EXHIBIT 2.1
PURCHASE OF NET REVENUE INTEREST
This Agreement is made on July 1, 2002, by and among ITIS INC., a Delaware
corporation (hereinafter referred to as "ITIS"), PHARMHOUSE, INC., a Texas
corporation ("PHARMHOUSE") and RAINMAKER VENTURES, LTD., a Texas limited
partnership (hereinafter referred to as "RAINMAKER").
RECITALS
PHARMHOUSE operates a business primarily engaged in establishing specialty
medication pharmacies; and
PHARMHOUSE owns licenses to open specialty medication pharmacy stores in
certain territories in Texas and the United States; and
RAINMAKER desires to acquire a fifty percent (50%) interest in and to the
net revenues of the first fourteen (14) separately-licensed specialty medication
pharmacy locations to be opened by PHARMHOUSE and an option to acquire a fifty
percent (50%) interest in and to the net revenues of an additional four (4)
separately-licensed specialty medication pharmacy locations to be opened by
PHARMHOUSE; and
ITIS desires to obtain additional funds to invest in PHARMHOUSE.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement and other good and valuable considerations, which is acknowledged to
be sufficient, the parties agree as follows:
TERMS OF AGREEMENT
SECTION 1. GRANT OF NET REVENUE INTEREST
1.1 DEFINITION OF "NET REVENUE". For the purposes of this Agreement, the
terms "Net Revenue" of any separately licensed specialty medication pharmacy
location mean for any period the difference between (a) all receipts arising
from the sale of prescription medications during such period by such location,
less (b) the sum during such period of (i) the costs of such sales, (ii) wages,
salaries, benefits, and other costs of personnel, whether or not full time
employees of PHARMHOUSE, employed at such location, (iii) rent, depreciation,
taxes, and repairs and maintenance of all fixed assets at such location, (iv)
interest on accounts or notes payable or other indebtedness relating to such
location, and (v) other costs or expenses associated with the operation of such
location and not capitalized or capitalizable in accordance with generally
accepted accounting principals. The determination of Net Revenue for each
location shall be based on the cash method of accounting without allocation of
interest, rents, general and administrative, or other expenses from another
location.
1.2 GRANT. PHARMHOUSE hereby grants and assigns to RAINMAKER a 50% interest
in and to the Net Revenue relating to or arising from the first fourteen (14)
separately licensed specialty medication pharmacy locations opened by
PHARMHOUSE. Nothing herein is intended to be or shall be deemed to be a sale of
any interest in PHARMHOUSE or ITIS or any interest in any of their respective
assets. RAINMAKER shall not be obligated to contribute to any negative Net
Revenue of PHARMHOUSE.
1.3 ACCOUNTING AND PAYMENT OF NET REVENUE INTEREST. Within thirty (30) days
after the end of each calendar quarter, PHARMHOUSE shall deliver to RAINMAKER a
statement setting forth the gross receipts, deductions and Net Revenue for such
calendar quarter for each location in which RAINMAKER has a Net Revenue Interest
and shall pay to RAINMAKER the amount of such Net Revenue interest for all such
locations. PHARMHOUSE shall not be entitled to any offset against the Net
Revenues for any location or locations for the negative Net Revenues of any
other location or locations.
SECTION 2. PAYMENTS
2.1 COMMITMENT. RAINMAKER will pay to ITIS an aggregate of up to Xxx
Xxxxxxx, Xxxx Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars ($2,500,000) (the
"Commitment") as and when required by ITIS. There shall be no restrictions on
the use of such funds by ITIS, however, it is the intent of the parties that
such funds shall be made available by ITIS to PHARMHOUSE (either as an
inter-company loan or contribution to the capital of PHARMHOUSE) for the purpose
of constructing and opening additional separately-licensed specialty medication
pharmacy locations.
2.2 NO INTEREST. Neither PHARMHOUSE nor ITIS shall have any obligation to
pay interest on any amounts paid by RAINMAKER to ITIS pursuant to this
Agreement. Such payments are consideration for the grant of the Net Revenue
interest under this Agreement and shall be recoverable, if at all, solely from
the Net Revenue interest granted pursuant to Section 1.2.
2.3 FUNDING REQUEST. The parties acknowledge that RAINMAKER has previously
provided funding on an interest-free basis as of the date of this Agreement.
