	 	 	Purchase and Sale of Shares
	 	 	6	 
	 	2.2	 	 	Purchase Price
	 	 	6	 
	 	2.3	 	 	Working Capital Adjustment
	 	 	7	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE III THE CLOSING	 	 	9	 
	 	3.1	 	 	Closing
	 	 	9	 
	 	3.2	 	 	Closing Deliveries of Purchaser
	 	 	9	 
	 	3.3	 	 	Closing Deliveries of the Shareholders
	 	 	10	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE IV SHAREHOLDERS’ REPRESENTATIONS AND WARRANTIES	 	 	11	 
	 	4.1	 	 	Organization
	 	 	11	 
	 	4.2	 	 	Authorization
	 	 	11	 
	 	4.3	 	 	Validity; Binding Effect
	 	 	11	 
	 	4.4	 	 	Noncontravention
	 	 	12	 
	 	4.5	 	 	Capital Structure
	 	 	12	 
	 	4.6	 	 	Financial Statements
	 	 	12	 
	 	4.7	 	 	Title to and Sufficiency of Assets
	 	 	13	 
	 	4.8	 	 	Tax Matters
	 	 	14	 
	 	4.9	 	 	Litigation; Claims
	 	 	14	 
	 	4.10	 	 	Legal Compliance
	 	 	15	 
	 	4.11	 	 	Environmental Laws and Regulations
	 	 	17	 
	 	4.12	 	 	Permits
	 	 	17	 
	 	4.13	 	 	Material Contracts
	 	 	17	 
	 	4.14	 	 	Labor and Employment Matters
	 	 	19	 
	 	4.15	 	 	Employee Benefits
	 	 	19	 
	 	4.16	 	 	Intellectual Property
	 	 	20	 
	 	4.17	 	 	Affiliate Transactions
	 	 	20	 
	 	4.18	 	 	Broker’s Fees
	 	 	20	 
	 	4.19	 	 	Warranty
	 	 	20	 
	 	4.20	 	 	Customers; Suppliers
	 	 	20	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE V PURCHASER’S REPRESENTATIONS AND WARRANTIES	 	 	21	 
	 	5.1	 	 	Organization of Purchaser
	 	 	21	 
	 	5.2	 	 	Authorization
	 	 	21	 
	 	5.3	 	 	Validity; Binding Effect
	 	 	21	 
	 	5.4	 	 	Noncontravention
	 	 	21	 
	 	5.5	 	 	Broker’s Fees
	 	 	21	 
	 	5.6	 	 	Financing
	 	 	21	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VI COVENANTS PENDING CLOSING	 	 	22	 






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	 	6.1	 	 	General
	 	 	22	 
	 	6.2	 	 	Notices and Consents
	 	 	22	 
	 	6.3	 	 	Due Diligence
	 	 	22	 
	 	6.4	 	 	The Company’s Operation of Business Prior to Closing
	 	 	22	 
	 	6.5	 	 	Governmental Permits and Approvals and Third Party Consent
	 	 	s       23	 
	 	6.6	 	 	Press Releases
	 	 	23	 
	 	6.7	 	 	Update to Schedules
	 	 	23	 
	 	6.8	 	 	Certain Actions
	 	 	23	 
	 	6.9	 	 	No Solicitation
	 	 	24	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VII CONDITIONS PRECEDENT	 	 	24	 
	 	7.1	 	 	The Purchaser’s Conditions Precedent
	 	 	24	 
	 	7.2	 	 	The Shareholders’ Conditions Precedent
	 	 	25	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VIII INDEMNIFICATION	 	 	25	 
	 	8.1	 	 	Indemnification by the Shareholders
	 	 	25	 
	 	8.2	 	 	Indemnification by Purchaser
	 	 	26	 
	 	8.3	 	 	Limitations on Indemnity
	 	 	26	 
	 	8.4	 	 	Third Party Claims
	 	 	27	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE IX ADDITIONAL COVENANTS	 	 	27	 
	 	9.1	 	 	General
	 	 	27	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE X TERMINATION	 	 	28	 
	 	10.1	 	 	Termination Events
	 	 	28	 
	 	10.2	 	 	Effect of Termination
	 	 	28	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XI MISCELLANEOUS	 	 	29	 
	 	11.1	 	 	Assignment
	 	 	29	 
	 	11.2	 	 	Notices
	 	 	29	 
	 	11.3	 	 	Expenses; Attorneys’ Fees
	 	 	30	 
	 	11.4	 	 	Governing Law; Forum
	 	 	31	 
	 	11.5	 	 	Partial Invalidity
	 	 	31	 
	 	11.6	 	 	Execution in Counterparts; Facsimile Signatures
	 	 	31	 
	 	11.7	 	 	Entire Agreement; Amendments and Waivers
	 	 	31	 
	 	11.9	 	 	No Third Party Beneficiary
	 	 	32	 






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	Exhibits
	 	 
	Exhibit A

	 	Working Capital Calculation Procedures
	Exhibit B

	 	Form of Employment Agreement – Schneider
	Exhibit C

	 	Form of Consulting Agreement – Kurtin
	Exhibit D

	 	Form of Consulting Agreement – Defay
	Exhibit E

	 	Promissory Note
	Exhibit F

	 	[Intentionally Omitted]
	Exhibit G

	 	Employee Bonuses
	 
	 	 
	Schedules
	 	 
	 
	 	 
	Schedule 4.1(a)

	 	Foreign Qualifications
	Schedule 4.1(b)

	 	Company Locations
	Schedule 4.4

	 	Noncontravention
	Schedule 4.5

	 	Capitalization
	Schedule 4.6(a)

	 	Financial Statements
	Schedule 4.6(c)

	 	Undisclosed Liabilities
	Schedule 4.6(d)

	 	Material Changes
	Schedule 4.6(e)

	 	Accounts Receivable
	Schedule 4.7(a)

	 	Real Property/Leaseholds
	Schedule 4.7(b)

	 	Permitted Liens
	Schedule 4.9

	 	Litigation; Claims
	Schedule 4.10(b)

	 	Shareholder Medicare/Medicaid Reimbursement
	Schedule 4.10(d)

	 	Medicare/Medicaid Reports
	Schedule 4.10(e)

	 	Company Records
	Schedule 4.10(f)

	 	Health Care Compliance Matters
	Schedule 4.11

	 	Environmental Matters
	Schedule 4.12

	 	Permits
	Schedule 4.13

	 	Material Contracts
	Schedule 4.14

	 	Labor and Employment Matters
	Schedule 4.15

	 	Employee Benefits
	Schedule 4.16

	 	Intellectual Property
	Schedule 4.17

	 	Affiliate Transactions
	Schedule 4.18

	 	Broker’s Fees
	Schedule 4.19

	 	Warranties
	Schedule 4.21(a)

	 	Customers
	Schedule 4.21(b)

	 	Suppliers






iii









 






STOCK PURCHASE AGREEMENT




     THIS AGREEMENT (this “Agreement”), entered into as of April 27, 2007, by and among
Universal HealthCare Company LLC, an Indiana limited liability company (“Purchaser”),
In-House Pharmacies, Inc., a California corporation (the “Company”), and Jon R. Kurtin and
Ralph M. Defay (collectively, the “Shareholders”),



WITNESSETH THAT:




     WHEREAS, the Shareholders collectively own all of the issued and outstanding capital Stock of
the Company; and



     WHEREAS, the Company desires to issue to Purchaser and Purchaser desires to purchase from the
Company all of the New Stock; and



     WHEREAS, the Shareholders desire to sell to Purchaser and Purchaser desires to purchase from
the Shareholders all of the Stock, all on the terms and subject to the conditions set forth in this
Agreement;



     NOW, THEREFORE, in consideration of the premises, and for other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto
hereby agree as follows:



ARTICLE I

DEFINITIONS; CONSTRUCTION




     1.1 Definitions. All initially-capitalized terms used in this Agreement shall have
the meanings given to such terms in this Section 1.1 below:



     “AAA” has the meaning ascribed to it in Section 11.4(b).



     “Accounts Receivable” has the meaning ascribed to it in Section 4.6(e).



     “Acquisition Transactions” has the meaning ascribed to it in Section 6.9.



     “Affiliate” means, with respect to any Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is under common
control with, such Person.



     “Agreement” has the meaning ascribed to it in the introductory paragraph hereof.



     “Balance Sheet” has the meaning ascribed to it in Section 4.6(a).



     “Base Working Capital” means the sum of Four Million Six Hundred Thousand
($4,600,000).



 









 





     “Benefit Plans” has the meaning ascribed to it in Section 4.15.



     “Business Day” means a day other than a Saturday or Sunday or a government or bank
holiday on which banks generally are closed in the State of Indiana.



     “Closing” has the meaning ascribed to it in Section 3.1.



     “Closing Date” means the date on which the Closing actually occurs.



     “Closing Date Balance Sheet” has the meaning ascribed to it in Section
2.3(a)(i).



     “Closing Date Working Capital” has the meaning ascribed to it in Section
2.3(a)(ii).



     “Code” means the Internal Revenue Code of 1986, as amended.



     “Company” has the meaning ascribed to it in the introductory paragraph of this
Agreement.



     “Consulting Agreements” has the meaning ascribed to it in Section 3.2(d).



     “Current Assets” has the meaning ascribed to it in Section 2.3(a)(ii).



     “Current Liabilities” has the meaning ascribed to it in Section 2.3(a)(ii).



     “Customers” has the meaning ascribed to it in Section 4.21(a).



     “Deposit Amount” means Three Hundred Thousand Dollars ($300,000).



     “Dispute Notice” has the meaning ascribed to it in Section 2.3(b).



     “Dispute Period” has the meaning ascribed to it in Section 2.3(b).



     “Employment Agreement” has the meaning ascribed to it in Section 3.2(c).



     “Environmental Laws” means all Laws concerning pollution or protection of the
environment, including, without limitation, all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control or cleanup of any Hazardous
Material.



     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.



     “ERISA Affiliate” means any member of a controlled group of corporations under Section
414(b) of the Code of which the Company is or was a member, and any trade or business
(whether or not incorporated) that is or was under common control with the Company under



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Section 414(c) of the Code, and all other entities which together with the Company are or were
prior to the date hereof treated as a single employer under Section 414(m) or 414(o) of the Code.




     “Financial Statements” has the meaning ascribed to it in Section 4.6(a).



     “GAAP” means generally accepted accounting principles in the United States of America,
consistently applied.



