ASSET PURCHASE AGREEMENT
BY AND AMONG
ALLSCRIPTS, INC.
AND
PHARMACARE MANAGEMENT SERVICES, INC.,
PHARMACARE DIRECT, INC.,
AND
PROCARE PHARMACY, INC.
DATED AS OF MARCH 19, 1999
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of March 19, 1999, by
and among ALLSCRIPTS, INC., an Illinois corporation ("Seller"), and PHARMACARE
MANAGEMENT SERVICES, INC., a Delaware corporation ("PharmaCare"), PHARMACARE
DIRECT, INC., a Delaware corporation ("PharmaCare Direct"), and PROCARE
PHARMACY, INC., a Rhode Island corporation ("CVS ProCare") (each a "Buyer" and
collectively "Buyers"). The Buyers and the Seller are referred to collectively
herein as the "Parties".
RECITALS
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A. Seller owns certain assets used in the conduct of the business of
its Pharmacy Benefit Management Division.
B. Buyers desire to purchase from Seller, and Seller desires to sell
to Buyers, substantially all of such assets of the Pharmacy Benefit Management
Division (excluding Accounts Receivable) upon the terms and subject to the
conditions of this Agreement.
AGREEMENT
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NOW THEREFORE, in consideration of the mutual covenants,
representations and premises contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
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1.1. CERTAIN DEFINED TERMS. As used herein, the terms below shall
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have the following meanings. Any of such terms, unless the context otherwise
requires, may be used in the singular or plural, depending upon the reference.
"ACCOUNT RECEIVABLE" shall mean any account or note receivable,
whether billed or unbilled (but with respect to such unbilled receivables, only
to the extent billed within ninety (90) days after Closing), whether current or
noncurrent, arising out of the sale of goods or provision of services and other
benefits by the Division on or before the Closing Date.
"AFFILIATE" shall have the meaning set forth in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
"ASSETS" shall mean all of Seller's right, title and interest in and
to the properties, assets and rights of any kind, whether tangible or
intangible, real or personal, that are used or held for use in the business of
the Division, including without limitation, all of Seller's right, title and
interest in the following:
(a) all rights under all Contracts and Leases, including goodwill
associated therewith, other than (i) Contracts pursuant to which Seller has
rights that are utilized by Seller to any significant degree
other than in the operation of the Division (such excluded Contracts being
referred to herein as "Company-Wide Contracts"), and (ii) Affiliate Contracts;
(b) all leasehold improvements of the Division;
(c) all Fixtures and Equipment;
(d) Inventory, to the extent purchased by Buyers pursuant to Section
2.3(b);
(e) all Books and Records;
(f) all Proprietary Rights, including goodwill associated therewith,
other than Proprietary Rights utilized by Seller to any significant degree other
than in the operation of the Division (such excluded Proprietary Rights being
referred to herein as "Company-Wide Proprietary Rights"), and all know-how of
the Division;
(g) all Permits to the extent transferable;
(h) the computer hardware, software and databases of the Division
that are identified on Schedule A;
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(i) deposits of customers of the Division that have been made to pre-
fund payments to pharmacies; and
(j) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind, against any person or entity, except
to the extent they relate to Excluded Assets or Excluded Liabilities;
but excluding therefrom the Excluded Assets.
"ASSUMED LIABILITIES" shall mean:
(a) all obligations of the Division under the Contracts, Leases and
other arrangements included in the definition of Assets either (i) to furnish
goods, services, and other benefits to another party after the Closing or (ii)
to pay for goods, services, and other benefits that another party will furnish
to it after the Closing;
(b) all liabilities for vacation entitlements through the Closing
Date of Rehired Employees (as defined in Section 7.6(a) hereof);
(c) any obligation of Seller to Teachers Insurance and Annuity
Association for the difference between the holdover rent and the regular rent
for Seller's Columbus, Ohio facility from February 1, 1999 through the Closing
Date; and
(d) obligations of the Division, if any, to repay advance co-payments
made by customers of the Division for prescription orders which the Division has
not filled as of the Closing;
provided, however, that the Assumed Liabilities shall not include any
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liabilities other than those enumerated above including, without limitation, any
liability of Seller (i) for unpaid Taxes (with respect
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to the Division or otherwise) for periods ending on or prior to the Closing or
for Taxes arising in connection with the consummation of the transactions
contemplated by this Agreement, (ii) for costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby, (iii)
under any Employee Benefit Plans (as defined in Section 4.16 hereof), except for
those described in (b) above, (iv) for borrowed money, (v) for rebates to
customers arising out of the sale of products for the period ending on or prior
to the Closing Date, or (vi) under this Agreement.
"BALANCE SHEET" shall mean the unaudited balance sheet of the Division
as of December 31, 1998.
"BOOKS AND RECORDS" shall mean (a) all records and lists of the
Division pertaining to the Assets, including customer lists and records, (b) all
product, business and marketing plans of the Division, and (c) all books,
ledgers, files, reports, plans, drawings and operating records of every kind
maintained by the Division, but excluding the Excluded Books and Records.
"CLOSING DATE" shall mean the first day that is (i) either the 15th
day of a calendar month or the last day of a calendar month, and (ii) falls
after the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself), or such other date as the Parties may mutually determine.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
"CONTRACT" shall mean any written agreement, contract, purchase order,
license or commitment (other than commitments evidencing indebtedness) of the
Division, excluding all Leases.
"DISCLOSURE SCHEDULE" shall mean the schedules executed and delivered
by Seller to Buyers which set forth the exceptions to the representations and
warranties contained in Article IV hereof and certain other information called
for by this Agreement. Unless otherwise specified, each reference in this
Agreement to any schedule designated by a letter or number is a reference to the
schedule designated by such letter or number which is included in the Disclosure
Schedule.
"DIVISION" means the Seller with respect to its Pharmacy Benefit
Management Division.
"ENCUMBRANCE" shall mean any claim, lien, option, pledge, charge,
mortgage, security interest, right of first refusal or offer or other
restriction on use, transfer, receipt of income, or exercise of any other
attribute of ownership.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXCLUDED ASSETS," notwithstanding any other provision of this
Agreement, shall mean the following assets of Seller which are not to be
acquired by Buyers hereunder:
(a) all cash and cash equivalents;
(b) all Accounts Receivable of the Division, and all rights to
rebates arising in connection with sales of products made on or before the
Closing Date, refunds, deposits (other than those customer
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deposits expressly included in the definition of Assets), prepayments or prepaid
expenses of the Division;
(c) this Agreement and all rights of Seller hereunder;
(d) the Excluded Books and Records;
(e) the Company-Wide Proprietary Rights;
(f) rights under Company-Wide Contracts;
(g) all claims, causes of action, choses in action, rights of
recovery, refunds and rights of set-off of any kind against any person or entity
arising out of or relating to (i) the Excluded Liabilities or (ii) the Excluded
Assets described in (a), (b), (c), (d), (e), (f) and (h) hereof; and
(h) the additional Excluded Assets listed on Schedule B attached
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hereto.
"EXCLUDED BOOKS AND RECORDS" shall mean Seller's minute books, stock
books and tax returns, other documents relating to the organization, maintenance
and existence of Seller as a corporation, and other such items to the extent
they relate to Excluded Assets or Excluded Liabilities.