RAINMAKER shall fund additional amounts, up to an aggregate of the Commitment,
upon the request of ITIS; provided, however, that RAINMAKER may, but shall have
no obligation to fund any amount, if PHARMHOUSE has not opened at least one (1)
separately licensed specialty medication pharmacy for each $166,667 invested by
RAINMAKER as of the date of the request.
2.4 LIMITATIONS. In the event that RAINMAKER declines to make any payment
as a result of the proviso in the foregoing sentence, the Net Revenue interest
granted to RAINMAKER pursuant to Section 1.2 shall be limited to the number of
locations that are equal to the quotient, rounded to the nearest whole number,
from dividing (a) the aggregate amount of the payments funded by RAINMAKER by
(b) the sum of $166,667.
SECTION 3. OPTION
3.1 ADDITIONAL NET REVENUE INTEREST. RAINMAKER shall have the option to
acquire a 50% Net Revenue interest on the same terms as set forth in Section 1.2
in exchange for an increase in the Commitment of $500,000. The option granted
by this provision shall be exercisable by PHARMHOUSE at any time so long as
PHARMHOUSE is not in default under the terms of any agreement with RAINMAKER.
SECTION 4. REPRESENTATIONS
4.1 PHARMHOUSE. PHARMHOUSE hereby represents and warrants to RAINMAKER that
(a) it is corporation duly formed and validly existing under the laws of the
State of Texas, (b) it has all requisite corporate authority to enter this
Agreement, (c) this Agreement has been duly authorized and properly executed and
is binding on PHARMHOUSE in accordance with its terms, (d) it has the right to
open and operate specialty medication pharmacies, subject to the granting of any
necessary licenses by appropriate government entities, and (e) it has not
previously granted any interest in or to the Net Revenues of the first
twenty-two (22) separately licensed specialty medication pharmacy locations to
be opened by PHARMHOUSE.
4.2 ITIS. ITIS hereby represents and warrants to RAINMAKER that (a) it is a
corporation duly formed and validly existing under the laws of the State of
Delaware, (b) it has all requisite corporate authority to enter this Agreement,
(c) this Agreement has been duly authorized and properly executed and is binding
on ITIS in accordance with its terms, (d) it is the owner of all of the issued
and outstanding equity interests and all of the voting rights in PHARMHOUSE.
4.3 RAINMAKER. RAINMAKER hereby represents and warrants to PHARMHOUSE and
ITIS that (a) it is a limited partnership duly formed and validly existing under
the laws of the State of Texas, (b) it has all requisite authority to enter this
Agreement, (c) this Agreement has been duly authorized and properly executed and
is binding RAINMAKER in accordance with its terms, (d) it is purchasing the Net
Revenue interest for investment purposes and not with a view to resell, and (e)
it has had an opportunity to meet with and question the principal executive
officers of ITIS and PHARMHOUSE relating to financial conditions, operational
issues, and other matters and is completely satisfied with the answers to such
questions (f) it has adequate resources, financial and otherwise, to pay the
purchase price and look solely to the Net Revenue interest for repayment of an
return on such purchase price.
SECTION 5. CONFIDENTIAL INFORMATION
5.1 DEFINITION OF CONFIDENTIAL INFORMATION. As used in this Agreement, the
term "Confidential Information" shall mean and include any and all information
about the financial condition, results of operations, business plans, assets,
costs, liabilities, operating method, hardware and software configurations,
business plans, or aspects of the business of PHARMHOUSE or ITIS except any such
information that is published or disclosed to the public by PHARMHOUSE, ITIS or
any person that has a right to do so without liability or compensation to ITIS
or PHARMHOUSE. Confidential Information shall include any such information that
was disclosed by PHARMHOUSE or ITIS prior to the date of this Agreement.
5.2 DUTY OF CONFIDENTIALITY. RAINMAKER shall not disclose any Confidential
Information to any third person for any purpose other than principals of
RAINMAKER or its legal, accounting and tax advisors, all of whom shall be
required to undertake a similar obligation of confidentiality to ITIS and
PHARMHOUSE. RAINMAKER shall not use any Confidential Information for any
purpose other than for the purposes of determining the Net Revenues of the
separately licensed specialty medication pharmacy locations in which it has a
Net Revenue interest and determining whether PHARMHOUSE has made adequate
progress in the construction, licensing and opening of locations to warrant
additional payments.
