PURCHASE AGREEMENT
AGREEMENT made the 15 day of August, 1998 between Xxxxxxxx X. Xxxxxx and
Xxxxx X. Xxxxxx, Co-owners, d/b/a R-D Pharmacy a sole proprietorship
("Seller"), and HORIZON Pharmacies, Inc., a Delaware Corporation ("Buyer").
W I T N E S S E T H
WHEREAS, Seller operates a retail pharmacy and DME operation doing
business as R-D Pharmacy (the Drug Store") located at 000 Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxx 00000 (the "Retail Location").
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase
certain assets utilized in connection with and as part of Seller's operation
of the Drug Store upon the terms and conditions stated herein:
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby the acknowledged, the parties agree as follows:
1. SALE OF ASSETS.
1.1 ASSETS TO BE PURCHASED. Seller hereby agrees to convey, transfer,
assign, and deliver to Buyer on a going concern basis, and Buyer
hereby agrees to purchase from Seller all of Seller's assets located
at or used in connection with Seller's operation of the Drug Store
including but not limited to:
A. MARKETABLE INVENTORY. All marketable pharmaceutical and retail
inventory of Seller held for retail sale by the Drug Store; and
B. PRESCRIPTION FILES AND PATIENT PROFILES. All prescription
files, patient profiles and customer list, telephone numbers.
C. FURNITURE, FIXTURES AND EQUIPMENT. Supplies and all furniture,
fixtures, equipment described in Exhibit "A" attached hereto
and made a part hereof, including but not limited to computers,
peripherals, cash registers, refrigerators, typewriters,
microfiche, fax machines, sound system, alarm system, telephone
equipment, shelving, counters, bottles, vials, ointment jars
and other usable supplies.
D. COPYRIGHTS, TRADE NAMES, AND TRADEMARKS. All copyrights, trade
names and trademarks associated with the Pharmacy Location(s)
including, but not limited to R-D Pharmacy and all variations
thereof.
1.2. ASSETS NOT PURCHASED BY BUYER. Unless otherwise agreed by the
parties in writing, Buyer shall not purchase the following: (i)
consigned merchandise; (ii) merchandise held in layaway; (iii)
merchandise which is damaged, shopworn, faded (including faded
labels) or subject to visible deterioration; (iv) merchandise which,
in Buyer's reasonable opinion, is unsalable because it is obsolete,
its expiration date has expired or it has been discontinued by the
manufacturer; (v) seasonal merchandise; or (vi) prescription
merchandise expiring within 30 days or prescription merchandise or
over-the-counter drugs which are (a) in a partially filled container
with a date which will expire within 90 days of the closing date; or
(b) in a full, sealed container with a date which is expired; (vii)
all third party insurance receivables for services rendered on or
before Closing Date, (viii) all individual charge account receivable
for services rendered on or before Closing Date.
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BUYER'S INITIAL SELLER'S INITIAL
1.3 TELEPHONE NUMBERS. Seller agrees to use all reasonable efforts and
take all action necessary to assure that all telephone numbers used at the
Drug Store shall be transferred without interruption to Buyer.
2. PURCHASE PRICE.
2.1 COMPUTATION. The purchase price to be paid by the Buyer for the
Drug Stores Assets shall be computed as follows: (i) $375,000.00
for prescription files, patient profiles, furniture, fixtures,
equipment, goodwill, and non-compete agreement; plus (ii) the
discounted fair market value of all inventory constituting a part of
the Drug Store Assets determined in accordance with Section 2.6,
below
2.2 ALLOCATION. The total purchase price described in Section 2.1,
above, shall be allocated as set forth in Exhibit "B" attached
hereto and made a part hereof.
2.3 PAYMENT OF THE PURCHASE PRICE. Buyer shall cause the purchase price
to be paid to Seller as follows:
(a) $200,000.00 on the Closing Date by certified or cashier's
check (less the Xxxxxxx Money Deposit as such term is defined
in Section 2.4, below);
(b) Shares of Buyer's common stock, par value $ .01 per share (the
"HORIZON Common Stock"), equivalent to $100,000.00 based upon
the average closing price for the HORIZON common stock as
reported in the Wall Street Journal for the ten (10) business
days immediately preceding the Closing Date, as such term is
defined in Section 7.1, below; and.
(c) The balance in a negotiable promissory note in the form
attached in Exhibit "C" attached hereto secured by the
inventory of the Drug Store in an amount sufficient to cover
the then outstanding principal plus accrued interest due
thereon;
(d) Buyer shall deduct from the purchase price payable at Closing
an amount equal to the sum of (i) Seller's pro rata share of
personal property taxes as described in Section 2.5.2, below,
and (ii) one half of the fee charged by the third party
inventory service.