     “GLB” has the meaning ascribed to it in Section 4.10(g).



     “Hazardous Activity” means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, release, storage, transfer,
transportation, treatment or use of Hazardous Material in, on, under about or from any of the real
estate owned, used or leased by the Company or any part thereof and any other act, business,
operation or thing that violates any Environmental Law, or increases the danger, or risk of danger,
or poses an unreasonable risk of harm, to Persons or property.



     “Hazardous Material” means any substance, material or waste which is be regulated by
any governmental authority, including any material, substance or waste defined as a “hazardous
waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted
hazardous waste,” contaminant,” toxic waste” or “toxic substance” under any provision of
Environmental Law, including lead paint, petroleum, petroleum products, asbestos, presumed
asbestos-containing material or asbestos-containing material, urea formaldehyde and polychlorinated
biphenyls, except such material, substance or waste which may be contained in prescription
pharmaceuticals.



     “HIPAA” has the meaning ascribed to it in Section 4.10(g).



     “Indebtedness” means any and all liabilities and obligations of the Company
outstanding immediately prior to the Effective Time (i) for the repayment of borrowed money
(whether owed to lenders, affiliates or any other Person), including amounts owed in respect of
principal, interest, fees, charges, premiums and prepayment penalties, and (ii) for Pre-Closing
Company Transaction Expenses.



     “Indemnified Person” has the meaning ascribed to it in Section 8.4(a).



     “Indemnifying Person” has the meaning ascribed to it in Section 8.4(a).



     “Independent Accountants” means a recognized accounting firm, that is mutually
agreeable to Buyer and Seller and that neither Buyer nor Seller has previously engaged for any
services.



     “Intellectual Property” has the meaning ascribed to it in Section 4.16.



     “Intellectual Property Agreement” has the meaning ascribed to it in Section
3.2(e).



3









 







     “IRS” means the Internal Revenue Service.



     “Labor and Employment Laws” means all Laws relating to employment, employment
practices, terms and conditions of employment, equal opportunity, nondiscrimination, immigration,
wages, hours, benefits and collective bargaining, the payment of social security and similar taxes,
unemployment compensation, workers compensation and occupational safety and health.



     “Laws” means all laws, statutes, rules, regulations, ordinances, codes, bulletins,
opinions, decisions, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder of federal, state, local and foreign governments (and all agencies thereof).



     “Liens” means any and all liens, security interests, mortgages, easements,
restrictions, encumbrances, pledges, conditional sales contracts, or other similar conflicting
ownership or security interest in favor of any Person.



     “Losses” has the meaning ascribed to it in Section 8.1.



     “Management” means David Schneider, Steve Kelso and Philip Curtis.



     “Material Adverse Effect” means any material and adverse effect on the business,
operations, properties, assets, liabilities, prospects or condition (financial or otherwise) of the
Company.



     “Material Contracts” has the meaning ascribed to it in Section 4.13.



     “Medicare Laws” means any and all Laws applicable to reimbursement by Medicare,
Medicaid or any other governmental healthcare program for services or items rendered by the
Company, including all federal and state laws relating to the referral of patients to the Company’s
business.



     “Multiemployer Plan” means a plan as defined in ERISA Section 4001(a)(3) to which the
Company or any ERISA Affiliate of the Company is making or accruing an obligation to make
contributions or has preceding the date hereof made or accrued an obligation to make contributions.



     “New Stock” means 71 shares of Company stock issued to Purchaser by Company, with an
agreed upon value of $16,515.50 per share.



     “Note” has the meaning ascribed to in in Section 2.2(b).



     “Notice” has the meaning ascribed to it in Section 11.2.



     “Notice Party” has the meaning ascribed to it in Section 11.2.



     “Order” has the meaning ascribed to it in Section 4.9.



4









 





     “Payors” has the meaning ascribed to it in Section 4.10(d).



     “Pension Plan” means an employee pension benefit plan, as defined in ERISA Section
3(2), other than a Multiemployer Plan, which is covered by Title IV of ERISA and which either (i)
is maintained by the Company and/or any ERISA Affiliate of the Company for employees of such
Person, or (ii) has at any time preceding the date hereof been maintained by the Company and/or any
ERISA Affiliate of the Company for employees of such Person.



     “Permits” has the meaning ascribed to such term in Section 4.12.



     “Person” means an individual, partnership, corporation, business trust, limited
liability company, limited liability partnership, joint stock company, trust, unincorporated
association, joint venture, company or other entity or any governmental authority.



     “PHI” has the meaning ascribed to it in Section 4.10(g).



     “Position Statement” has the meaning ascribed to it in Section 2.3(e).



     “Post-Closing Delivery” has the meaning ascribed to it in Section 2.3(a).



     “Pre-Closing Company Transaction Expenses” means any and all fees and expenses
incident to the transactions contemplated by this Agreement and which are incurred by or are for
the account of the Company and/or the Shareholders, including, without limitation, fees and
expenses payable to their representatives (including any accountants, attorneys’, advisors,
broker’s or finder’s fees), in respect of services performed on or before the Closing Date, whether
or not such expenses have accrued or have been billed or become due prior to Closing and all
amounts payable by the Company and/or the Shareholders to consultants or others arising out of or
relating to the transactions contemplated by this Agreement.



     “Purchaser” has the meaning ascribed to it in the introductory paragraph of this
Agreement.



     “Reports” has the meaning ascribed to it in Section 4.10(d).



     “Resolution Period” has the meaning ascribed to it in Section 2.3(d).



     “Restrictions” means any and all Liens, restrictions, restrictions on transfer,
options, pledges, voting agreements, rights of first refusal, tag-along, co-sale or other rights,
claims, charges or encumbrances of any kind or nature whatsoever, other than restrictions on the
transfer of unregistered stock pursuant to state and/or federal securities laws.



     “Required Permits” has the meaning ascribed to it in Section 6.5.



     “Shareholders” has the meaning ascribed to it in the introductory paragraph of this
Agreement.



5









 





     “Stock” has the meaning ascribed to it in Section 4.5.



     “Suppliers” has the meaning ascribed to it in Section 4.21(b).



     “Termination Date” means May 16, 2007.



     “Third-Party Claim” has the meaning ascribed to it in Section 8.4(a).



     “Updated Schedules and Materials” has the meaning ascribed to it in Section
6.7.



     “Working Capital” means the sum of cash on hand plus accounts receivable that
are not more than 90 days old plus the book value of inventory saleable in the ordinary
course of business minus current liabilities calculated in accordance with Exhibit
A.



     1.2 Construction.



          (a) The meanings of terms defined herein are equally applicable to the singular and plural of
such defined terms.




          (b) The headings of articles and sections to this Agreement are provided for convenience only
and will not affect the construction or interpretation hereof.




          (c) This Agreement and all Exhibits and Schedules hereto are a result of negotiations among
the parties hereto. Accordingly, neither this Agreement nor any Exhibit or Schedule hereto shall
be construed against any party hereto because of its or its counsel’s involvement in its
preparation.




          (d) Any disclosure under one of the Schedules to this Agreement shall be deemed disclosed in
any other relevant Schedule to this Agreement if the disclosure under one Schedule is reasonably
sufficient on its face without further inquiry to inform Parent and Merger Sub of the information
required to be disclosed in respect of such other Schedule or Schedules to avoid a
misrepresentation under the relevant counterpart Section of this Agreement.




ARTICLE II

PURCHASE AND SALE 




     2.1 Purchase and Sale of Shares. Subject to and upon the terms and conditions set
forth in this Agreement, (a) the Company shall sell and issue the New Stock to Purchaser free and
clear of any and all Restrictions, (b) each of the Shareholders will sell, transfer, convey, assign
and deliver the Stock to Purchaser free and clear of any and all Restrictions, and (c) Purchaser
will purchase, at the Closing hereunder, the New Stock and the issued and outstanding shares of the
Stock.



     2.2 Purchase Price.



6









 





     (a) Subject to the terms and conditions set forth in this Agreement and in consideration of
the sale, transfer, conveyance, assignment and delivery of the Stock by the Shareholders to
Purchaser, and in reliance upon the representations and warranties made herein by the Shareholders,
Purchaser will pay to the Shareholders an aggregate purchase price of Sixteen Million Six Hundred
Fifty-Four Thousand Eight Hundred Dollars ($16,654,800), payable to the Shareholders as follows:




	 	(i)	 	Fifteen Million Six Hundred Sixty-Eight Thousand Four Dollars
($15,668,400) minus the Deposit Amount in immediately available funds
due at Closing;
	 
	 	(ii)	 	Nine Hundred Eighty Six Thousand Four Hundred Dollars
($986,400) by delivery of the Subordinated Promissory Note, substantially in
the form attached hereto as Exhibit E (the “Note”); and
	 
	 	(iii)	 	the working capital adjustment, if any, pursuant to Section 2.3 below.





     (b) Subject to the terms and conditions set forth in this Agreement and in consideration of
the issuance, sale, transfer, conveyance, assignment and delivery of the New Stock by the Company
to Purchaser, Purchaser will pay to the Company an aggregate purchase price of One Million One
Hundred Seventy Two Thousand Six Hundred Dollars ($1,172,600) in immediately available funds due at
the Closing.



     (c) The Deposit Amount shall be deposited with Shareholder’s counsel, Blanchard, Krasner &
French, PC, in LaJolla, California on the date hereof and shall be administered by Shareholder’s
counsel in accordance with the excrow instruction letter executed as of the date hereof.



     2.3 Working Capital Adjustment.



          (a) Within sixty (60) days after the Closing Date, Purchaser shall prepare and deliver to
Shareholders (such delivery, the “Post-Closing Delivery”): a calculation of the Working
Capital of Company as of the close of business on the Closing Date (the “Closing Date Working
Capital”).




          (b) The Shareholders (acting jointly) shall have thirty (30) days from the date Purchaser
makes the Post-Closing Delivery (such period, the “Dispute Period”) to notify Purchaser, in
writing, as to whether the Shareholders agree or disagree with the calculations set forth on the
Post-Closing Delivery (such written notice, the “Dispute Notice”). During the Dispute
Period, the Shareholders shall be permitted to review (during regular business hours and upon
reasonable prior notice) the working papers of Purchaser and (where applicable) the Purchaser’s
accountants (and any other pertinent documents reasonably required by the Shareholders) relating to
the matters set forth in the Post-Closing Delivery.