"FINANCIAL STATEMENTS" shall mean (i) the unaudited Balance Sheet and
the related statement of operations for the twelve months ended December 31,
1998, and (ii) the unaudited balance sheet of the Division as of December 31,
1997 and the related statement of operations for the twelve months ended
December 31, 1997.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery, automobiles, trucks, spare parts, supplies, equipment
and other tangible personal property of the Division.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"INVENTORY" shall mean all drug inventory of the Division held for
resale and all of the Division's raw materials, work in process, finished
products, wrapping, supply and packaging items and similar items, in each case
wherever the same may be located, but excluding discontinued and out-of-date
items.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" shall mean any
effect or change in the condition (financial or otherwise), business, results of
operations, assets, liabilities or operations of the Division that is materially
adverse to the condition (financial or otherwise), business, results of
operations, assets, liabilities or operations of the Division or to the ability
of Seller to consummate the transactions contemplated hereby.
"PERMITTED ENCUMBRANCES" shall mean (i) materialmen's, mechanics',
carriers', workmen's, repairmen's or other like liens arising in the ordinary
course of business for amounts not yet due or which are being contested in good
faith by appropriate proceedings, provided that Seller shall remain liable for
any liability or obligation secured by any such lien to the extent incurred on
or prior to the Closing, (ii) liens for current taxes or special assessments not
yet due or any taxes being contested in good faith by appropriate proceedings,
provided that Seller shall remain liable for all such Taxes and
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special assessments for all periods ending on or prior to the Closing or which
arise in connection with the transactions contemplated hereby, (iii) liens that
are immaterial in character, amount and extent, and which do not detract from
the marketability or value or interfere with the present or proposed use of the
properties they affect and which have not arisen in connection with the
borrowing of money, (iv) easements, rights of way, encroachments, restrictions
or similar conditions affecting or burdening the Assets which individually or in
the aggregate do not detract materially from the marketability, use or value of
the Assets, and (v) purchase money liens and liens securing rental payments
under capital lease arrangements assumed hereunder.
"PERMITS" shall mean all licenses, permits, franchises, approvals,
authorizations, certificates, registrations, consents or orders of, or filings
with, any governmental authority, whether foreign, federal, state or local, or
any other person, used or held for use in the operation of the Division and all
other rights and privileges necessary to allow the Division to own and operate
its business without any violation of law.
"TAX" shall mean any federal, state, local, foreign or other tax,
including without limitation income, capital gains, estimated income, business,
occupation, gross receipts, franchise, property, payroll, personal property,
sales, transfer, use, employment, commercial rent, occupancy, franchise or
withholding taxes, and any premium, including without limitation interest,
penalties and additions in connection therewith (whether payable directly or by
withholding and whether or not requiring the filing of a Tax return), and shall
include any liability for such amounts as a result of either being a member of a
combined, consolidated, unitary or affiliated group or having a contractual
obligation to indemnify any person or other entity.
1.2. OTHER DEFINED TERMS. The following terms shall have the
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meanings defined for such terms in the Sections set forth below:
TERM SECTION
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"ACCELERATION CONTRACTS" 2.4(d)
"ACCELERATION PAYMENTS" 2.4(d)
"ACTIONS" 4.10
"ACTUAL VOLUME" 2.4(a)
"AFFILIATE CONTRACTS" 4.26
"ANNIVERSARY DATE" 2.4(a)
"APPRAISER" 2.3(b)
"BASE PURCHASE PRICE" 2.3(a)
"BUYERS" Preamble
"CLAIM" 10.2(c)
"CLAIM NOTICE" 10.2(c)
"CLOSING" 3.1
"CLOSING INVENTORY" 2.3(b)
"CLOSING STATEMENT" 2.4(a)
"COMPANY-WIDE CONTRACTS" 1.1
"COMPANY-WIDE PROPRIETARY RIGHTS" 1.1
"CONTINGENT PURCHASE PRICE" 2.3(a)
"CVS PROCARE" Preamble
"DAMAGES" 10.2(a)
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"DIVISION EMPLOYEES" 4.15
"DRW" 4.24
"EMPLOYEE BENEFIT PLANS" 4.16(a)
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" 4.18(a)
"EXCLUDED LIABILITIES" 2.2
"HAZARDOUS SUBSTANCES" 4.18(b)
"INDEMNIFIED PARTY" 10.2(c)
"INDEMNIFYING PARTY" 10.2(c)
"LEASES" 4.4
"XXXX(S)" 7.8
"MATERIAL CONTRACTS" 4.5
"NON-COMPETE PERIOD" 7.3
"NON- TRANSFERABLE ASSETS" 6.3
"PARENT" 2.7
"PARENT GUARANTEE" 2.7
"PARTIES" Preamble
"PHARMACARE" Preamble
"PHARMACARE DIRECT" Preamble
"PRESCRIPTION FILLINGS" 2.4(a)
"PROPRIETARY RIGHTS" 4.14(a)
"REHIRED EMPLOYEES" 7.6(a)
"RELATED PARTIES" 10.2(a)
"SELLER" Preamble
"TAKEOVER PROPOSAL" 6.1(d)
"TRANSITION SERVICES AGREEMENT" 8.7(a)
"YEAR 2000 PROBLEM" 4.23
ARTICLE II.
PURCHASE AND SALE OF ASSETS
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2.1. TRANSFER OF ASSETS. Upon the terms and subject to the
------------------
conditions contained herein, at the Closing, Seller will sell, convey, transfer,
assign and deliver to Buyers, and Buyers will acquire from Seller, the Assets,
free and clear of all Encumbrances other than Permitted Encumbrances and
Encumbrances securing Assumed Liabilities.
2.2. ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
-------------------------
conditions contained herein, at the Closing, Buyers shall assume the Assumed
Liabilities. Buyers will not assume or have any responsibility, however, with
respect to any other obligation or liability of Seller (the "Excluded
Liabilities") not included within the definition of Assumed Liabilities. Buyers
hereby acknowledge that they are assuming the Assumed Liabilities and Buyers
agree to pay, discharge and perform all such liabilities and obligations
promptly when due. Seller hereby acknowledges that it is retaining the Excluded
Liabilities and Seller agrees to pay, discharge and perform all such liabilities
and obligations promptly when due.
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2.3. PURCHASE PRICE.
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(a) Base Purchase Price. The purchase price for the Assets and the
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other obligations of Seller hereunder (including the covenant-not-to-compete in
Section 7.3) shall consist of the "Base Purchase Price" and the "Contingent
Purchase Price." The Base Purchase Price for the Assets shall be Seven Million
Dollars ($7,000,000), plus the value of the Closing Inventory purchased by
Buyers and as determined pursuant to Section 2.3(b). At the Closing, upon the
terms and subject to the conditions set forth herein, Buyers shall pay and
deliver to Seller the Base Purchase Price by wire transfer of immediately
available funds.
(b) Closing Inventory. On the day before the Closing Date, a
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physical count of the items of Inventory as of the Closing Date (the "Closing
Inventory") shall be conducted by a third party mutually agreeable to the
Parties (the "Appraiser"). Each Party shall have the right to observe the
physical count of the Closing Inventory. The Appraiser shall value the Closing
Inventory on the basis of Seller's net cost (including applicable discounts) of
the Closing Inventory. Buyers shall be obligated to purchase at the Closing all
of the Closing Inventory up to a maximum of $500,000 in value as determined by
the Appraiser. Buyers shall have the option to purchase the Closing Inventory at
the Closing to the extent it exceeds $500,000 in value.
(c) Seller and Buyers acknowledge that they will negotiate in good
faith regarding the allocation of the Purchase Price and that such allocation
will be consistent with the requirements of Section 1060 of the Code and the
regulations thereunder. Seller and Buyers agree to jointly complete and
separately file Internal Revenue Service Form 8594 with their respective federal
income tax returns for the tax year in which the Closing Date occurs. Seller
and Buyers further agree to jointly complete and separately file any amended
Internal Revenue Service Form 8594 to the extent required after the payment of
any amounts required to be paid as part of the Contingent Purchase Price.