2.4 XXXXXXX MONEY DEPOSIT. Buyer herewith deposits with Converse
County Bank, Douglas, Wyoming (the "Escrow Agent"), the sum of $0
(the "Xxxxxxx Money Deposit"), which sum shall be applied to the
cash portion of the purchase price at Closing. In the event Seller
fails to perform each and every covenant and condition required
hereunder, Buyer may terminate this Agreement by giving Seller
written notice and Seller shall return the Xxxxxxx Money to Buyer
within three (3) days of Seller's receipt of such notice. In the
event Buyer fails to perform each and every obligation hereunder,
Seller may terminate this Agreement and retain the Xxxxxxx Money as
liquidated damages. The remedies provided in this Section shall be
the exclusive remedies for a breach of this Section.
2.5 TAXES.
2.5.1 SALES, USE, AND TRANSFER TAXES. Buyer shall pay any and all
sales, use, and transfer taxes arising out of the sale of
the Drug Store Assets pursuant to this Agreement.
2.5.2 PERSONAL PROPERTY TAXES. Seller shall pay all personal
property taxes attributable to the Drug Store Assets for the
period up to and including the Closing Date, and Buyer shall
pay all personal property taxes attributable to the Drug
Store Assets for the period following the Closing Date. The
parties shall, using last year's tax returns, estimate as of
the Closing Date the personal property taxes anticipated to
be owed on the Drug Store Assets for the current calendar
year, and Seller's pro rata portion
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BUYER'S INITIAL SELLER'S INITIAL
of such estimated taxes shall be withheld by Buyer from the
purchase price described in Section 2.3, above.
2.6 INVENTORY EVALUATION. A physical inventory of the Drug Store Assets
shall be performed on the Closing Date by an independent third
party inventory service. Each party shall pay one-half of the fee
charged by the service company, with Seller's pro rata share of such
costs to be deducted from the purchase price payable by Buyer at
Closing. For purposes of calculating that portion of the purchase
price attributed to inventory under Section 2, above, the marketable
inventory shall be valued as follows, except as otherwise provided
herein:
MARKETABLE INVENTORY METHOD OF VALUATION
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Prescription inventory Actual acquisition cost
(except if acquisition cost is
not available then AWP less
16%)
Non-Prescription inventory Acquisition cost
In the event Seller is unable to establish the acquisition cost of any
non-prescription inventory, the following formula shall be applied in
valuing such inventory.
CATEGORY OF MERCHANDISE METHOD OF VALUATION
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HBA Retail price less 25%
OTC Retail price less 25%
Gifts Retail price less 50%
Cards Retail price less 50%
Cosmetics Retail price less 40%
Watches/Cameras Retail price less 50%
Fragrances Retail price less 25%
Candy (box) Retail price less 40%
Candy (loose) Retail price less 30%
Jewelry Retail price less 50%
Miscellaneous Retail price less 50%
Seasonal Merchandise Retail price less 50%
Books Retail price less 40%
Audiotapes Retail price less 45%
3. REPRESENTATIONS AND WARRANTIES.
3.1. The Seller does hereby represent and warrant to Buyer as follows:
3.1.1 ORGANIZATION. Seller is a sole proprietorship and is
entitled to own and lease its properties and to carry on its
business as and in the places where such properties are now
owned, leased or operated and such business is conducted.
3.1.2 TITLE TO PROPERTIES. The Seller has good and marketable
title to all of the Drug Store assets, free and clear of all
mortgages, liens, encumbrances, pledges, or security
interests of any nature whatsoever, except for secured
debts, if any, listed on Exhibit "D" attached hereto which
shall be satisfied and released at or prior to closing.
3.1.3 BOOKS AND RECORDS. Seller's books and records which have
been provided to Buyer for inspection are true, correct and
complete, and contain no material omission with respect to
Seller's business, operation or status.
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BUYER'S INITIAL SELLER'S INITIAL
3.1.4 STATEMENTS NOT MISLEADING. No representation, warranty or
other information disclosed to Buyer in connection with this
Agreement omits or will omit to state the material facts
necessary to make such representation, warranty or
information not misleading.
3.1.5 COMPLIANCE WITH APPLICABLE LAWS. Seller has received no
notice of violation of any applicable law, regulation or
requirement relating to the operation of the Drug Store, the
Drug Store Assets or the Retail Location, and Seller has no
knowledge of or reason to believe any such violation exists.