SECTION 6. DEFAULT AND REMEDIES
6.1 DEFAULT. PHARMHOUSE shall be in default of this Agreement if (a)
PHARMHOUSE fails to make payment of any Net Revenue interest amount on the date
or in the amount required by this Agreement; (b) PHARMHOUSE fails to provide
RAINMAKER with any report required to be provided by PHARMHOUSE and does not
correct such failure within 10 business days after demand therefore; (c)
PHARMHOUSE fails to construct, license, open and operate separately licensed
specialty medication pharmacies at a rate satisfactory to RAINMAKER and does not
correct such failure by opening at least one such location for each $166,667
funded by RAINMAKER within 90 calendar days after demand by RAINMAKER; or (d)
any representation or warranty of PHARMHOUSE is incorrect when made and the
effect of such defect either cannot be corrected or PHARMHOUSE fails to correct
such defect within 30 calendar days after demand by RAINMAKER.
6.2 REMEDIES. In the event that PHARMHOUSE is in default of this Agreement,
RAINMAKER may, but shall have no obligation to, (a) cease funding any additional
amounts under the Commitment; (b) terminate this Agreement to the extent of any
unfunded Commitment; (c) take over the operation of any separately licensed
specialty medication pharmacy location in which it has a Net Revenue interest;
and/or (d) take any other action that it may take under applicable law. The
election of any one or more remedy under the foregoing sentence shall not
exclude or prevent any other remedy. PHARMHOUSE agrees to execute and deliver
to RAINMAKER any and all assignments, authorizations, and other documents
necessary to allow RAINMAKER to take over the operation of any location in which
RAINMAKER has a Net Revenue interest.
SECTION 7. MISCELLANEOUS
7.1 JURISDICTION. Any action or proceeding seeking to enforce any provision
of, or arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Texas, County of Xxxxxx or, if it has or can
acquire jurisdiction, in the United States District Court for the Southern
District of Texas, Houston Division, and the parties consent to the jurisdiction
of such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein or claim that such
venue is not convenient. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
7.2 ENTIRE AGREEMENT. This Agreement supersedes all prior agreements
between the parties with respect to its subject matter and constitutes the
exclusive statement of the terms of the agreement among the parties with respect
to its subject matter. This Agreement may not be amended except by a written
agreement executed by all of the parties to this Agreement.
7.3 ASSIGNMENT. None of the parties to this Agreement may assign any of its
rights under this Agreement without the prior consent of the other parties,
which consent shall not be unreasonably withheld.
7.4 NO THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in this
Agreement will be construed to give any person other than the parties to this
Agreement any legal or equitable right or remedy under or with respect to this
Agreement. This Agreement is intended for the sole and exclusive benefit of the
parties hereto.
7.5 SEVERABILITY. If any provision of this Agreement which is not essential
is held invalid or unenforceable by any court of competent jurisdiction, the
other provisions of this Agreement will remain in full force and effect. If
such invalid or unenforceable provision can be made valid and enforceable by
limiting its geographic application or its duration, it shall be limited to the
minimum extent necessary to make such provision enforceable.
7.6 SECTION HEADINGS. The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to Sections refer to the Sections of this
Agreement.
7.7 CONSTRUCTION. All words used in this Agreement will be construed to be
of such gender or number as the circumstances required. Capitalized terms
include both the singular and plural forms. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
7.8 NOTICE. Any notice or other communication required or permitted to be
given under this Agreement shall be in writing and shall be mailed by certified
mail, return receipt requested, postage prepaid, or by commercial carrier,
addressed to the parties as follows:
If to PHARMHOUSE: PharmHouse, Inc.
Attn: Xxxxxx Xxxxxx
00000 Xxxxxxxx
Xxxxxx Xxxxx
Xxxxxxx, XX 00000
If to ITIS: ITIS Inc.
Attn: Hunter M.A. Xxxx
00000 Xxxxxxxx
Xxxxxx Xxxxx
Xxxxxxx, XX 00000
If to RAINMAKER: Rainmaker Ventures, Ltd.
Attn: Xxxxxx X. Xxxxxxx
00000 Xxxxxxxx
Xxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
7.9 TIME OF THE ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
7.10 GOVERNING LAW. This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Texas without regard to conflicts of
laws principles.
7.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same agreement.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
ITIS INC.
By:
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Name:
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Title:
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PharmHouse, Inc.
By:
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Name:
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Title:
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Rainmaker Ventures, Ltd.
By:
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Name:
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Title:
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