Seller's Employer Identification Number is 00-0000000. The Employer
Identification Numbers of each of PharmaCare, PharmaCare Direct and CVS ProCare
are 00-0000000, 00-0000000 and 00-0000000, respectively.
2.4. CONTINGENT PURCHASE PRICE.
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(a) Preparation of Closing Statement. Within ten (10) business days
--------------------------------
after the first anniversary of the Closing Date (the "Anniversary Date"),
PharmaCare, on behalf of itself and the other Buyers, shall prepare and deliver
to Seller a statement (the "Closing Statement") showing the volume of
prescription fillings (including original filling and subsequent refills)
("Prescription Fillings") during the one-year period following the Closing Date
attributable to each line of business comprising the Division, i.e., traditional
mail order, specialty mail order and retail pharmacy, in each case from (i) each
client of Seller listed on Schedule 2.4(a)(i) that on the Anniversary Date
------------------
remains under contract to, and, within the ninety (90) days prior to the
Anniversary Date, had any claim activity or submitted a current eligibility list
or update to, a Buyer or any subsequent assignee of, or successor to, the assets
comprising the business currently operated as the Division and has not submitted
a written notice of termination of such contract (or oral notice of termination
in the case of a contractual relationship that is not in writing), (ii) any
party that becomes a client of a Buyer due to Seller's relationship with any of
the brokers, agents or third-party administrators listed on Schedule 2.4(a)(ii)
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that on the Anniversary Date is under contract to, and, within the ninety (90)
days prior to the Anniversary Date, had any claim activity or submitted a
current eligibility list or update to, a Buyer or any subsequent assignee of, or
successor to, the assets comprising the business currently operated as the
Division and that has not submitted a written notice of termination of such
contract (or oral notice of termination in the case of a contractual
relationship that is
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not in writing), and (iii) each party identified on Schedule 2.4(a)(iii) that on
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the Anniversary Date is under contract to, and, within the ninety (90) days
prior to the Anniversary Date, had any claim activity or submitted a current
eligibility list or update to, a Buyer or any subsequent assignee of, or
successor to, the assets comprising the business currently operated as the
Division and has not submitted a written notice of termination of such contract
(or oral notice of termination in the case of a contractual relationship that is
not in writing). The Prescription Fillings volume during the one-year period
following the Closing Date from parties described in (i), (ii) and (iii) above
is referred to herein as the "Actual Volume." PharmaCare shall deliver to Seller
simultaneously with its delivery of the Closing Statement copies of all working
papers relevant to the determination of Actual Volume and access to all books
and records relevant to the determination of Actual Volume. PharmaCare shall
also deliver to Seller within ten (10) business days after the end of each
calendar quarter after the Closing Date until the Anniversary Date, a statement
showing the Actual Volume for such calendar quarter and the Actual Volume from
the Closing Date through the end of such calendar quarter.
(b) Contingent Purchase Price. The Contingent Purchase Price shall
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equal the sum of (i) the number of Prescription Fillings included in Actual
Volume attributable to the traditional mail order business divided by 216,267
and multiplied by $5,000,000, up to a maximum of $5,000,000, such maximum to
include any Acceleration Payment made in respect of Acceleration Contracts (1)
or (2) below, (ii) the number of Prescription Fillings included in Actual Volume
attributable to the specialty mail order business divided by 60,000 and
multiplied by $700,000, up to a maximum of $700,000, such maximum to include any
Acceleration Payments made in respect of Acceleration Contracts (4), (5) or (6)
below, and (iii) the number of Prescription Fillings included in Actual Volume
attributable to the retail pharmacy business divided by 602,972 and multiplied
by $2,700,000, up to a maximum of $2,700,000, such maximum to include any
Acceleration Payment made in respect of Acceleration Contract (3) below.
(c) Payment of Contingent Purchase Price. In the event PharmaCare
------------------------------------
does not receive notice from Seller disputing the calculation of Actual Volume
within the time period specified in Section 2.5(a), Seller shall be deemed to
have agreed with such calculation and within two (2) business days following the
expiration of such time period, Buyers shall pay Seller the Contingent Purchase
Price by wire transfer of immediately available funds.
(d) Acceleration of Payments on Execution of Certain Contracts. In
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the event contracts meeting (or exceeding) the following criteria and otherwise
containing terms and conditions not materially less favorable than Seller's past
practice ("Acceleration Contracts") are signed by customers prior to the
Anniversary Date, then within two (2) business days of a Buyer's receipt of a
signed Acceleration Contract, Buyers shall pay Seller the amounts ("Acceleration
Payments") set forth below, which amounts shall be part of the Contingent
Purchase Price:
CUSTOMER SUBJECT MATTER MINIMUMTERM OF CONTRACT ACCELERATIONPAYMENT
(1) BankOne Retirees-Trad. Mail Three Years $1,000,000
(2) BankOne New-Including Trad. Mail Three Years $ 700,000
(3) BankOne New-Including Retail Three Years $ 700,000
(4) State of Ohio ADAP-Specialty One Year $ 200,000
(5) State of Indiana ADAP-Specialty One Year $ 100,000
(6) State of Arkansas ADAP-Specialty One Year $ 100,000
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(e) Tax Holdback. Notwithstanding any provision of this Section 2.4
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to the contrary, no payment of the first $100,000 of the Contingent Purchase
Price due to Seller will be made by Buyers prior to (i) the delivery by Seller
of a certificate from the tax commissioner of the State of Ohio indicating that
all sales and use taxes, interest and penalties have been paid by Seller
pursuant to Sections 5739.14 and 5741.14 of the Ohio Revised Code, or (ii)
Seller's demonstration to Buyers' reasonable satisfaction that such Sections of
the Ohio Revised Code are inapplicable to the transactions contemplated hereby.
2.5. DISPUTES REGARDING CONTINGENT PURCHASE PRICE.
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(a) Disputed Amount. If Seller disagrees with the Closing Statement
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used to calculate the Contingent Purchase Price, it shall notify PharmaCare of
such disagreement in writing specifying in detail the particulars of such
disagreement within thirty (30) calendar days after Seller's receipt of the
Closing Statement.
(b) Resolution of Disputed Amount. PharmaCare and Seller shall use
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reasonable efforts for a period of fifteen (15) calendar days after Seller's
delivery of the notice specified in Section 2.5(a) (or such longer period as
PharmaCare and Seller agree upon) to resolve any disagreements raised by Seller
with respect to the Closing Statement used to calculate the Contingent Purchase
Price. If, at the end of such period, PharmaCare and Seller do not resolve such
disagreements, PharmaCare and Seller shall jointly select an independent
accounting firm of recognized national standing to review the Closing Statement
used to calculate the Contingent Purchase Price and resolve any remaining
disagreements. In the event PharmaCare and Seller cannot agree upon an
accounting firm, they shall choose an accounting firm by lot from those "Big 5"
accounting firms having no material relationship to any Buyer or Seller and
having offices in locations suitable to conduct such review. The determination
by such independent accounting firm shall be final, binding and conclusive on
the Parties. PharmaCare and Seller shall use reasonable efforts to cause such
independent accounting firm to make its determination within thirty (30)
calendar days of accepting its selection. The fees and expenses of such
independent accounting firm shall be borne by the non-prevailing party;
provided, however, that if neither party is clearly the prevailing party, such
fees and expenses shall be borne equally by Buyers, on one hand, and Seller, on
the other.
2.6. CLOSING COSTS; TRANSFER TAXES AND FEES. Notwithstanding any
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other provision herein, any documentary and transfer taxes and any sales, use or
other taxes imposed by reason of the transfers of Assets provided hereunder and
any deficiency, interest or penalty asserted with respect thereto shall be borne
by the party legally required to pay such taxes. The fees and costs of recording
or filing all applicable conveyancing instruments, if any, described in Section
3.2(a) shall be borne equally by Buyers, on one hand, and Seller, on the other.