Seller is in full compliance with all wages and hour laws,
and to the best of its knowledge is not engaged in any
unfair labor practice or discriminatory employment practice
and no complaint of any such practice against Seller is
filed or threatened to be filed with or by the National
Labor Relation Board, the Equal Employment Opportunity
Commission or any other administrative agency, Federal or
state, that regulates labor or employment practices, nor is
any grievances filed or threatened to be filed against
Seller by any employee pursuant to any collect bargaining or
other employment agreement to which Seller is a party. To
the Seller's best knowledge it is in compliance with all
applicable Federal and state laws and regulations regarding
occupational safety and health standards and has received no
material complaints from any Federal or state agency or
regulatory body alleging violations of any such laws and
regulations.
3.1.6 CONTRACTS. Seller is not party to any contract,
understanding or commitment whether in the ordinary course
of business or not, relating to Seller's operation of the
Drug Store which extends beyond the Closing Date except
leases covering copier, postage machine, surveillance
system, and consulting contract with Memorial Hospital of
Converse County and consulting agreement with Xxxxxxx Xxxxx
Living Centers of America.
3.1.7 EMPLOYMENT CONTRACTS. Seller is not a party to any oral or
written contract of employment between Seller and any
officer or other employee, and the employment of each of
Seller's officers and all the Drug Store's employees is
terminable at will without any penalty or severance
obligation of any kind.
3.1.8 LITIGATION. Seller is not a party to and has no knowledge
of any suit, action, proceeding, investigation, claim,
complaint or accusation pending or threatened against or
affecting Seller or the Drug Store Assets, in any court or
before any arbitration panel of any kind or before or by any
Federal, state, local, foreign or other government agency,
department, commission, board, bureau, instrumentality or
body, and to the best knowledge and belief of Seller, there
is no basis for any such suit, action, litigation,
proceeding, investigation, claim, complaint or accusation.
There is no outstanding order, writ, injunction, decree,
judgment or award by any court, arbitration panel or
government body against or affecting Seller, Drug Store, the
Drug Store Assets or the Retail Location except, Sellers are
currently participating in the following causes of action as
members of the class of Plaintiffs, and shall retain any and
all interest, including but not limited to all costs of
litigation and all proceeds of any order or settlement: 1)
Brand Name Prescription Drugs Anti-Trust Litigation
(MDL-997) and 2) American Booksellers Association
negotiations and suit against publishers and wholesalers.
3.1.9 EMPLOYEE BENEFITS. All sums due for employee compensation
and benefits and all vacation time owing to any employees of
Seller have been duly and adequately accrued and reflected
in the accounting records of Seller. Seller shall be
responsible for all employee benefits, including but not
limited to payment for accrued vacation, to the Closing
Date. To the Seller's best knowledge, all
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BUYER'S INITIAL SELLER'S INITIAL
employees of Seller are either United States citizens or
resident aliens specifically authorized to engage in
employment in the United States in accordance with all
applicable laws.
3.1.10 TAXES.
(a) Seller has filed all required Federal, state, local,
foreign and other tax returns, notices and reports
(including, but not limited to, income, property,
sales, use, franchise, capital, stock, excise, added
value, employee's income withholding, social security
and unemployment tax returns) heretofore due; and to
Seller's best knowledge all such returns, notices, and
reports are correct, accurate, and complete.
(b) Seller has made all deposits required to be made in
connection with any tax including but not limited to,
estimated income, franchise, sales, use, and employee
withholding taxes.
(c) Seller has paid or made adequate reserves on its books
of account for all taxes, assessments, fees, penalties,
interest and other governmental charges which have
become due and payable, and the amounts reflected on
such books are to Seller's best knowledge sufficient
for the payment of all unpaid Federal, state, local,
foreign, and other taxes, fees, and assessment and all
interest and penalties thereon with respect to the
periods then added and or all periods prior thereto.
3.1.11 INVESTMENT PURPOSE. Seller is acquiring the HORIZON Common
Stock for investment, and not with a view to the sale or
distribution thereof. Seller understands and acknowledges
that the transfer of the HORIZON Stock issuable hereunder
will be restricted and that Seller may not sell or otherwise
dispose of such shares unless and until a registration
statement under the Security Act of 1933, as amended (the
"Securities Act"), is in effect with respect thereto and
Seller has fully complied with the Securities Act and all
applicable regulations thereunder, or Seller has received an
opinion from Buyer's counsel that the contemplated sale or
other disposition of the HORIZON Common Stock will not
require registration under the Security Act.