          (c) If the Shareholders (acting jointly) fail to deliver a Dispute Notice to Purchaser during
the Dispute Period, (i) the Closing Date Balance Sheet as prepared by





7









 







Purchaser shall be deemed to
have been correctly prepared, and (ii) Purchaser’s calculation of Closing Date Working Capital
shall be deemed to be final and correct and shall be binding upon each of the parties hereto.




          (d) If the Shareholders (acting jointly) deliver a Dispute Notice to Purchaser during the
Dispute Period, the Shareholders (acting jointly) and Purchaser shall, for a period of forty-five
(45) days from the date the Dispute Notice is delivered to Purchaser (such period, the
“Resolution Period”), use their respective reasonable best efforts to amicably resolve the
items in dispute. Any items so resolved by the parties shall be deemed to be final and correct as
so resolved and shall be binding upon each of the parties hereto.




          (e) If the Shareholders (acting jointly) and Purchaser are unable to resolve all of the items
in dispute during the Resolution Period, then either the Shareholders (acting jointly) or Purchaser
may refer the items remaining in dispute to Independent Accountants. The Shareholders (acting
jointly) and Purchaser shall each submit an affidavit to the other evidencing no conflict with the
selected accounting firm, and such firm shall so certify to the Shareholders and Purchaser that no
conflicts exist. Such referral shall be made to the Independent Accountants in writing not later
than thirty (30) days after the end of the Resolution Period, copies of which shall concurrently be
delivered to the non-referring parties hereto. The referring party shall furnish the Independent
Accountants, at the time of such referral, with the Post-Closing Delivery and the Dispute Notice.
The parties shall also furnish the Independent Accountants with such other information and
documents as the Independent Accountants may reasonably request in order for them to resolve the
items in dispute. The Shareholders (acting jointly) and Purchaser shall each also, within ten (10)
days of the date the items in dispute are referred to the Independent Accountants, provide the
Independent Accountants with a written notice (a “Position Statement”) describing in
reasonable detail their respective positions on the items in dispute (copies of which will
concurrently be delivered to the other party hereto). If any party fails to timely deliver its
Position Statement to the Independent Accountants, the Independent Accountants shall resolve the
items in dispute solely upon the basis of the information otherwise provided to them. The
Independent Accountants shall resolve all disputed items in a written determination to be delivered
to the Shareholders and Purchaser within forty-five (45) days after such matter is referred to
them; provided, however, that any delay in delivering such determination shall not
invalidate such determination or deprive the Independent Accountants of jurisdiction to resolve the
items in dispute. The decision of the Independent Accountants as to the items in dispute shall be
final and binding upon the parties hereto and shall not be subject to judicial review. The fees
and expenses of the Independent Accountants incurred in the resolution of any items in dispute
shall be reasonably determined by the Independent Accountants and set forth in their report and
shall be allocated and paid by the Shareholders (jointly) and Purchaser in inverse proportion to
the extent they prevailed on the items in dispute.




          (f) Within five (5) business days after the final determination of the Closing Date Balance
Sheet and the calculation of Closing Date Working Capital (whether through
failure of Shareholders to timely deliver a Dispute Notice, agreement of the parties, or
determination of the Independent Accountants),





8









 









          (i) if Closing Date Working Capital is less than the Base Working Capital, Mr.
Kurtin shall pay Purchaser 50% of the difference and Mr. Defay shall pay Purchaser 50% of
the difference; or




          (ii) if the amount of cash included in Closing Date Working Capital is less than One
Hundred Thousand Dollars ($100,000), Mr. Kurtin shall pay Purchaser 50% of the difference
and Mr. Defay shall pay Purchaser 50% of the difference; or




          (iii) if Closing Date Working Capital is more than the Base Working
Capital and the amount of cash included in Closing Date Working Capital is greater
than One Hundred Thousand Dollars, Purchaser shall pay Shareholders the difference
up to the amount of cash in excess of $100,000.



          (g) Unless otherwise agreed to in writing by Purchaser and the Shareholders, all payments
under Section 2.3(f) above shall be made by wire transfer of immediately available funds to
an account or accounts designated in writing by the Shareholders or Purchaser, as appropriate,
which designation shall be made by the party receiving such payment no later than one (1) business
day prior to the payment date.




          (h) If Purchaser fails to timely deliver the Post-Closing Delivery or if during the Resolution
Period the dispute described in the Dispute Notice is not resolved and Purchaser fails to timely
refer the dispute to the Independent Accountants, Purchaser shall not be entitled to any adjustment
under this Section 2.3.




ARTICLE III

THE CLOSING




     3.1 Closing. The closing of the sale and purchase of the Stock (the
“Closing”) shall take place electronically at or about 1:00 p.m. Eastern Standard Time on
May 16, 2007, through the offices of Purchaser’s counsel, Sommer Barnard PC, in Indianapolis,
Indiana and Shareholder’s counsel, Blanchard, Krasner & French, PC, in LaJolla, California, or at
such other time, date or place as agreed to by the parties hereto.



     3.2 Closing Deliveries of Purchaser. At the Closing, in addition to any other
documents specifically required to be delivered pursuant to this Agreement, Purchaser shall deliver
to the Shareholders:



     (a) the immediately available funds as required by Sections 2.2(a) above;



     (b) the Note, duly executed by Purchaser;



     (c) a counterpart to an Employment and Non-Competition Agreement with David Schneider, in the
form attached hereto as Exhibit B (the “Employment Agreement”);



     (d) counterparts to Consulting Agreements with Jon R. Kurtin and Ralph M. Defay, in the forms
attached hereto as Exhibits C and D, respectively (the “Consulting
Agreements”);



9









 





     (e) a counterpart to a retention bonus letter for each of the employees listed on Exhibit
G, duly executed by the Purchaser (the “Bonus Retention Letters”);



     (f) certificate of the Secretary or Assistant Secretary of Purchaser, dated as of the date
hereof, certifying (i) the resolutions duly adopted by the manager and sole member of Purchaser
authorizing and approving the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, and (ii) that such resolutions have not been
rescinded or modified and remain in full force and effect as of the Closing Date; and



     (g) a certificate to be dated as of the Closing Date, certifying that Purchaser performed and
complied with all the terms, provisions and conditions of this Agreement to be performed and
complied with by it prior to Closing and that its representations and warranties contained herein
are true in all respects as of the date of this Agreement and as of the Closing Date.



     3.3 Closing Deliveries of the Shareholders. At the Closing, in addition to any other
documents specifically required to be delivered pursuant to this Agreement, the Shareholders shall
deliver to Purchaser the following:



     (a) certificates representing all of the Stock, endorsed to Purchaser or in blank by an
effective endorsement sufficient to give Purchaser “control” of the Stock for purposes of Section
303 of Article 8 of the Uniform Commercial Code and free and clear of all Restrictions;



     (b) counterparts to the Employment Agreement and the Consulting Agreements, duly executed by
Messrs. Schneider, Kurtin and Defay (as appropriate);



     (c) [intentionally omitted]




     (d) a certificate of the Secretary or Assistant Secretary of the Company, dated as of the date
hereof, certifying (i) the resolutions duly adopted by the Board of Directors of the Company
authorizing and approving the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, (ii) that such resolutions have not been
rescinded or modified and remain in full force and effect as of the Closing Date, and (iii) the
Articles of Incorporation of the Company, as amended and in effect on the date hereof;



     (e) a certificate of the Shareholders to be dated as of the Closing Date, certifying that the
Shareholders and the Company have performed and complied with all the terms, provisions and
conditions of this Agreement to be performed and complied with by them prior to Closing and that
their representations and warranties contained herein are true in all respects as of the date of
this Agreement and as of the Closing Date;



     (f) the original minute books, stock ledgers and corporate seal (if any) of the Company; and



10









 





     (g) evidence of the payment in full and satisfaction of all Indebtedness.



     3.4 Closing Deliveries of the Company. At the Closing, the Company shall deliver to
Purchaser a certificate or certificates representing the New Stock duly executed and issued by the
Company, subject to any applicable securities law legends.



ARTICLE IV

SHAREHOLDERS’ REPRESENTATIONS AND WARRANTIES




     The Shareholders, severally but not jointly, represent and warrant to Purchaser as follows:



     4.1 Organization.



          (a) The Company is a corporation duly organized, validly existing and in good standing under
the laws of the State of California. Schedule 4.1(a) contains a true, accurate and
complete list of each jurisdiction in which the Company is qualified to do business as a foreign
corporation. The Company is duly qualified to do business as a foreign corporation and is in good
standing under the Laws of each state or other jurisdiction in which either the ownership or use of
the properties owned or used by it, or the nature of the activities conducted by it, requires such
qualification.




          (b) The Company has full corporate power and authority to own or use its properties and assets
and carry on its business activities as now conducted. Schedule 4.1(b) lists the addresses
of all locations at which the Company conducts its business.




          (c) Complete and accurate copies of the Articles of Incorporation, By-Laws, minute books and
stock transfer books of the Company have been delivered to Purchaser. The minute books of the
Company fairly and accurately reflect all material actions of the Board of Directors and the
shareholders of the Company. The stock transfer books of the Company are correct, complete and
current, and, to the extent applicable, all documentary and stock transfer tax stamps required in
connection with the issuance and transfer of shares of the Company’s stock have been duly paid,
affixed or canceled.




     4.2 Authorization. The Company and each Shareholder has full power and authority to
execute and deliver this Agreement and to perform his or its respective obligations hereunder. The
execution, delivery and performance of this Agreement have been duly authorized by all necessary
action on the part of the Company and each Shareholder.



     4.3 Validity; Binding Effect. This Agreement has been duly and validly executed and
delivered by the Company and each Shareholder. This Agreement constitutes a valid and legally
binding obligation of the Company and each Shareholder, enforceable against the Company and each
Shareholder in accordance with its terms, except as enforceability may be limited by bankruptcy,
insolvency and similar laws and/or by principals of equity.




11









 





     4.4 Noncontravention. Except as set forth in Schedule 4.4, the
execution, delivery and performance of this Agreement by the Company and each Shareholder, the
consummation by the Company and each Shareholder of the transactions contemplated hereby, and the
compliance by the Company and each Shareholder with or fulfillment by the Company and each
Shareholder of the terms and provisions hereof or of any other agreement or instrument contemplated
hereby, do not and shall not (a) conflict with or result in a breach of any of the provisions of
the constituent documents of the Company, (b) contravene any Order which affects or binds either of
the Shareholders, the Stock, the Company or any of its properties, (c) to the knowledge of
Shareholders and Management, contravene any Law which affects or binds either of the Shareholders,
the Stock, the Company or any of its properties; or (d) conflict with, contravene or constitute a
default or breach of or under, or require the consent of any third party under any Material
Contract or any contract or agreement to which either Shareholder is a party or by which either of
them or the Stock is bound.