2.7. PARENT GUARANTEE. The Parties hereby acknowledge that CVS
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Corporation, a Delaware corporation and the ultimate parent of each of the
Buyers ("Parent"), is concurrently with the execution and delivery of this
Agreement, executing and delivering to Seller a Guarantee in the form attached
hereto as Schedule 2.7 (the "Parent Guarantee"), whereby Parent will guarantee
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to Seller all obligations of each of the Buyers. The Parties hereby acknowledge
that Seller would not enter into this Agreement without the benefit of the
Parent Guarantee.
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ARTICLE III.
CLOSING
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3.1. CLOSING. The closing of the transactions contemplated herein
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(the "Closing") shall be at 10:00 a.m. local time on the Closing Date at the
offices of Xxxxxxx, Carton & Xxxxxxx, 000 X. Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000, or such other time or place as the Parties hereto may mutually
determine, and shall be effective as of the close of business on the Closing
Date.
3.2. DELIVERIES AND ACTIONS TAKEN AT CLOSING.
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(a) Deliveries by Seller. To effect the sale and transfer referred
--------------------
to in Section 2.1 hereof, Seller will, at the Closing, deliver to Buyers one or
more of the following:
(i) good and sufficient bills of sale, assignments and other
instruments of transfer to convey to Buyers good and
merchantable title to the Assets, free and clear of all
Encumbrances of any kind, except the Permitted
Encumbrances and Encumbrances securing Assumed
Liabilities;
(ii) instruments evidencing the release of all Encumbrances
on the Assets securing Excluded Liabilities, other than
Permitted Encumbrances;
(iii) a copy of Seller's Amended and Restated Articles of
Incorporation certified by the Secretary of State of
Illinois, together with a good standing certificates
issued by the Secretary of State of Illinois and the
Secretary of State of Ohio, in each case as of a date
not more than ten (10) business days prior to the
Closing Date;
(iv) a copy of Seller's corporate bylaws certified by the
secretary of Seller as of the Closing Date;
(v) copies of the resolutions and other requisite corporate
actions of Seller, authorizing the execution and
delivery of this Agreement and the other documents and
instruments to be executed and delivered pursuant to
this Agreement, and the consummation by Seller of the
transactions contemplated hereby and thereby, which
copies have been certified by the secretary of Seller as
of the Closing Date;
(vi) a certificate of the secretary of Seller dated as of the
Closing Date certifying as to the genuineness of the
signatures of officers of Seller executing any
certificate, document, instrument or agreement to be
delivered pursuant to this Agreement, which incumbency
certificate shall include the true signatures of such
officers;
(vii) a statement signed by an officer of Seller under the
penalty of perjury in the form attached hereto as
Schedule 3.2(a)(vii); and
(viii) such other documents and instruments, including the
certificate referred to in Section 9.1, as Buyers or
their counsel reasonably shall deem necessary to
consummate the transactions contemplated hereby.
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(b) Deliveries by Buyers. To effect the sale and transfer referred
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to in Section 2.1 hereof, Buyers will, at the Closing, deliver to Seller:
(i) a wire transfer of immediately available funds in the
amount of the Base Purchase Price;
(ii) a copy of each Buyer's Certificate or Articles of
Incorporation certified by the Secretary of State of
Delaware or Rhode Island, as appropriate, together with
a good standing certificate issued by such Secretary, in
each case, as of a date not more than ten (10) business
days prior to the Closing Date;
(iii) a copy of each Buyer's corporate by-laws certified by
the secretary of such Buyer as of the Closing Date;
(iv) copies of the resolutions and other requisite corporate
actions of each Buyer authorizing the execution and
delivery of this Agreement and the other documents and
instruments to be executed and delivered pursuant to
this Agreement, and the consummation by such Buyer of
the transactions contemplated hereby and thereby, which
copies have been certified by the secretary of such
Buyer as of the Closing Date;
(v) instruments of assumption of the Assumed Liabilities;
(vi) a certificate of the secretary of each Buyer dated as of
the Closing Date certifying as to the genuineness of the
signatures of officers of such Buyer executing any
certificate, document, instrument or agreement to be
delivered pursuant to this Agreement, which incumbency
certificate shall include the true signatures of such
officers; and
(vii) such other documents and instruments, including the
certificate referred to in Section 8.1 hereof, as Seller
or its counsel reasonably shall deem necessary to
consummate the transactions contemplated hereby.
(c) Form of Instruments. To the extent that a form of any document
-------------------
to be delivered hereunder is not attached as an Exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to Buyers and Seller.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller hereby represents and warrants to Buyers as follows:
4.1. ORGANIZATION AND QUALIFICATION OF SELLER. Seller is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Illinois. Seller has all requisite corporate power and
authority to own and operate the Division as it is presently being operated and
Seller is qualified to do business as a foreign corporation and is in good
standing in Ohio and in all other jurisdictions where failure to be so qualified
or in good standing is reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect.
-11-
4.2. AUTHORIZATION. Seller has all requisite corporate power and
-------------
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and to consummate the transactions contemplated hereby and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by Seller and is the legal, valid and binding obligation of Seller,
enforceable against it in accordance with its terms, subject to general
principles of equity and except as enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws of general application relating to creditors' rights generally.
4.3. ASSETS. Except as set forth in Schedule 4.3 attached hereto,
------ ------------
Seller has good and marketable title to, or a valid leasehold interest in, all
of the Assets, subject to no Encumbrance, except for Permitted Encumbrances.
Except as set forth in Schedule 4.3 the Fixtures and Equipment are in all
------------
material respects in good working order and condition, ordinary wear and tear
excepted. The Assets, the Excluded Assets and the Non-Transferable Assets (as
defined in Section 6.3) (if any) constitute all the assets necessary for the
conduct of the business of the Division as presently conducted. No assets,
other than the Assets, the Excluded Assets and the Non-Transferable Assets (if
any), are used or held for use by Seller or any other person or entity in the
conduct of the business of the Division as presently conducted.
4.4. FACILITIES; LEASES. Schedule 4.4 contains a complete list of
------------------ ------------
all leases pursuant to which the Seller leases any real property or personal
property (the "Leases") used or held for use by the Division. All such Leases
are valid obligations of Seller and, to Seller's knowledge, of the other parties
thereto, and are in full force and effect. No event of default has occurred
which (whether with or without notice, lapse of time or both or the happening or
occurrence of any other event) would constitute a material default under any
such Lease on the part of Seller. Seller does not have any knowledge of the
occurrence of any event which (whether with or without notice, lapse of time or
both or the happening or occurrence of any other event) would constitute a
material default under any such Lease by any other party thereto. Seller enjoys
peaceful and undisturbed possession of all the leased real property covered by
such Leases, and Seller has in all material respects performed all the
obligations with respect thereto required through the date hereof to be
performed by it. To Seller's knowledge, all of the leased real property,
improvements and fixtures thereto are structurally sound and have no material
defects and are capable of being used in the conduct of the business of the
Division after the Closing in substantially the same manner as conducted before
the Closing. Seller owns no real property used or held for use by the Division.