3.1.12 INSURANCE. All inventories, buildings and fixed assets
owned or leased by Seller are and will be adequately insured
against fire to the Closing Date, valid policies therefor
are and will be outstanding and in force, and the premiums
will be paid before the Closing Date.
3.1.13 NO CHANGES. Until the Closing Date, Seller will not, except
with Buyer's prior written consent: (i) conduct its business
except in the regular and ordinary course; (ii) increase the
amount of compensation currently being paid to employee or
agent, or make any bonus arrangement with any employee or
agent; (iii) enter into any transaction other than in the
ordinary course of business; or (iv) pay out assets being
sold to Buyer any debt, obligation or liability which Buyer
has not agreed to assume under the terms of this Agreement.
3.2 Buyer does hereby represent and warrant to Seller as follows:
3.2.1 ORGANIZATION. Buyer is a corporation duly organized and
existing in good standing under the laws of Delaware, and is
entitled to own or lease properties and carry on its
business as and in the places where such properties are now
owned, leased or operated and such business is now
conducted.
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BUYER'S INITIAL SELLER'S INITIAL
3.2.2 COMMON STOCK. Buyer has authorized 14,000,000 shares of
HORIZON Common Stock of which approximately 5,400,000 shares
are currently issued and outstanding, and 1,000,000 share of
preferred stock, par value $0.01 per share, none of which
are currently issued and outstanding.
4. CONDITIONS TO CLOSING.
4.1 BUYER'S CONDITIONS TO CLOSING. All obligations of Buyer under this
Agreement are subject to the fulfillment, prior to or at Closing, of
each of the following conditions (unless waived in writing by
Buyer).
4.1.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller contained in this Agreement shall be
true and complete at the Closing Date as if they were made
at such time.
4.1.2 COMPLIANCE. Seller shall have performed and complied with
all terms and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing
Date.
4.1.3 CONSENTS. All necessary consents to the transfer of the
Drug Store Assets have been obtained from vendors and other
third party, if any.
4.1.4 NO CASUALTY. The Drug Store's business and property shall
not have been adversely affected in any material way as a
result of any strike, lock-out, accident or other casualty
or act of God of the public enemy, or any judicial,
administrative or governmental proceeding.
4.1.5 LEASE OF RETAIL LOCATION. Buyer shall have executed a
lease covering the Retail Locations in Douglas, Wyoming.
4.1.6 LICENSE TO OPERATE RETAIL PHARMACY. Buyer shall have
obtained a valid license to operate a retail pharmacy under
the HORIZON Pharmacies, Inc. name in the state of Wyoming.
4.2 SELLER'S CONDITIONS TO CLOSING. All obligations of Seller under
this Agreement are subject to the fulfillment, prior to or at
Closing, of each of the following conditions (unless waived in
writing by Seller).
4.2.1 REPRESENTATIONS. The representations and warranties of
Buyer contained in this Agreement shall be true and complete
at the Closing Date as if they were made at such time.
4.2.2 COMPLIANCE. Buyer shall have performed and complied with
all terms and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing
Date.
5. LIABILITIES NOT ASSUMED BY BUYER. The parties expressly agree and
acknowledge that Buyer shall not, by virtue of this Agreement, the
consummation of the transactions contemplated herein or otherwise, assume
any liabilities or obligations of Seller or any liabilities or obligations
constituting a charge, lien, encumbrance or security interest upon the Drug
Store Assets, regardless of whether such liabilities or obligations are
absolute or contingent, liquidated or unliquidated or otherwise.
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BUYER'S INITIAL SELLER'S INITIAL
6. INDEMNIFICATION.
6.1 SELLER'S INDEMNIFICATION OF BUYER. Seller and Xxxxxxxx Xxxxxx shall
indemnify and hold harmless Buyer against and in respect of any and
all liabilities concerning or otherwise connected to the conduct or
operation of the Drug Store as of or prior to the Closing Date, and
with the exception of liabilities expressly assumed by Buyer, all
liabilities and obligations of the Seller, of every kind and
description, regardless of whether such liabilities or obligations
are absolute or contingent, liquidated or unliquidated, accrued or
otherwise, and regardless of how and when the same may have arisen,
which are asserted against Buyer as a result of this Agreement or
the consummation of the transactions contemplated herein.
6.2 BUYER'S INDEMNIFICATION OF SELLER. Buyer shall indemnify and hold
harmless Seller against and in respect of any and all liabilities
concerning or otherwise connected to the conduct or operation of the
Drug Store following the Closing Date.