     4.5 Capital Structure.



          (a) The authorized capital stock of the Company consists of One Hundred Thousand (100,000)
authorized common shares consisting of Fifty Thousand (50,000) Class A Common shares with no par
value and Fifty Thousand (50,000) Class B Common shares with no par value, of which Nine Hundred
(900) Class A Common and One Hundred Twenty (120) Class B Common shares have been duly and validly
issued, are fully-paid and non-assessable, and all of which are owned, beneficially and of record,
by the Shareholders as described on Schedule 4.5 (collectively, the “Stock”), free
and clear of any and all Restrictions.




          (b) Other than as described on Schedule 4.5, there are no issued and/or outstanding
equity securities of the Company, or securities convertible into or exchangeable or exercisable for
equity securities of the Company, and there are no outstanding options, warrants, rights,
contracts, commitments, understandings or arrangements by which the Company or any other Person is
bound to issue, repurchase or otherwise acquire or retire any equity securities of the Company.
There are no voting trusts, proxies or any other agreements or understandings with respect to the
voting of any equity securities of the Company.




          (c) No equity or other securities of the Company (including the common shares described on
Schedule 4.5), were issued in violation of any Law.




          (d) The Company does not own, or have any right, option or obligation to acquire, any equity
securities of any other Person.




     4.6 Financial Statements.



          (a) Attached hereto as Schedule 4.6(a) are true, accurate and complete copies of the
following: the unaudited balance sheet of the Company as of January 31, 2007 (the “Balance
Sheet”) and the related unaudited statements of operations and comprehensive income,
shareholder’s equity, and cash flows for the fiscal year then ended (collectively, the
“Financial Statements”).




12









 








          (b) The Financial Statements (i) fairly present, in all material respects, the operating
results, the financial condition, changes in shareholder’s equity and cash flow of the Company on
the dates and for the periods indicated, (ii) are correct and complete in all material respects,
(iii) are consistent with the books and records of the Company (which books and records are correct
and complete), and (iv) were prepared in accordance with cash basis accounting, rather than GAAP.




          (c) The Company has no liabilities or obligations of any nature (whether absolute, accrued,
contingent or otherwise) except for (x) liabilities or obligations reflected or reserved against in
the Balance Sheet, (y) immaterial liabilities or obligations incurred since the date of the Balance
Sheet in the ordinary course of business, and (z) liabilities or obligations set forth in the
Material Contracts or Schedule 4.6(c).




          (d) Except as set forth on Schedule 4.6(d), since the date of the Balance Sheet, (i)
there has not been any material adverse change in the business, operations, assets, prospects, or
condition of the Company, and to the knowledge of the Shareholders no event has occurred or
circumstance exists that could reasonably be expected to result in such a change, (ii) the Company
has operated only in the ordinary course, (iii) no party has accelerated, terminated, modified or
cancelled any material agreement, contract, lease or license to which the Company is a party or by
which the Company is bound, and (iv) the Company has not experienced any material damage,
destruction or loss (whether or not covered by insurance) to any of its material assets.




          (e) All accounts receivable of the Company as of January 31, 2007 are set forth on
Schedule 4.6(e) (collectively, the “Accounts Receivable”) and represent (i) valid
obligations arising from sales actually made or services actually performed in the ordinary course
of business, (ii) rebates owed to the Company by vendors, and (iii) loans made to employees of the
Company. To the knowledge of Shareholders, there is no contest, claim, or right of set-off, other
than returns in the ordinary course of business, under any agreement with any obligor of an Account
Receivable relating to the amount or validity of such Account Receivable.




          (f) To the knowledge of Shareholders, all inventory of the Company, whether or not reflected
in the Balance Sheet, consists of a quality and quantity usable and salable in the ordinary course
of business, except for obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Balance Sheet or in the accounting
records of the Company as of the Closing Date, as the case may be. All inventories not written off
are reflected in the Balance Sheet at cost. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are reasonable in the present
circumstances of the Company.




     4.7 Title to and Sufficiency of Assets.



          (a) Schedule 4.7(a) contains a complete and accurate list of all real property leased
or otherwise occupied by the Company. The Company does not own any real property. The Company
owns all the properties and assets (whether tangible or intangible) that it purports
to own, including all of the properties and assets reflected in the Balance Sheet (except for
assets

13









 








held under capitalized leases and personal property sold since the date of the Balance Sheet
in the ordinary course of business), and all of the properties and assets purchased or otherwise
acquired by the Company since the date of the Balance Sheet (except for personal property acquired
and sold since the date of the Balance sheet in the ordinary course of business).




          (b) Except as set forth in Schedule 4.7(b), all of the properties and assets reflected
in the Balance Sheet are owned by the Company free and clear of any and all Liens and are not, in
the case of real property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations or limitations of any nature except, (i) liens for current taxes not yet
due, (ii) minor imperfections of title, none of which is substantial in amount, materially detracts
from the value or impairs the use of the property subject thereto, or impairs the operations of the
Company, (iii) zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto, and (iv) terms of lease and license agreements.




          (c) The building, plants, structures, equipment and other assets of the Company are sufficient
for the continued conduct of the Company’s business after the Closing in substantially the same
manner as conducted prior to the Closing.




     4.8 Tax Matters. The Company has filed or caused to be filed all tax returns, and all
reports with respect to taxes, required to have been filed by or with respect to the Company prior
to the date hereof. To the knowledge of the Shareholders, all such tax returns or reports were
true, accurate, correct and complete in all material respects. The Company is not the beneficiary
of any extension of time within which to file any tax return or report. To the knowledge of the
Shareholders, the Company has paid, caused to be paid or the Shareholders will cause to be paid all
taxes, penalties and interest required to have been paid by the Company on or before their
respective due dates. The Company has withheld, deducted, collected and paid all taxes required to
have been withheld, deducted, collected and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party by the Company. The
Company has not waived any statute of limitations in respect of taxes or agreed to any extension of
time with respect to a tax assessment or deficiency. No claim has ever been made by a governmental
authority in a jurisdiction where tax returns by the Company have not been filed that the Company
is or may be subject to taxation by such jurisdiction. To the knowledge of the Shareholders, there
are no Liens on any of the Company’s assets or properties that arose in connection with any failure
(or alleged failure) to pay any tax. No tax return of the Company has been audited or is currently
under audit or examination. There is no tax sharing agreement, tax allocation agreement, tax
indemnity obligation or similar written or unwritten agreement, arrangement, understanding or
practice with respect to taxes (including any advance pricing agreement, closing agreement or other
arrangement relating to taxes) that will require any payment by the Company. The Company is not
now and has never been an S-corporation as defined in Code Section 1361.



     4.9 Litigation; Claims. Except as set forth in Schedule 4.9, the Company is
not (a) subject to any outstanding injunction, judgment, order, decree, ruling or charge of any
governmental authority or arbitrator (collectively, an “Order”),
nor (b) a party or, to the knowledge of the Shareholders, threatened to be made a party to any
action, suit, proceeding, hearing, audit or investigation of, in, or before any court or
quasi-judicial or administrative



14









 







agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator or governmental agency or entity having regulatory authority over the
Company. Except as set forth on Schedule 4.9, the Company has not been audited, examined
or otherwise reviewed by any governmental agency or entity, or federal, state or local authorities
during the current or past three (3) fiscal years. No matter described in Schedule 4.9
could reasonably be expected to have a material adverse effect on the business, condition,
operations or prospects of the Company.



     4.10 Legal Compliance. To the knowledge of the Shareholders and Management,



          (a) The Company has complied in all material respects with all applicable Laws, including all
Medicare Laws, Environmental Laws and all Labor and Employment Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been delivered
to or filed or commenced against the Company alleging any failure so to comply. To the knowledge
of the Shareholders, no event has occurred or circumstance exists that (with or without notice or
lapse of time) may constitute or result in a violation by the Company, or a failure on the part of
the Company to comply with, any Law, other than violations that may result from a change of control
of the Company due to the transactions contemplated by this Agreement.




          (b) Except as set forth on Schedule 4.10(b), neither the Shareholders nor any former
holders of any shares of the capital stock of the Company nor any of their Affiliates has ordered,
referred, or requested, directly or indirectly, any items or services from the Company that are
subject or entitled to reimbursement in whole or in part by Medicare, Medicaid or any other state
or federal government reimbursement program.




          (c) Without limiting the generality of the foregoing, the Company is in material compliance
with all conditions and standards for participation in the Medicare and Medicaid programs and is
eligible for participation in Medicare and Medicaid programs. The Company is not operating any
aspect of its business under or subject to a plan of correction or corporate integrity agreement
with a governmental agency or entity. The Company is currently receiving and is entitled to
continue to receive Medicare and Medicaid reimbursement payments, except to the extent the Company
is not entitled to continue receiving Medicare and Medicaid payments as a result of a change of
control due to the transactions contemplated in this Agreement.




          (d) The Company has duly and timely filed all reports and other items required to be filed
prior to the Closing Date (the “Reports”) with any reimbursement program or third party
payor (including, without limitation, Medicare, Medicaid, medically indigent assistance, Blue
Cross, Blue Shield, any health maintenance, preferred provider, independent practice or other
healthcare providers or payors) (collectively, the “Payors”) and has timely paid all
amounts due to such Payors. Except as set forth in Schedule 4.10(d), (i) the Company has
not requested an extension of time in which to file any of the Reports, (ii) the Company is not
delinquent in the payment of any amount due to any Payors, (iii) there are no pending or
threatened audits, claims, assessments, adjustments, challenges or notices from any
governmental agency or entity or Payors with regard to any of the Reports or any reimbursements or
payments that the Company received from the government agency or entity or Payors, (iv) the Company
has not executed any waivers or extension of the statute of

15









 








limitations for the collection or
assessment of any amount due under or in connection with any Report or to any government agency or
entity or Payors, and (v) the Company is not liable for any amounts owed to any Payor or
governmental agency or entity, nor subject to any contractual adjustments, fines or penalties.




          (e) Except as set forth on Schedule 4.10(e), the Company has correctly maintained all
records required to be maintained by the Food and Drug Administration, Drug Enforcement Agency,
State Boards of Pharmacy, Social Security Administration, Health Care Financing Administration, the
Center for Medicare and Medicaid Services, state regulatory agencies and the Medicare and Medicaid
programs.