4.5. CONTRACTS AND COMMITMENTS. (a) Schedule 4.5(a) lists the
------------------------- ---------------
following Contracts (excluding Company-Wide Contracts) to which Seller is a
party with respect to the Division (the "Material Contracts"):
(i) any distributor, dealer, manufacturer's representative,
sales agency or broker agreement;
(ii) any sales agreement (including oral agreements) with any
customer;
(iii) any agreement with any labor union;
(iv) any agreement with any supplier containing any provision
permitting any party other than Seller to renegotiate
the price or other terms, or containing any pay-back,
retroactive adjustment or other similar
-12-
provision, upon the occurrence of a failure by the
Division to meet its obligations under the agreement
when due or the occurrence of any other event;
(v) any agreement or commitment for the future purchase of
fixed assets or the maintenance thereof or for the
future purchase of materials, supplies or equipment in
excess of the Division's normal operating requirements;
(vi) any agreement for the employment of any employee or for
the retention of consulting services of any other person
(whether of a legally binding nature or in the nature of
informal understandings) which is not terminable on
notice without cost or other liability to the Division,
except normal severance arrangements and accrued
vacation pay;
(vii) any bonus, incentive pay, deferred compensation,
severance, stay or change of control, pension, profit-
sharing, retirement, hospitalization, insurance, stock
purchase, stock option or other plan, agreement or
understanding pursuant to which benefits are provided to
any employee of the Division (other than group insurance
plans which are not self-insured and are applicable to
employees generally);
(viii) any agreement relating to the borrowing of money or to
the mortgaging or pledging of, or otherwise placing a
lien or security interest on, any asset of the Division,
including but not limited to, indebtedness by way of
lease or installment purchase arrangement, guarantee,
reimbursement obligations pertaining to letters of
credit, and all mortgages, pledges, conditional sales
contracts, chattel and purchase money mortgages and
other security arrangements;
(ix) any guaranty of any obligation for borrowed money or
otherwise or any agreement to indemnify not in the
ordinary course of business;
(x) any agreement, or group of related agreements with the
same party or any group of affiliated parties, under
which the Division has advanced or agreed to advance
money;
(xi) any assignment, license or other agreement with respect
to any form of intangible property including with
respect to any invention or know-how used in or related
to the business of the Division (other than license
agreements with respect to "off-the-shelf" software);
(xii) any agreement under which the Division has limited or
restricted its right to compete with any person in any
respect or use or disclose any information in its
possession (other than supplier and customer
confidentiality agreements entered into the ordinary
course of business);
(xiii) all agreements relating to joint ventures or agreements
involving a sharing of profits;
-13-
(xiv) any contract relating to cleanup, abatement or other
actions in connection with environmental liabilities;
and
(xv) any other agreement, or group of related agreements with
the same party or any group of affiliated parties,
involving payments on an annual basis of more than
$50,000 or continuing over a period of more than six
months from the date or dates thereof (including
renewals or extensions optional with another party),
which agreement or group of agreements is not terminable
by the Division without penalty upon notice of thirty
(30) days or less; or
(xvi) any other agreement, instrument, commitment, plan or
arrangement, a copy of which would be required to be
filed with the Securities and Exchange Commission as an
exhibit to a registration statement on Form S-1 if the
Division were registering securities under the
Securities Act of 1933, as amended.
All of the Material Contracts are valid obligations of Seller and, to
Seller's knowledge, of the other parties thereto, and are in full force and
effect. Seller has duly performed in all material respects all of its
obligations under the Material Contracts to the extent those obligations to
perform have accrued, and no material violation of, or material default or
breach under, any Material Contracts by Seller or, to Seller's best knowledge,
any other party thereto has occurred and neither Seller nor, to Seller's best
knowledge, any other party has repudiated any provisions thereof. There is no
litigation pending nor, to Seller's best knowledge, threatened by any party with
respect to any Material Contract. Except as set forth on Schedule 4.5(a),
---------------
consummation of the transactions contemplated hereby will not violate any
Material Contract and will not give any person a right to terminate or modify
any rights of, or accelerate or augment any obligations of, or demand payment
by, Seller pursuant to any Material Contract. Except as set forth on Schedule
--------
4.5(a), Seller has not received written notice (or oral notice, in the case of a
------
contract that is not in writing) of termination or non-renewal of any Material
Contract and has no knowledge that the other party thereto has a current
intention to terminate or fail to renew a Material Contract. The consummation
of the transactions contemplated hereby will not result in any payment becoming
due from Seller under any Material Contract, nor accelerate the timing of future
payments or increase the amount of any such future payments.
(b) Schedule 4.5(b) contains a list of all Company-Wide Contracts.
---------------
(c) Schedule 4.5(c) is a true, correct and complete list of the
---------------
Division's customers, and accurately summarizes the provisions of Seller's
written and oral contracts with such customers that it purports to summarize.
4.6. PERMITS. The Division has all material Permits required to
-------
conduct its business as now being conducted. All such Permits of the Division
are valid and in full force and effect and are listed on Schedule 4.6. There is
------------
not now pending nor, to the best knowledge of Seller, threatened, any action by
any person or by or before any governmental or regulatory authority to revoke,
cancel, rescind, modify, or refuse to renew any of such Permits.
4.7. NO CONFLICT OR VIOLATION. Except as set forth on Schedule 4.7,
------------------------ ------------
none of Seller's execution, delivery or performance of this Agreement,
consummation of the transactions contemplated
-14-
hereby, or compliance with any of the provisions hereof, will (a) violate or
conflict with any provision of the Articles of Incorporation or Bylaws of
Seller, (b) violate, conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or increase the amount payable by Seller under, or result in
the creation of any Encumbrance upon any of the Assets under, any of the terms,
conditions or provisions of any Contract, Lease or Permit (i) to which the
Division is a party or (ii) by which the Assets are bound, or (c) violate any
statute, rule, regulation, ordinance, code, order, judgment, ruling, writ,
injunction, decree or award.
4.8. FINANCIAL STATEMENTS. Seller has heretofore delivered to Buyers
--------------------
the Financial Statements, all as attached hereto as Schedule 4.8. The Financial
------------
Statements (a) were prepared in accordance with the books and records of Seller,
(b) have been prepared in accordance with GAAP consistently applied throughout
the periods covered thereby and (c) fairly present in all material respects the
assets, liabilities (including all reserves) and financial position of the
Division as of the respective dates thereof and the results of operations for
the periods covered thereby, subject to the lack of footnote disclosure and
other presentation items.
4.9. ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 4.9
-------------------------- ------------
attached hereto, since the date of the Balance Sheet, there has not been: (a)
any Material Adverse Change; (b) any material damage, destruction or loss
(whether or not covered by insurance) adversely affecting the properties,
Assets, liabilities, financial condition or results of operations of the
Division; (c) any increase in the compensation, commissions or perquisites
payable or to become payable by the Division to any employee of the Division, or
any payment of any bonus, profit sharing or other extraordinary compensation to
any employee of the Division (other than any such increase or payment paid or to
become payable not exceeding 4% over amounts paid during the year ended December
31, 1998); (d) any cancellation of any material debts owed to or claims held by
the Division or waiver of any material rights held by the Division; (e) any
sale, lease, abandonment or other disposition by the Division of any real
property, or, other than in the ordinary course of business and not exceeding
$50,000 in the aggregate based on the book value thereof, of any machinery,
equipment or other operating properties, or of any intangible assets; (f) any
change in the amount, aging or collectibility of the Accounts Receivable or
other debts due to Seller with respect to the Division or the allowances with
respect thereto or accounts payable from that reflected on the Financial
Statements which could reasonably be expected to have a Material Adverse Effect;
or (g) any action taken by Seller which, if taken subsequent to the execution of
this Agreement and on or prior to the Closing Date, would constitute a breach of
Seller's agreements set forth in Section 6.1(a), (b), (e), (f), (g) or (h) of
this Agreement.