7. CLOSING.
7.1 CLOSING DATE. The closing shall take place at the Retail Location
on or before August 15, 1998 (the "Closing Date") but in no event
later than August 29, 1998 unless otherwise agreed by the parties in
writing.
7.2 SELLER'S OBLIGATIONS AT CLOSING. Seller shall deliver to Buyer at
closing of this Agreement a Xxxx of Sale effective to vest in Buyer
good and marketable title to the Drug Store Assets, free and clear
of all mortgages, security interest, liens, encumbrances, pledges
and hypothecation of every nature and description and all other
instruments and documents that are necessary or appropriate to the
sale and delivery of the Drug Store Assets.
7.3 BUYER'S OBLIGATIONS AT CLOSING. Buyer shall deliver to Seller at
closing: (i) a certified or cashier's check for the cash portion of
the purchase price provided for in Section 2.3; (ii) the Note and
Security Agreement provided for in Section 2.3; and (iii) evidence
of the shares of Common Stock provided for in Section 2.3.
8. MISCELLANEOUS.
8.1 SURVIVAL OF REPRESENTATION, WARRANTIES AND INDEMNIFICATIONS. All of
the representations, warranties and indemnifications of the parties
set forth in this Agreement shall survive the Closing hereof.
8.2 RISK OF LOSS. The risk of loss of damages of Drug Store Assets
shall be upon Seller until the Closing hereof.
8.3 COVENANT NOT TO COMPETE. Except as otherwise herein, Xxxxxxxx
Xxxxxx shall not, for a period of six (6) years after the Closing
Date, directly or indirectly own an equity interest in, operate,
manage or assist any person or entity other than Buyer in operating
or managing, any business which includes a retail pharmacy, nursing
home or home health care company, or which offers for sale or lease
durable medical equipment within the city limits of Douglas,
Wyoming. The parties expressly agree that Xxxxxxxx Xxxxxx may serve
no more than one (1) day per week as a relief pharmacist at retail
pharmacies not owned or operated by Buyer in Douglas, Wyoming. The
parties acknowledge that the territorial and time limitations
contained in the paragraph are reasonable and properly required for
the adequate protection of the business to be conducted by Buyer
with the assets and properties to be transferred hereunder and can
not be changed except by written permission of Buyer.
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8.4 RIGHT TO ENJOIN BREACH. The parties agree that in the event of a
breach by Seller or Buyer of any provision of this paragraph,
monetary damages alone would be inadequate and Seller or Buyer
shall, in addition to all other legal remedies, be entitled to
obtain an order enjoining the defaulting party from violating the
covenants set forth herein.
8.5 ACCESS TO RECORDS. Seller shall give Buyer, its counsel,
accountants and representatives, reasonable access during normal
business hours to all of Seller's books, contracts, commitments and
records and furnish Buyer with all information which Buyer
reasonably may request to conduct a financial audit of the last two
(2) fiscal years and unaudited financial data up to Closing Date at
Buyer's expense. The Buyer's audit will be conducted after the
Closing Date.
8.6 GOVERNING LAW. This agreement shall be governed and construed in
accordance with the laws of the state of Wyoming.
8.7 ENTIRE AGREEMENT; MODIFICATION. This agreement contains the entire
agreement between the parties, and no representations, warranties or
promises, unless contained herein, shall be binding upon the parties
hereto, their successors and assigns. This Agreement may not be
amended or terminated except by an instrument executed by both
parties.
8.8 ASSIGNMENT. This agreement may not be assigned by Buyer without
written consent of Seller, which consent will not be unreasonably
withheld.
8.9 DEFAULT. If either party hereto should default under the terms of
this contract, the non-defaulting party shall be entitled to pursue
any remedy available, at law or in equity. The prevailing party in
any such action for default between the parties shall be entitled to
a reasonable attorney's fees and costs incurred in enforcing the
provisions hereof. In the alternative, if the Seller is not the
defaulting party, Seller may hold and retain the xxxxxxx money paid
by Buyer, as liquidated damages.
8.10 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
IN WITNESS WHEREOF, the parties hereto have set their hands the day and
year first above written.
BUYER: HORIZON Pharmacies, Inc.
Witness:
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Xxxxxx Xxxxxxx, Vice-President
SELLER: R-D Pharmacy
Witness:
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Xxxxxxxx X.Xxxxxx, Co-Owner, d/b/a R-D Pharmacy
-------------------------------------------------
Xxxxx X. Xxxxxx, Co-Owner, d/b/a R-D Pharmacy
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