          (f) To the knowledge of the Shareholders, without limiting the generality of the foregoing,
the Company has not given or received in violation of any Law any payments or any other
remuneration, either directly or indirectly, overtly or covertly, in cash or in kind, in return for
receiving or making referrals for the furnishing or arranging for the furnishing of any item or
service, or in return for purchasing, leasing, ordering, or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service or item in violation of 42 U.S.C.
§1320a 7a and 1320a 7b, commonly known as the “Anti Kickback Statute.” In addition, the Company
has not accepted any referral for the provision of any designated health service, or submitted a
claim for payment to Medicare or Medicaid for the provision of such services, in violation of 42
U.S.C. §1395nn, commonly known as the “Stark Act” or “Stark II.” With respect to any compliance
concerns found to be substantiated, the Company has taken appropriate corrective action and made
all appropriate reports to all applicable governmental agencies or entities, and each such
corrective action and appropriate report is listed and disclosed in Schedule 4.10(f).




          (g) Without limiting the generality of the foregoing, to the extent applicable to the Company,
the Company, in its ordinary business operation, has complied and is currently in compliance with
the requirements of the Health Insurance Portability and Accountability Act of 1996
(“HIPAA”) and its implementing regulations and with the requirements of all applicable
state regulations implementing Title V of the Gramm-Leach-Bliley Act (“GLB”) that are
applicable to the Company’s relationship with any Business Associate (as such term is defined in
HIPAA and/or GLB). To the extent that the Company has access to Protected Health Information (as
such term is defined in HIPAA and/or GLB, “PHI”), and except as necessary to complete the
transactions contemplated by this Agreement or for internal management and compliance purposes, the
Company has not and shall not use or further disclose PHI other than as permitted or required by
HIPAA or as required by Law.




16









 








     4.11 Environmental Laws and Regulations. Except as set forth on Schedule
4.11:



          (a) To the knowledge of the Shareholders, there are no Hazardous Materials present on the
Company’s owned, leased or used real estate or, to the knowledge of the Shareholders, any
geologically or hydrologically adjoining property, including any Hazardous Materials contained in
barrels, aboveground or underground storage tanks, landfills, land deposits, dumps, equipment or
other containers, either temporary or permanent, and deposited or located in land, water, sumps, or
any other part of such owned, leased or used real estate or such adjoining property, or
incorporated into any structure therein or thereon, except in material compliance with
Environmental Laws. The Company has not permitted or conducted any Hazardous Activity except in
material compliance with applicable Environmental Laws.




          (b) To the knowledge of the Shareholders, there has not been a release or threatened release
of any Hazardous Materials at or from the Company’s owned, leased or used real estate (nor by any
Person for whose conduct it is or may be held responsible), except in material compliance with
applicable Environmental Laws.




          (c) To the knowledge of the Shareholders, there has been no release, or any threatened
release, of any Hazardous Materials at or from any site or facility for which the Company is or may
be liable under any applicable Environmental Laws.




     4.12 Permits. Schedule 4.12 contains a complete and accurate list of each
material consent, approval, ratification, waiver or other authorization, license (including import
and export licenses), registration or permit issued, granted, given or otherwise made available by
or under the authority of any governmental authority or pursuant to any Law that is held by the
Company or that otherwise relates to its business, assets or operations (collectively, the
“Permits”). Each Permit is valid and in full force and effect. To the knowledge of the
Shareholders, the Company is, and at all times has been, in material compliance with all of the
terms and requirements of each Permit. To the knowledge of the Shareholders, the Permits listed in
Schedule 4.12 collectively constitute all of the Permits necessary to permit the Company to
lawfully conduct and operate its business and assets in the manner in which it currently conducts
and operates its business and assets.



     4.13 Material Contracts. Schedule 4.13 lists all contracts and agreements
(whether oral or written) to which the Company is a party or by which it is bound that are material
to its business as currently conducted (collectively, the “Material Contracts”), including:



          (a) each agreement that involves performance of services or delivery of goods or materials by
or to the Company of an amount or value in excess of $5,000;




          (b) each lease of personal property requiring payments (in the aggregate) in excess of $10,000
and each lease of real property;




          (c) each agreement with any labor union or other employee representative of a group of
employees relating to wages, hours and other conditions of employment and each employment or
consulting agreement;




17









 








          (d) each agreement (however named) involving a sharing of profits, losses, costs or
liabilities by the Company with any other Person;




          (e) each agreement containing covenants that in any way purport to restrict the Company’s
business activities or limit the freedom of the Company to engage in any line of business or to
compete with any other Person;




          (f) each agreement providing for payments to or by any third parties based on sales, purchases
or profits;




          (g) each power of attorney of the Company that is currently effective and outstanding;




          (h) each agreement that contains or provides for an express undertaking by the Company to
indemnify or hold harmless a third party or to be responsible for consequential damages;




          (i) each agreement for capital expenditures in excess of $5,000;




          (j) each agreement not denominated in U.S. dollars;




          (k) each agreement relating to any of the Intellectual Property;




          (l) each agreement with Medicare, Medicaid, any similar governmental agency or entity, and any
and all Payors; and




          (m) each agreement with any Affiliate of the Company;




          (n) each insurance policy insuring the Company and/or any of its assets, employees, agents or
other representatives; and




          (o) each promissory note, loan agreement or other agreement creating, evidencing or relating
to any Indebtedness.



Except as set forth in Schedule 4.13, with respect to each Material Contract, to the
knowledge of the Shareholders (w) the agreement is legal, valid, binding, enforceable and in full
force and effect, (x) subject to Section 6.5 and to compliance with the terms of the
agreement, the agreement will continue to be legal, valid, binding, enforceable and in full force
and effect on identical terms following the consummation of the transactions contemplated hereby,
(y) the Company and each other party thereto is, and at all times has been, in material compliance
with all applicable terms and requirements of such agreement, and (z) no party thereto has
repudiated any material provision of the agreement. To the knowledge of the Shareholders and
subject to
Section 6.5, each Material Contract that is a Medicare or Medicaid provider/billing
agreements is not subject to any revocation or termination action by any governmental agency or
entity.




18









 








     4.14 Labor and Employment Matters. Schedule 4.14 contains a complete and
accurate list of the following information for each employee of the Company, including each
employee on leave of absence or layoff status: name; job title; date of commencement of employment
or engagement; current compensation paid or payable and any change in compensation since December
31, 2006; sick and vacation leave that is accrued but unused; and service credited for purposes of
vesting and eligibility to participate under any Benefit Plan. Except as set forth in Schedule
4.14 hereto, (a) the Company is not, and has never been, a party to any collective bargaining
agreement or other labor contract; (b) there has not been, there is not presently pending or
existing, and to the knowledge of the Shareholders there is not threatened, any strike, slowdown,
picketing, work stoppage, lock out, or employee grievance process involving the Company; (c) to the
knowledge of the Shareholders, no event has occurred or circumstance exists that could reasonably
be expected to provide the basis for any work stoppage or other labor dispute involving the
Company, (d) there is no pending or, to the knowledge of the Shareholders threatened, against or
affecting the Company any charge or complaint filed with any governmental authority, (e) no
application or petition for an election of or for certification of a collective bargaining agent is
pending with respect to the Company, (f) there is no grievance or arbitration proceeding against
the Company by any employee of the Company, and (g) there is no lockout of any employees by the
Company. All current employees of the Company who provide services for the business of the Company
maintain all necessary certifications, professional qualifications and experience for the their
respective positions and job responsibilities. To the knowledge of the Shareholders, the Company’s
current employees, officers and directors have not been charged with, convicted of or pled guilty
to crimes of theft or dishonesty, financial misconduct, or offenses related to the delivery of
health care; nor have any of the Company’s current officers, directors, or employees been excluded
from participation in Medicare, Medicaid or any other state or federal government reimbursement
program.



     4.15 Employee Benefits. Schedule 4.15 sets forth a true and correct listing of
each profit sharing plan, bonus plan, incentive compensation plan, stock ownership plan, stock
purchase plan, stock option plan, stock appreciation plan, employee benefit plan, employee benefit
policy, retirement plan, fringe benefit program, employee insurance plan, severance plan,
disability plan, health care plan, sick leave plan and death benefit plan of the Company or any
other plan or program which provides retirement income, fringe benefits, welfare benefits, or other
benefits to employees or former employees of the Company and each Pension Plan and Multiemployer
Plan of the Company (collectively, the “Benefit Plans”). Except as set forth in
Schedule 4.15 hereto, neither the Company, nor any ERISA Affiliate of the Company, has
contributed to or accrued an obligation to contribute to a Pension Plan or a Multiemployer Plan.
Neither the Company nor any ERISA Affiliate of the Company has incurred any withdrawal liability to
any Multiemployer Plan. The Company and each ERISA Affiliate of the Company has complied in all
material respects with their respective obligations under the minimum funding standards of ERISA
and the Code with respect to each Pension Plan. To the knowledge of the Shareholders, each Benefit
Plan designated in Schedule 4.15 hereto as being qualified under Section 401(a) of the Code
is
properly qualified and, except as set forth in Schedule 4.15 hereto, nothing has
occurred in the operation of the plan or the adoption or amendment of the plan documents for which
the plan could be disregarded.



19









 





     4.16 Intellectual Property. Schedule 4.16 lists all of the Company’s licensed
(a) registered and unregistered copyrights in both published works and unpublished works (whether
United States or foreign), (b) legal names, assumed fictional business names, trade names,
registered and unregistered trademarks, service marks and applications (whether United States or
foreign), and (c) patents, patent applications and inventions and discoveries that may or may not
be patentable (whether United States or foreign) (collectively, the “Intellectual
Property”). The Company owns no intellectual property. The Intellectual Property,
collectively, constitutes all of the intellectual property necessary for the Company to operate its
business as currently conducted or anticipated to be conducted. To the knowledge of the
Shareholders and other than with respect to the use of the term “Community” in the name of another
pharmacy, none of the Intellectual Property or any of the products manufactured or sold by the
Company, nor any equipment, process or know-how used by the Company infringes, or to the knowledge
of the Shareholders is alleged to infringe, any intellectual property right of any other Person.