4.10. LITIGATION. Except as disclosed in Schedule 4.10 attached
---------- -------------
hereto, there is no action, order, writ, injunction, judgment or decree
outstanding or any claim, suit, litigation, proceeding, labor dispute,
arbitration action, governmental audit or investigation (collectively,
"Actions") (a) pending, or to the best of Seller's knowledge, threatened against
the Division or the Assets, or (b) to the best of Seller's knowledge, pending or
threatened that seeks to delay, limit or enjoin the transactions contemplated by
this Agreement. The Division is not in default with respect to, or subject to,
any judgment, order, writ, injunction or decree of any court or governmental
agency, and there are no unsatisfied judgments against the Division or the
Assets.
4.11. UNDISCLOSED LIABILITIES. To Seller's knowledge, the Division
-----------------------
has no material liabilities, obligations or commitments of any nature (whether
absolute, accrued, contingent or otherwise and
-15-
whether matured or unmatured), including without limitation Tax liabilities due
or to become due, except (a) liabilities which are reflected and reserved
against on the Balance Sheet which have not been paid or discharged since the
date thereof, (b) accounts payable and accrued expenses incurred in the ordinary
course of the Division's operations which have not caused the level of the
Division's accounts payable or accrued expenses to increase materially from the
amounts reflected on the Balance Sheet, (c) liabilities arising in the ordinary
course of business under Contracts, Leases, letters of credit, purchase orders,
licenses, Permits, purchase agreements and other agreements, business
arrangements and commitments described in the Disclosure Schedule and (d) as set
forth on Schedule 4.11.
-------------
4.12. COMPLIANCE WITH LAW. (a) The Division has not violated and is
-------------------
in compliance with all laws, statutes, ordinances, regulations, rules and orders
of any foreign, federal, state or local government and any other governmental
department or agency, and any judgment, decision, decree or order of any court
or governmental agency, department or authority, including without limitation,
Environmental Laws, except where such violation or lack of compliance is not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect. Since January 1, 1996, Seller has not received any notice to the effect
that, or otherwise been advised that, the Division is not in such compliance
with any such statutes, regulations, rules, judgments, decrees, orders,
ordinances or other laws, and Seller has no knowledge that any existing
circumstances are likely to result in such violations of any of the foregoing.
(b) Neither the Division nor any of its stockholders, officers,
directors, employees and persons who provide professional services under
agreements with the Division, has engaged in any activities which are prohibited
under the federal Medicare and Medicaid statutes, 42 U.S.C. (S)1320a-7b, 42
U.S.C. (S)1395nn or 31 U.S.C. 3729, or the regulations promulgated pursuant to
such statutes or related federal, state or local statutes or regulations or
which are prohibited by rules of professional conduct, including without
limitation: (i) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or indirectly,
overtly or covertly, in cash or in kind or offering to pay such remuneration (a)
in return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare, Medicaid or other applicable governmental
third party payor, or (b) in return for purchasing, leasing, ordering or
arranging for or recommending the purchasing, leasing or ordering of any good,
facility, service, or item for which payment may be paid in whole or in part by
Medicare, Medicaid or other applicable governmental third party payor; (ii)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or payment.
(c) None of the Permits contains any material term, provision,
condition or limitation materially more adverse than those generally applicable
to entities engaged in the same businesses as the Division. The Division has,
to the extent applicable, (i) obtained all required material approvals for the
acquisition, construction, expansion of, investment in or operation of its
business as currently operated, (ii) obtained and maintained accreditation from
all generally recognized accrediting bodies for the Division's business as
required or otherwise customary in the industry in which the Division is
engaged, (iii) obtained and maintained in good standing its Medicare and
Medicaid Provider Agreements and other material governmental third party payor
agreements, and (iv) obtained and maintained all required material professional
licenses from all appropriate agencies and boards for the administration,
pharmacy, medical, nursing and allied health professional staffs of the
Division's facilities and programs, and all other required licenses,
certifications, approvals and authorizations from the state, the U.S. Department
of Health and Human Services, Health Care Financing Administration or any other
supervisory, regulatory or accrediting body having or claiming jurisdiction.
-16-
4.13. THIRD PARTY PAYORS. The Division is in compliance with the
------------------
terms, conditions and provisions of participation in, and acting as a provider
or supplier to, the Medicare and Medicaid programs, except where such lack of
compliance is not reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect. There is not pending nor, to Seller's knowledge,
threatened any proceeding or investigation under the Medicare or Medicaid
programs involving the Division.
4.14. PROPRIETARY RIGHTS. (a) Schedule 4.14(a) lists all of Seller's
------------------ ----------------
(i) domestic and foreign trademarks and servicemarks, trade names, brand names,
fictitious names and assumed names, and all registrations and pending
applications for registrations therefor, (ii) patents and copyrights and all
pending applications therefor, and (iii) other material licenses and other
proprietary rights (other than licenses with respect to "off-the-shelf"
software), in each case that are used in the operation of the Division
(collectively, "Proprietary Rights"). Except as set forth on Schedule 4.14(a),
----------------
all Proprietary Rights are either (i) owned by Seller and Seller has the sole
and exclusive power and authority to use, sell, transfer, assign and license
such Proprietary Rights, and has not entered into any licenses, sub-licenses or
agreements related to the use by any other person of such Proprietary Rights, or
(ii) subject to a valid transferable license to use such Proprietary Rights.
The Division has not interfered with, infringed upon, misappropriated, or
violated any material intellectual property rights of third parties in any
material respect and, to Seller's knowledge, no third party has interfered with,
infringed upon, misappropriated or violated any of the Proprietary Rights in any
material respect. The operation of the Division requires no intellectual
property rights other than the Proprietary Rights and the Company-Wide
Proprietary Rights.
(b) Schedule 4.14(b) lists all Company-Wide Proprietary Rights.
----------------
4.15. EMPLOYEES. Schedule 4.15 attached hereto lists all persons
--------- -------------
currently employed primarily by the Division (the "Division Employees") and all
persons providing services to the Division as independent contractors. Schedule
--------
4.15 states, with respect to such persons, their hourly rates of compensation,
----
base salaries or other basis for and amount of compensation, their total 1998
compensation, the commencement date of their employment, and their vacation
entitlements as of the date hereof. Except as set forth on Schedule 4.15 or
-------------
Schedule 4.16, there are no employment or severance or termination agreements,
-------------
policies, plans, commitments or understandings, whether written or oral,
accruing to the benefit of any employee or independent contractor of the
Division. Other than financial and information systems support, no employee
other than Division Employees are necessary for the operation of the Division as
currently operated.
4.16. EMPLOYEE BENEFIT PLANS.
----------------------
(a) Except as set forth on Schedule 4.16, the Division does not
-------------
maintain or contribute (or have an obligation to contribute) to (i) any
"employee benefit plan" (as defined in Section 3(3) of ERISA), whether a single
employer, a multiple employer or a multiemployer plan, for the benefit of
employees or former employees of the Division, or (ii) any other plan, policy,
program, practice or arrangement providing compensation or benefits under which
the Division has any obligation or liability to any employee or former employee
of the Division (or any dependent or other beneficiary thereof) including,
without limitation, incentive, bonus, deferred compensation, vacation, holiday,
medical, severance, disability, death, stock option, stock purchase or other
similar benefit, whether written or unwritten (individually, an "Employee
Benefit Plan" and collectively, the "Employee Benefit Plans").
-17-
(b) Each Employee Benefit Plan (and each related trust, custodial
account or insurance contract) has complied in form and in operation in all
material respects with its terms and all applicable governmental requirements,
including ERISA and the Code, and all contributions due under each such plan
have been or will be made by the date such contribution is or was required to be
made under the terms of the Plan or applicable law. Each Employee Benefit Plan
that is intended to be qualified under Section 401(a) of the Code has been so
qualified and no event has occurred since the date of such determination that
would adversely affect such qualification; each trust created under any such
Employee Benefit Plan is exempt from tax under Section 501(a) of the Code and
has been so exempt during the period from creation to date. Seller has provided
Buyers with access to the most recent determination letters from the Internal
Revenue Service relating to such Employee Benefit Plans and such determination
letter includes any new or modified requirements under the Tax Reform Act of
1986 and subsequent legislation enacted thereafter to the extent the remedial
amendment period with respect to such legislation has expired.