     4.17 Affiliate Transactions. Neither the Company, any Shareholder, any former holder
of any shares of the capital stock of the Company nor any of their Affiliates owns or has owned, of
record or as a beneficial owner, an equity interest or any other financial or profits interest in
any Person that has (a) had business dealings with the Company other than business dealings or
transactions disclosed in Schedule 4.17, each of which has been conducted in the ordinary
course of business at substantially prevailing market prices and on substantially prevailing market
terms, or (b) engaged in competition with the Company.



     4.18 Broker’s Fees. Except as set forth in Schedule 4.18, neither the Company
nor the Shareholders have any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement.



     4.19 Warranty. Schedule 4.19 hereto contains a correct and complete copy of
the standard written warranty and return policy of the Company. Except as set forth on
Schedule 4.19 hereto, the Company has not granted to any customer, whether in writing or
otherwise, any other warranty for products sold by the Company. Except as set forth in
Schedule 4.19 hereto, there have been no warranty or product liability claims asserted, or
to the knowledge of the Shareholders threatened to be asserted, against the Company.



     4.20 [Intentionally Omitted]



     4.21 Customers; Suppliers.



          (a) Schedule 4.21(a) is a true and complete list of key customers of the Company which
have purchased products having an aggregate purchase price of $20,000,000 or more from the Company
within the last year (“Customers”). Except as set forth on Schedule 4.20(a), the
Company has not received notice from any key Customer that it has or intends to cease doing
business with the Company, and to the knowledge of the Shareholders and Management, none of the key
Customers intends to cease doing business with the Company.




          (b) Schedule 4.21(b) is a true and complete list of each supplier which has provided
goods or services having an aggregate cost of $25,000,000 or more to the Company

20









 







within twelve
months prior to the date of this Agreement (“Suppliers”) and none of the Suppliers has
given notice that is has or intends to cease transaction business with the Company, and to the
knowledge of the Shareholders and Management, none of the Suppliers intends to cease transacting
business with the Company.




ARTICLE V

PURCHASER’S REPRESENTATIONS AND WARRANTIES




     Purchaser represents and warrants to the Shareholders as follows:



     5.1 Organization of Purchaser. Purchaser is a limited liability company duly
organized and validly existing under the laws of the State of Indiana.



     5.2 Authorization. Purchaser has full legal power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary action on the part of
Purchaser.



     5.3 Validity; Binding Effect. This Agreement has been duly and validly executed and
delivered by Purchaser. This Agreement constitutes a valid and legally binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms.



     5.4
Noncontravention. The execution, delivery and performance of this Agreement by
Purchaser, the consummation of the transactions contemplated hereby and the compliance with or
fulfillment of the terms and provisions hereof or of any other agreement or instrument contemplated
hereby, do not and shall not (a) conflict with or result in a breach of any of the provisions of
the Articles of Organization or the Purchaser Operating Agreement, (b) contravene any Law or Order
which affects or binds Purchaser or any of its properties, or (c) require Purchaser to obtain the
approval, consent or authorization of, or to make any declaration, filing or registration with, any
governmental authority or other third party which has not been obtained in writing prior to the
date of this Agreement.



     5.5 Broker’s Fees. Purchaser has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions contemplated by this
Agreement.



     5.6 Financing. Purchaser has, directly or indirectly through binding commitments for
financing or capital contributions, the financial capability to pay and deliver the immediately
available funds required to be paid by Purchaser to the Shareholders and the Company on the Closing
Date pursuant to Section 2.2.



21









 





ARTICLE VI

COVENANTS PENDING CLOSING




     The parties hereto agree as follows with respect to the period between the execution of this
Agreement and the Closing:



     6.1 General. Each of the parties hereto shall use commercially reasonable efforts to,
and shall take all action and to do all things necessary, proper, or advisable in order to,
consummate and make effective the transactions contemplated by this Agreement.



     6.2 Notices and Consents. Each of the parties hereto shall give any notices to third
parties, and will use commercially reasonable efforts, to (a) obtain any third party consents
necessary to consummate the transactions contemplated by this Agreement, and (b) obtain any
authorizations, consents, and approvals of all governmental authorities necessary to consummate the
transactions contemplated by this Agreement.



     6.3 Due Diligence. The Shareholders and the Company have permitted Purchaser and its
representatives to have access to all premises, properties, personnel, books, records, contracts,
and documents of or pertaining to the Company. The Shareholders and the Company have made
available to Purchaser such financial data, operating data, copies of all contracts or documents to
which the Company is a party, and any other information as Purchaser requested (to the extent not
precluded by any confidentiality agreement). Purchaser acknowledges that it has completed its due
diligence review of the Company, and the Shareholders and the Company shall not be obligated to
provide any further access to the premises, properties, personnel, books, records, contracts,
documents or data of the Company, except that (a) in the event that there is a material change in
any of the foregoing, then Company shall provide such documentation relating to such change as is
reasonably requested by Purchaser and (b) the Shareholders and the Company shall provide reasonable
access and shall cooperate with Purchaser in providing additional due diligence information as
reasonably requested by Purchaser’s lender(s) in connection with financing for the transactions
contemplated herein.



     6.4 The Company’s Operation of the Business Prior to Closing.



          (a) From the date hereof through the Closing Date, the Shareholders shall not permit the
Company to and the Company shall not (unless otherwise agreed to in writing by Parent) engage in
any transaction or take any action other than in the ordinary course of business consistent with
past practice.




          (b) From the date hereof through the Closing Date, the Shareholders shall cause the Company to
and the Company shall operate and maintain its assets and properties in substantially the same
manner in which they have been operated and maintained before the date hereof and shall use
commercially reasonable efforts to preserve the Company’s existing business organization and the
relationships the Company currently maintains with its employees, customers and suppliers.




22









 








          (c) From the date hereof through the Closing Date, the Shareholders shall not permit the
Company to, and the Company shall not, issue any additional securities or rights to acquire or
redeem any equity securities of the Company, other than the New Stock.




          (d) From the date hereof through the Closing Date, the Company may pay or accrue bonuses,
payables and other liabilities provided that sufficient Working Capital is available to meet the
Base Working Capital requirements of Section 2.3.




     6.5 Governmental Permits and Approvals and Third-Party Consents. Notwithstanding any
other provision of this Agreement, Purchaser shall be solely responsible for obtaining any consent,
approval, license, waiver, authorization or other action and making any filing or giving any notice
as may be required under any Material Contract or by any governmental authority in connection with
the Permits including, without limitation, the California Board of Pharmacy, the Cities of San
Diego and Chula Vista, or as required under Medicare Laws. Purchaser shall apply in writing, in
all material respects, for all necessary operating licenses and permits required for the operation
of the business of the Company, not otherwise in place and unaffected by the Stock sale transaction
contemplated by this Agreement (such permits or licenses, the “Required Permits”), as soon
as practical after the date hereof. The Company and Shareholders shall give all cooperation
necessary for the timely completion of such application processes and for obtaining any necessary
third-party consents or the giving of any required notices under the Material Contracts.



     6.6 Press Releases. The Company, the Shareholders and the Purchaser shall not issue
any press releases or make any other public announcements or disclosures to the press or other
media relating to this Agreement or the transactions contemplated hereby without the prior written
consent of the other parties to this Agreement.



     6.7 Update to Schedules. The Shareholders shall promptly (a) supplement, amend and
update any and all of the Schedules referred to in Article IV of this Agreement to reflect
each and every change to each Schedule and
every action, matter or event occurring or arising after the date of this Agreement and prior
to the Closing Date which would make any of Shareholders’ representations and warranties and/or any
such Schedule incomplete or inaccurate or which, if in existence or having occurred as of or prior
to the date of this Agreement, would have been required to be set forth or described in any such
Schedule (collectively, the “Updated Schedules and Materials”), and (b) disclose in writing
to Purchaser each and every document, action, matter, event or other information which, if existing
or known to the Shareholders or Management as of the date hereof, would have made any of the
representations or warranties of the Shareholders contained herein inaccurate, untrue or
misleading. No Updated Schedule or Material and no disclosure pursuant to this Section will be
deemed to amend, modify or limit, or to provide any exceptions with respect to, any representation
or warranty or any original Schedule. The Shareholders acknowledge that any delivery by them of
Updated Schedules and Materials shall be subject to, and shall not affect, Purchaser’s rights under
Section 7.1 hereof in the event that any Updated Schedules and Materials reveal any
representation or warranty given as of the date hereof was or is no longer true.



     6.8 Certain Actions. The Company and Shareholders shall not take any action or fail
to take any reasonable action, and shall not permit any of the Company’s directors, employees,



23









 







representatives or agents to take or fail to take, any action which will result in (a) a
misrepresentation or a breach of any covenant or warranty of Shareholders in this Agreement, (b)
Purchaser having the right to terminate this Agreement, or (c) the non-fulfillment of any condition
to the obligation of Purchaser to consummate the transaction contemplated by this Agreement.



     6.9 No Solicitations. On and after the date of this Agreement and until the Closing
Date or until this Agreement is terminated as provided in Section 10.1, the Company and the
Shareholders shall not, and shall not authorize or permit any of the directors, officers,
employees, attorneys, accountants, investment bankers, representatives or agents of the Company to,
directly or indirectly initiate, solicit, encourage, engage or participate in inquiries,
discussions or negotiations with, or provide any information to, any Person concerning any merger,
consolidation, combination, affiliation, share exchange, tender offer, sale of substantial assets
or securities or any other similar transaction relating to the Company (collectively,
“Acquisition Transactions”). Shareholders shall promptly notify Purchaser in writing of
(a) the existence and terms of any proposal or offer which either of them or the Company may
receive with respect an Acquisition Transaction and (b) any request by or indication of interest on
the part of any third party with respect to the initiation of any Acquisition Transaction or any
discussions with respect thereto.



ARTICLE VII

CONDITIONS PRECEDENT




     7.1 The Purchaser’s Conditions Precedent. The obligation of Purchaser to consummate
the transactions contemplated by this Agreement is subject to the fulfillment at or prior to the
Closing of each of
the following conditions, except to the extent any such condition is waived in writing by
Purchaser:



          (a) Performance by the Company and the Shareholders. The Company and the Shareholders
shall have performed and complied, in all material respects, with all of the terms, provisions and
conditions of this Agreement to be performed and complied with by the Company and/or the
Shareholders at or prior to the Closing, and shall have performed and complied in all respects with
the agreements and obligations set forth in Section 3.3.




          (b) Accuracy of Representations and Warranties. All of the representations and
warranties made by the Shareholders in this Agreement shall be true, in all material respects, as
of the date of this Agreement and as of the Closing Date as if made on the Closing Date (without
giving effect to any qualification as to materiality and/or any Updated Schedules and Materials).