(c) No charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand with respect to the administration or investment
of the assets of any Employee Benefit Plan (other than routine claims for
benefits) is pending or, to Seller's best knowledge, threatened, and to the best
knowledge of Seller, no facts exist that could form the basis for any such
charge, complaint action, suit, proceeding, hearing, investigation, claim or
demand.
(d) The Division (i) has never contributed to, or been under any
obligation to contribute to, any multiemployer plan (as defined in Section 3(37)
of ERISA) and (ii) is not liable, directly or indirectly, with respect to any
such plan for a complete or partial withdrawal (within the meaning of Title IV
of ERISA) or due to the termination or reorganization of such a plan or an
employee benefit plan subject to the minimum funding requirements of the Code
and ERISA.
(e) The Division has never maintained or contributed, or had an
obligation to contribute, to a defined benefit plan subject to Title IV of ERISA
or an employee benefit plan subject to the minimum funding requirements of the
Code and ERISA.
(f) All employee benefits required to be paid or provided pursuant
to any Employee Benefit Plan now or formerly in effect with respect to employees
or former employees of the Division have been paid or provided (or adequate
provision has been made to pay or provide the same, and the same will be paid or
provided in full when due).
(g) Except as set forth on Schedule 4.16, no employee of the
-------------
Division is entitled to claim or receive severance pay or severance benefits.
The Division has fewer than 100 employees, and on that basis is not an
"employer", as defined in 29 U.S.C. Section 2101(a)(1), or otherwise subject to
the Worker Adjustment and Retraining Notification Act, as amended.
4.17. LABOR RELATIONS. The Division has complied in all material
---------------
respects with all applicable governmental requirements pertaining to the
employment of labor, including those relating to wages, hours, collective
bargaining, employment discrimination, sexual harassment, worker's compensation,
and the payment of or withholding of taxes, and there are no actions, suits,
charges, complaints, proceedings, investigations or audits pending or, to
Seller's knowledge, threatened against the Division in connection therewith.
There are no collective bargaining agreements relating to the Division's
relationship with any employee. The Division has not recognized any labor
organization, nor has any such organization been certified, as the exclusive
bargaining agent of any employees of the Division. There has been no demand on
behalf of any labor organization to represent any employees of the Division and
Seller has no knowledge of any present efforts of any labor organization for
authorization to represent any employees of the Division.
-18-
There are no strikes, work stoppages or labor disputes pending or, to Seller's
knowledge, threatened, against the Division.
4.18. ENVIRONMENTAL, HEALTH, AND SAFETY.
---------------------------------
(a) At all times prior to the Closing, the Division has complied
and at Closing will be in compliance, in all material respects, with all
Environmental and Safety Requirements, and Seller has not received any notice,
report, or information (including information that litigation, investigation or
administrative or other proceedings of any kind are pending or threatened)
regarding any liabilities (whether accrued, absolute, contingent, unliquidated,
or otherwise), or any corrective, investigatory, or remedial obligations,
arising under Environmental and Safety Requirements relating to the Division or
the occupation or use of any of the Assets. For the purposes of this Agreement,
"Environmental and Safety Requirements" means all present governmental
requirements relating to the discharge or release of air pollutants, water
pollutants, process waste water, petroleum products or hazardous substances,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Federal Water Pollution Control Act, as
amended, the Federal Resource Conservation and Recovery Act, as amended, the
Federal Clean Water Act, as amended, the Toxic Substances Control Act, as
amended, the Federal Clean Air Act, as amended, the Superfund Amendments and
Reauthorization Act, as amended, and any and all other comparable state or local
laws relating to public health and safety or work health and safety.
(b) No Hazardous Substances have been, or are currently, located
at, in, or under or emanating from either the Assets or any other property
currently or previously owned or operated by the Division in a manner which: (i)
violates any applicable Environmental and Safety Requirements, or (ii) requires
response, remedial, corrective action or cleanup of any kind under any
applicable Environmental and Safety Requirements. For purposes of this
Agreement, "Hazardous Substances" has the meaning set forth in Section 101(14)
of the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, in the Federal Resource Conservation and Recovery Act, as
amended, and applicable state law and regulation, and shall also expressly
include petroleum, crude oil and any fraction thereof.
4.19. TAX MATTERS.
-----------
(a) Filing of Tax Returns. Seller has timely filed with the
---------------------
appropriate taxing authorities all returns relating to the Division (including
without limitation information returns and other material information) in
respect of Taxes required to be filed through the date hereof (or timely
extensions to file such returns) and will timely file any such returns (or
extensions) required to be filed on or prior to the Closing Date. The returns
and other information filed are complete and accurate in all material respects.
No claim has ever been made by an authority in a jurisdiction where Seller does
not file tax returns that Seller, with respect to the Division, is, or may be,
subject to taxation in that jurisdiction.
(b) Payment of Taxes. With respect to the Division, all Taxes
----------------
payable by Seller, in respect of periods beginning before the Closing Date, have
been timely paid, or will be timely paid by Seller, or an adequate reserve has
been established by Seller therefor, as set forth in the Financial Statements,
and Seller has no material liability for such Taxes in excess of the amounts so
paid or reserves so established.
-19-
Seller has withheld and paid all such Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(c) Audits, Investigations or Claims. There are no pending or, to
--------------------------------
Seller's best knowledge, threatened, audits, investigations or claims for or
relating to any material additional liability of Seller in respect of Taxes with
respect to the Division, and there are no matters under discussion between
Seller and any governmental authorities with respect thereto. Seller has not
waived any statute of limitations in respect to Taxes or agreed to any extension
of time with respect to a tax assessment or deficiency.
(d) Tax Liens. There are no tax liens on any of the Assets, except
---------
for liens for current taxes not yet due and payable.
4.20. INSURANCE. Schedule 4.20 contains a complete and accurate list
--------- -------------
of all policies or binders of fire, liability, worker's compensation, product
liability and other forms of insurance maintained by Seller on the Division or
the Assets. Such insurance provides coverage to the extent and in the manner as
may be required by law and by any and all Material Contracts to which the
Division is a party.
4.21. INVENTORY. Schedule 4.21 hereto contains a complete and
--------- -------------
accurate list of all of the addresses at which all Inventory is located. The
Inventory consists only of items that are good and merchantable, of quality and
quantity commercially usable and salable in the ordinary course of business, and
are valued at cost, including any appropriate discounts, and the present
quantities of all Inventory are reasonable and appropriate to conduct the
operations of the Division after the Closing in the manner heretofore conducted.
4.22. GOVERNMENTAL AND OTHER THIRD-PARTY CONSENTS.
-------------------------------------------
(a) no consent or approval of, notice to, waiver by or registration
or filing with any governmental authority is required to be made by Seller to
permit Seller to sell the Assets to Buyers, other than those set forth on
Schedule 4.22(a); and
----------------
(b) no consent of or notice to, or waiver by, any person or entity
is required for the assignment of any Permit, Material Contract or Lease to
Buyers, other than those set forth on Schedule 4.22(b).
----------------
4.23. YEAR 2000 COMPLIANCE. No facts have come to Seller's attention
--------------------
that would reasonably lead it to believe that the Year 2000 Problem (as defined
below) is reasonably likely to have a Material Adverse Effect. As used in this
Section, "Year 2000 Problem" means the risk that a computer application used by
the Division may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31, 1999,
taking into account leap years, including the year 2000.