          (c) No Injunction. No injunction, restraining order, judgment, decree of any court or
governmental authority shall be in effect and no litigation shall be pending against any of the
parties to this Agreement seeking to restrain, prevent or adversely alter or collect damages
arising out of the transactions contemplated hereby.




24









 








          (d) No Material Adverse Effect. Since the date of this Agreement, there shall not
have been any Material Adverse Effect and (except as may otherwise be consented to in writing by
Purchaser) the Shareholders shall have caused the Company to conduct business only in the ordinary
course consistent with past practice from the date of this Agreement.




          (e) Required Permits. Purchaser shall have obtained all Required Permits.




     7.2 The Shareholders’ Conditions Precedent. The obligation of the Shareholders to
consummate the transactions contemplated by this Agreement is subject to the fulfillment at or
prior to the Closing of each of the following conditions, except to the extent any such condition
is waived in writing by the Shareholders:



          (a) Performance by Purchaser. Purchaser shall have performed and complied, in all
material respects, with all of the terms, provisions and conditions of this Agreement to be
performed and complied with by Purchaser at or prior to the Closing, and shall have performed and
complied in all respects with the agreements and obligations set forth in Section 3.2.




          (b) Accuracy of Representations and Warranties. All of the representations and
warranties made by Purchaser in this Agreement shall be true, in all material respects, as of the
date of this Agreement and as of the Closing Date as if made as of the Closing Date (without giving
effect to any qualification as to materiality).




          (c) No Injunction. No injunction, restraining order, judgment, decree of any court or
governmental authority shall be in effect and no litigation shall be pending against any of the
parties to this Agreement seeking to restrain, prevent or adversely alter or collect damages
arising out of the transactions contemplated hereby.




          (d) Required Permits. Purchaser shall have obtained all Required Permits.




          (e) Employee Bonuses. The Company shall have paid, or made arrangements to pay, the
bonuses to the employees in the amounts set forth opposite such employee’s name on Exhibit
G attached hereto.




ARTICLE VIII

INDEMNIFICATION




     8.1 Indemnification by the Shareholders. Subject to Section 8.3, the
Shareholders, severally but not jointly, shall indemnify Purchaser and the Company from, against
and in respect of any and all losses, liabilities, deficiencies, penalties, fines, costs, damages
and expenses whatsoever (including, without limitation, reasonable professional fees and costs of
investigation, litigation, settlement and judgment and interest) (collectively, “Losses”)
that may be suffered or incurred by Purchaser and/or the Company from or by reason of (a) any
inaccuracy or breach of a representation or warranty made by the Shareholders in this Agreement,
the Schedules or any other certificate or document delivered by the Shareholders pursuant to this
Agreement, (b) any breach of any covenant or agreement made by the Shareholders in this Agreement,
the Schedules or any other certificate or document delivered by



25









 







the Shareholders pursuant to this
Agreement, (c) any Indebtedness of the Company required to be paid at or prior to the Closing which
remains unsatisfied after the Closing, including, without limitation, any claim by any Person for
brokerage or finder’s fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with any Shareholder and/or the Company
(or any Person acting on their behalf) in connection with the transactions contemplated hereby.



     8.2 Indemnification by Purchaser. Purchaser shall indemnify the Shareholders against
any and all Losses that may be suffered or incurred by the Shareholders from or by reason of (a)
any inaccuracy of a representation or warranty made by Purchaser in this Agreement, or any other
certificate or document delivered by Purchaser pursuant to this Agreement, (b) any breach of any
covenant or agreement made by Purchaser in this Agreement, or any other certificate or document
delivered by Purchaser pursuant to this Agreement, and (c) any claim by any Person for brokerage or
finder’s fees or commissions or similar payments based upon any agreement or understanding alleged
to have been made by any such Person with Purchaser (or any Person acting on its behalf) in
connection with the transactions contemplated hereby.



     8.3 Limitations on Indemnity.



     (a) The Shareholders shall not have any liability or obligation to Purchaser or the Company
whatsoever, and no claim shall be asserted against the Shareholders, for indemnification under
Section 8.1(a) unless and until the aggregate amount of Losses incurred by Purchaser and/or
the Company as a result thereof exceeds $100,000, and then only to the extent the aggregate amount
of such Losses exceeds $100,000 and is less than Four Million Seven Hundred and Fifty Thousand
Dollars ($4,750,000); provided, however, that the limitations set
forth above in this Section 8.3(a) shall not apply to (i) any intentional breach of
the Shareholders’ representations or warranties of which any Shareholder had knowledge at any time
prior to or on the date hereof, or (ii) claims for indemnification resulting from the breach or
inaccuracy of the representations and warranties set forth in Sections 4.5(a),
4.6(g) and 4.8. In addition and for the avoidance of doubt, the limitations set
forth above in this Section 8.3(a) shall not apply to claims for indemnification arising
under Sections 8.1(b) and/or 8.1(c).



          (b) All representations and warranties in this Agreement, the Schedules and the certificates
and other documents delivered pursuant hereto shall survive the Closing and be enforceable against
the party making the same for a period of one (1) year from the Closing Date at which time they
shall expire and be of no further force or effect; provided, however, that (i) the
representations and warranties set forth in Section 4.5(a) shall survive for a period of
two (2) years, (ii) the representations and warranties set forth in Section 4.10 shall
survive for a period of eighteen (18) months, and (iii) the representations and warranties set
forth in Section 4.8 shall survive for the period of the statute of limitations applicable
to such representations and warranties. Any claim for indemnification with respect to any such
matter which is not asserted by a notice given as herein provided within such period of survival
may not be pursued and shall be thereafter forever barred. Indemnification pursuant to this
Article 8 shall be the sole remedy of Shareholders and Purchaser for a breach of a representation
or warranty made pursuant to this Agreement; other than fraudulent breaches of representations or
warranties for which common law remedies are available.




26









 








     8.4 Third-Party Claims.



          (a) Promptly after receipt by a party hereto entitled to indemnity under Section 8.1
or Section 8.2 (an “Indemnified Person”) of notice of the assertion of a claim for
which such party hereto is entitled to indemnity hereunder against it by a third party (a
“Third-Party Claim”), such Indemnified Person shall give notice to the party hereto
obligated to indemnify under such Section (an “Indemnifying Person”) of the assertion of
such Third-Party Claim, provided that the failure to notify the Indemnifying Person will not
relieve the Indemnifying Person of any liability that it may have to any Indemnified Person, except
to the extent that the Indemnifying Person demonstrates that the defense of such Third-Party Claim
is prejudiced by the Indemnified Person’s failure to give such notice.




          (b) If an Indemnified Person gives notice to the Indemnifying Person pursuant to Section
8.4(a) of the assertion of a Third-Party Claim, the Indemnifying Person shall be entitled to
participate in the defense of such Third-Party Claim and, to the extent that it wishes, to assume
the defense of such Third-Party Claim with counsel satisfactory to the Indemnified Person. After
notice from the Indemnifying Person to the Indemnified Person of its election to assume the defense
of such Third-Party Claim, the Indemnifying Person shall not, so long as it diligently conducts
such defense, be liable to the Indemnified Person under this Article VIII for any fees or
costs of other counsel or any other expenses with respect to the defense of such Third-Party Claim,
in each case subsequently incurred by the Indemnified Person in connection with the defense of such
Third-Party Claim. If the Indemnifying Person assumes the defense of a Third-Party Claim, (i) such
assumption will establish for purposes of this Agreement that the claims made in that Third-Party
Claim are within the scope of and subject to indemnification, and (ii) no compromise or settlement
of such Third-Party Claims may be effected by the
Indemnifying Person without the Indemnified Person’s consent unless (A) there is no finding or
admission of any violation of Law or any violation of the rights of any party; and (B) the sole
relief provided is monetary damages that are paid in full by the Indemnifying Person. If notice is
given to an Indemnifying Person of the assertion of any Third-Party Claim and the Indemnifying
Person does not, within ten (10) days after the Indemnified Person’s notice is given, give notice
to the Indemnified Person of assumption of the defense of such claim as set forth above, the
Indemnifying Person will be bound by any determination made in such Third-Party Claim or any
compromise or settlement effected by the Indemnified Person, and shall be liable to the Indemnified
Person for any costs and expenses incurred in the defense of such claim.




ARTICLE IX

ADDITIONAL COVENANTS




     9.1 General. If any further action is necessary or desirable to carry out the
purposes of this Agreement, each of the parties hereto will take such further action (including,
without limitation, 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 VIII
above).



27









 





ARTICLE X

TERMINATION




     10.1 Termination Events. This Agreement may be terminated:



          (a) by Purchaser, on the one hand, or the Shareholders (acting jointly), on the other hand, if
a material breach of any provision (including representations and warranties) of this Agreement has
been committed by the other party and such breach has not been waived in writing or, if capable of
being cured, not cured before the earlier of (i) ten (10) days after such breach, or (ii) the
Termination Date;




          (b) (i) by Purchaser if any of the conditions precedent set forth in Section 7.1 have
not been satisfied as of the Termination Date or if satisfaction of such a condition becomes
impossible (other than through failure of Purchaser to comply with its obligations under this
Agreement) and Purchaser has not waived such condition in writing on or before the Termination
Date, or (ii) by the Shareholders (acting jointly) if any of the conditions precedent set forth in
Section 7.2 have not been satisfied as of the Termination Date or if satisfaction of such a
condition becomes impossible (other than through failure of the Company and/or the Shareholders to
comply with their obligations under this Agreement) and the Shareholders (acting jointly) has not
waived such condition in writing on or before the Termination Date; or




          (c) by mutual written agreement of Purchaser and the Shareholders (acting jointly).




     10.2 Effect of Termination. If this Agreement is terminated under Section
10.1 above, no party hereto shall have any further obligation under this Agreement.



     10.3 Termination Fee.



          (a) If all of the conditions of Section 7.1 are met on or before the Termination Date,
and Purchaser fails or refuses to close for any reason the transaction contemplated by this
Agreement on or before the Termination Date, the Shareholders shall be entitled to retain the
entire Deposit Amount as liquidated damages. The parties hereto expressly agree and acknowledge
that Shareholder’s actual damages in the event of a default by Purchaser would be extremely
difficult or impracticable to ascertain and that the Deposit Amount plus any interest accrued
thereon represents the parties’ reasonable estimate of such damages. The payment of such amount as
liquidated damages is not intended as a forfeiture or penalty within the meaning of California
Civil Code Sections 3275 or 3369, but is intended to constitute liquidated damages to the
Shareholders pursuant to California Civil Code Section 1671.




          (b) If all of the conditions of Section 7.2 are met on or before the Termination Date,
and the Company and the Shareholders fail or refuse to close for any reason the transaction
contemplated by this Agreement on or before the Termination Date, the entire Deposit Amount shall
be paid back to Purchaser, and Purchaser shall, at its option, be entitled to payment by the
Shareholders and the Company of $300,000 as liquidated damages (in addition to any portion of the
Deposit Amount retained by the Company) within ten (10) business days after termination of this
Agreement. The parties hereto expressly agree and acknowledge that Purchaser’s actual

28









 








damages in
the event of a default by Company or the Shareholders would be extremely difficult or impracticable
to ascertain and that $300,000 plus any interest accrued thereon represents the parties’ reasonable
estimate of such damages. The payment of such amount as liquidated damages is not intended as a
forfeiture or penalty within the meaning of California Civil Code Sections 3275 or 3369, but is
intended to constitute liquidated damages to the Purchaser pursuant to California Civil Code
Section 1671.




          (c) In the event Purchaser fails to close the transaction contemplated by this Agreement on or
before the Termination Date because of a failure to satisfy the condition set forth in Section
7.1(a), and such failure is due to a breach by the Company or the Shareholders of this
Agreement, or Purchaser terminates this Agreement pursuant to Section 10.1(a) above for
breach by the Shareholders or the Company, the entire Deposit Amount shall be paid back to
Purchaser.




          (d) If the Purchaser terminates this Agreement pursuant to Section 10.1(b)(i) above
for a failure of satisfaction of the condition set forth in Section 7.1(e), or the Company
or the Shareholders terminate this Agreement pursuant to Section 10.1(b)(ii) above for
failure of satisfaction of the condition set forth in Section 7.2(d), the Shareholders
shall be entitled to retain the entire Deposit Amount as liquidated damages.




ARTICLE XI

MISCELLANEOUS




     11.1 Assignment. No party may assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of the other party hereto,
except that Purchaser may, without the prior written consent of the Company or the Shareholders (a)
collaterally assign its rights hereunder to any financial institution or other lender in connection
with the financing of the transactions contemplated hereby, (b) assign its rights and/or
obligations hereunder (in whole or in part) to one or more subsidiaries or other Affiliated
entities, and/or (c) after the Closing, assign to any person or entity who acquires the Company or
its business (regardless of the form of such acquisition) any of its rights under this Agreement.



     11.2 Notices. All notices, requests, consents and other communications hereunder
(each, a “Notice”) shall be in writing and shall be deemed to have been given (a) if
mailed, two (2) business days after such Notice is sent, when sent via first class United States
registered mail, return receipt requested, postage prepaid to the address listed below for the
party to whom the Notice is being sent (the “Notice Party”), (b) if hand delivered or
delivered by courier, upon actual delivery of such Notice to the Notice Party at the address listed
below for such Notice Party, or (c) if sent by facsimile, on the first business day after the date
of the sender’s receipt of a confirmed transmission of such Notice to the Notice Party at the
facsimile number, if any, listed below for such Notice Party provided the party giving such Notice
mails a copy of such Notice within two (2) business days after the transmission of such Notice by
facsimile to the Notice Party. The addresses and facsimile numbers for each party to this
Agreement, as of the date hereof, are:



29









 





	 	 	 
	If to Purchaser (or the

	 	Universal HealthCare Company LLC
	Company, after Closing):

	 	10689 N. Pennsylvania St.
	 

	 	Indianapolis, IN 46280
	 

	 	Facsimile No.: 317-574-6227
	 

	 	Attention: Ronald D. Hunter
	 
	 	 
	 

	 	with a copy to:
	 
	 	 
	 

	 	Sommer Barnard
	 

	 	One Indiana Square, Suite 3500
	 

	 	Indianapolis, IN 46204
	 

	 	Facsimile No.: 317-713-3699
	 

	 	Attention: Robert J. Hicks
	 
	 	 
	If to the Shareholders or

	 	Jon R. Kurtin
	the Company (prior to

	 	12672 Caminito Radiante
	Closing:

	 	San Diego, CA 92130
	 

	 	Facsimile No.: 858-793-7977
	 
	 	 
	 

	 	with a copy to:
	 
	 	 
	 

	 	Robert W. Blanchard
	 

	 	Blanchard, Krasner & French, P.C.
	 

	 	800 Silverado Street, Second Floor
	 

	 	La Jolla, Ca. 92037
	 

	 	Facsimile No: 858 551-2434





Either party may change its address or facsimile number by providing written notice, in accordance
with the foregoing provisions of this Section 11.2, to the other party of such change.




     11.3 Expenses; Attorneys’ Fees.



          (a) Each party hereto will pay all costs, fees and expenses incident to its negotiation and
preparation of this Agreement and to its performance and compliance with all agreements contained
herein on its part to be performed, including the fees, expenses and disbursements of its
respective counsel and accountants.




          (b) In any litigation between the parties regarding this Agreement, the losing party shall pay
to the prevailing party all reasonable expenses and court costs, including, without limitation,
reasonable attorneys’ fees and costs, incurred by the prevailing party. A party shall be
considered the prevailing party if (i) it initiated the litigation and obtains substantially all of
the relief or remedy it sought, either through a judgment or the losing party’s voluntary action,
(ii) the other party withdraws its action without substantially obtaining the relief or remedy it
sought, or (iii) it did not initiate the litigation and judgment is entered for either party, but
without substantially granting the relief or remedy sought by the initiating party.




30









 








     11.4 Governing Law; Forum.



          (a) This Agreement shall be governed by and construed in accordance with the Laws of the State
of California, without regard to such jurisdiction’s conflict of laws principles.




          (b) Except as otherwise set forth in this Agreement, any controversy, claim or dispute arising
out of or relating to this Agreement or the breach, termination, enforceability or validity of this
Agreement, shall be determined exclusively by binding arbitration (i) in the City of Indianapolis,
Indiana if brought by the Company (prior to Closing) or the Shareholders (or either of them), and
(ii) in the City of San Diego, California if brought by the Company (after the Closing) or
Purchaser. The arbitration shall be governed by the rules and procedures of the American
Arbitration Association (the “AAA”) under its Commercial Arbitration Rules. No provision
of, nor the exercise of any rights under, this Section 11.4 shall limit the right of any
party to request and obtain from a court of competent jurisdiction before, during or after the
pendency of any arbitration, provisional or ancillary remedies and relief including injunctive or
mandatory relief or the appointment of a receiver. The institution and maintenance of an action or
judicial proceeding for, or pursuit of, provisional or ancillary remedies shall not constitute a
waiver of the right of any party, even if it is the plaintiff, to submit the dispute to
arbitration if such party would otherwise have such right. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction.




     11.5 Partial Invalidity. In case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement,
but this Agreement shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.



     11.6 Execution in Counterparts; Facsimile Signatures. This Agreement may be executed
in one or more counterparts, each of which shall be considered an original counterpart, and all of
which shall be considered to be but one agreement and shall become a binding agreement when each
party shall have executed one counterpart and delivered it to the other party hereto. A signature
affixed to a counterpart of this Agreement and delivered by facsimile by any Person is intended to
be its, his or her signature and shall be valid, binding and enforceable against the party on whose
behalf it has been affixed.



     11.7 Entire Agreement; Amendments and Waivers. This Agreement contains the entire
understanding of the parties hereto with regard to the subject matter contained in this Agreement
and supersedes all prior agreements or understandings of the parties (including, without
limitation, the Letter of Interest, dated October 19, 2005). The parties, only by mutual agreement
in writing, may amend, modify or supplement this Agreement. The failure of any party to this
Agreement to enforce at any time any provision of this Agreement shall not be construed to be a
waiver of such provision, nor in any way to affect the validity of this Agreement or any part
hereof or the right of such party thereafter to enforce each and every such provision. No waiver
of any
breach of this Agreement shall be held to constitute a waiver of any



31









 







other or subsequent
breach. Time shall be of the essence in the payment and performance by each party of all of its
obligations under this Agreement.



     11.8 No Third Party Beneficiary. This Agreement is intended and agreed to be solely
for the benefit of the parties hereto, and no third party shall accrue any benefit, claim or right
of any kind whatsoever pursuant to, under, by or through this Agreement.



[Signature Page Follows]




32









 





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



	 	 	 	 	 	 	 	 	 
	Universal HealthCare Company LLC	 	In-House Pharmacies, Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Ronald D. Hunter, its                                        
	 	Printed:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Jon R. Kurtin	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Ralph M. Defay	 	 






S-1




 









 





EXHIBIT G




Employee Cash Bonuses




	 	 	 	 	 
	Employee Name:	 	Bonus:
	David W. Schneider
	 	$	328,000.00	 
	Philip Curtis
	 	$	328,000.00	 
	Michelle Darnelle
	 	$	328,000.00	 
	Steve W. Kelso
	 	$	164,000.00	 
	Naomi T. Peters
	 	$	16,400.00	 
	Kathleen Pitcher
	 	$	8,200.00	 





Provided that the following employees are employed by the Company or Purchaser on May 16, 2009,
they shall be entitled to the following additional retention bonus:




	 	 	 	 	 
	Employee Name:	 	Retention Bonus:
	David W. Schneider
	 	$	328,000.00	 
	Philip Curtis
	 	$	328,000.00	 
	Michelle Darnelle
	 	$	328,000.00	 
	Steve W. Kelso
	 	$	164,000.00	 
	Naomi T. Peters
	 	$	16,400.00	 
	Kathleen Pitcher
	 	$	8,200.00	 





In the event any of the above employees voluntarily terminates his or her employment or the Company
terminates his or employment “for cause” (as defined in the employee’s Retention Bonus Letter
attached hereto as Exhibit G-1) prior to May 16, 2009, and the retention bonus is not paid to such
employee, the amount not paid to the terminated employee shall be paid to the above employees
remaining employed by Purchaser or the Company on May 16, 2009, pro rata, based upon the amounts of
their respective retention bonuses set forth above. If none of the employees listed above is
eligible to receive a bonus on May 16, 2009, then all of the retention bonuses shall be paid to the
Shareholders (50% to Mr. Kurtin and 50% to Mr. Defay).