4.24. BROKERS. Except for Xxxx Xxxxxxxx Xxxxxxx ("DRW"), no person
-------
will be entitled to any brokerage commissions, finder's fees or similar
compensation arising out of or due to any act of Seller in connection with the
transactions contemplated by this Agreement. Seller shall be solely responsible
for any and all fees of DRW.
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4.25. CUSTOMERS. Schedule 4.25 sets forth (a) the names of all
--------- -------------
current customers of the Division that ordered goods and services from the
Division which accounted for over 1% of the total net sales of the Division for
the twelve-month period ended December 31, 1998 and (b) the amount of sales
generated for each such customer during such period. Except as set forth on
Schedule 4.25, Seller has not received any written notice (or oral notice, if
-------------
the contractual relationship at issue is not in writing) that any such customer
of the Division (i) has ceased, or intends to cease, to use the products, goods
or services of the Division or (ii) has substantially reduced or intends to
substantially reduce, the use of products, goods or services of the Division,
including in each case after the consummation of the transactions contemplated
hereby, and has no knowledge of any current intention on the part of any such
customer to cease or substantially reduce the use of products, goods or services
of the Division.
4.26. AFFILIATE TRANSACTIONS. Schedule 4.26 describes all contracts,
---------------------- -------------
agreements, arrangements or transactions between the Division and any other
division of Seller or any of Seller's Affiliates, including any entity that is
under common control with Seller ("Affiliate Contracts"), setting forth the
terms thereof.
4.27. OPINION OF FINANCIAL ADVISOR. The Board of Directors of Seller
----------------------------
has received the opinion of DRW addressed to such Board, dated the date hereof,
to the effect that, as of such date, the Purchase Price is fair to Seller.
4.28. INDEBTEDNESS TO AND FROM SELLER, AFFILIATES, OFFICERS,
------------------------------------------------------
DIRECTORS AND EMPLOYEES. Seller is not indebted to any employee of the
-----------------------
Division, except for amounts due as normal salaries, wages, benefits or
reimbursement of ordinary business expenses. The Division is not indebted to
any other division of Seller or any Affiliate of Seller. No director, officer
or employee of the Division is now, or on the Closing Date will be, indebted to
Seller except for ordinary business expense advances due from employees of the
Division.
4.29. ACCURACY OF WARRANTIES. No representation or warranty by
----------------------
Seller in this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
not misleading.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYERS
----------------------------------------
Buyers hereby, jointly and severally, represent and warrant to Seller
as follows:
5.1. ORGANIZATION AND QUALIFICATION. Each of PharmaCare, PharmaCare
------------------------------
Direct and Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. CVS ProCare is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Rhode Island
5.2. AUTHORIZATION. Each Buyer has all requisite corporate power and
-------------
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by each Buyer and is the legal, valid and binding obligation of each
Buyer, enforceable against each Buyer in accordance with its terms, subject to
general principles of equity and except as enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws of general application relating to creditors'
rights
-21-
generally. Parent has all requisite corporate power and authority, and
has taken all corporate action necessary, to execute and deliver the Parent
Guarantee, to consummate the transactions contemplated thereby and to perform
its obligations thereunder. The Parent Guarantee has been duly executed and
delivered by Parent and is the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, subject to general
principles of equity and except as enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws of general application relating to creditors' rights generally.
5.3. NO CONFLICT OR VIOLATION. None of any Buyer's execution,
------------------------
delivery or performance of this Agreement, consummation of the transactions
contemplated hereby, or compliance with any of the provisions hereof, will (a)
violate or conflict with any provision of the Certificate or Articles of
Incorporation or Bylaws of such Buyer, (b) violate, conflict with, or result in
a breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
encumbrance upon any of the assets of such Buyer under, any of the terms,
conditions or provisions of any contract, indebtedness, note, bond, indenture,
security or pledge agreement, commitment, license, lease, franchise, permit,
agreement, or other instrument or obligation (i) to which such Buyer is a party
or (ii) by which such Buyer's assets are bound or (c) violate any statute, rule,
regulation, ordinance, code, order, judgment, ruling, writ, injunction, decree
or award, except in the case of (b) and (c), for such violations, conflicts,
breaches, defaults, terminations, accelerations or encumbrances as are not
reasonably likely to have a material adverse effect on such Buyer's ability to
consummate the transactions contemplated hereby.
5.4. GOVERNMENTAL CONSENTS. Except as set forth on Schedule 5.4, no
--------------------- ------------
consent or approval of, notice to, or filing with any governmental authority is
required to be made by any Buyer in order to permit such Buyer to purchase the
Assets from Seller.
5.5. BROKERS. There are no claims for brokerage commissions,
-------
finder's fees or similar compensation arising out of due to any act of Buyers in
connection with the transactions contemplated by this Agreement.
5.6. FINANCING. On the Closing Date, Buyers will have sufficient
---------
cash resources available to finance the transactions contemplated hereby.
5.7. LITIGATION. To each Buyer's best knowledge, there is no Action
----------
pending or threatened that seeks to delay, limit or enjoin the transactions
contemplated by this Agreement.
ARTICLE VI.
PRE-CLOSING COVENANTS OF SELLER AND BUYERS
------------------------------------------
The Parties agree as follows:
6.1. CONDUCT OF BUSINESS. From the date hereof through the Closing
-------------------
Date, Seller shall operate the Division in the ordinary course of business and
in accordance with past practice and Seller will not take any action
inconsistent with this Agreement or with the consummation of the Closing.
Without limiting the generality of the foregoing, the Division shall not, except
as specifically contemplated by this Agreement or consented to in writing by
PharmaCare, which consent shall not be unreasonably withheld:
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(a) enter into, extend, materially modify, terminate, waive any
material right under or renew any Material Contract or Lease, except in the
ordinary course of business;
(b) sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Assets (other than the sale of
Inventory in the ordinary course of business), or any interests therein, except
for sales or dispositions in the ordinary course of business that do not exceed
$25,000 in the aggregate;
(c) fail to maintain or sell Inventory consistent with its past
practices;
(d) solicit or, unless the fiduciary duties of Seller's directors
and officers otherwise require, consider from any corporation, business or
person any inquiries, proposals or offers relating to the disposition of the
Assets or the merger or consolidation of Seller with any corporation (a
"Takeover Proposal"), or, unless the fiduciary duties of Seller's directors and
officers otherwise require, divulge or otherwise disclose to any corporation,
business or person information concerning any aspects of the terms of this
Agreement. Seller shall promptly notify PharmaCare orally, and confirm in
writing, all relevant details relating to inquiries or proposals which Seller
may receive relating to any of the matters referred to in this Section 6.1(d);
(e) cancel any of the Division's insurance policies;
(f) fail to pay its accounts payable, or fail to pay or discharge
when due any liabilities, in the ordinary course of business, other than in
connection with a dispute by the Division as to the validity of such liability;
(g) fail to maintain its assets in substantially their current
state of repair, excepting normal wear and tear;
(h) make any loans or advances to any partnership, firm or
corporation, or, except for expense reimbursements incurred by agents or
employees in the ordinary course of business, any individual;
(i) intentionally do any other act which would cause any
representation or warranty of Seller in this Agreement to be or become untrue in
any material respect; or
(j) enter into any agreement, or otherwise become obligated, to do
any action prohibited hereunder.
6.2. ACCESS. Until the Closing or the earlier termination of this
------
Agreement, Seller shall afford to Buyers, and to their respective officers,
employees and authorized representatives, full access, during normal business
hours, to all properties, books, records and corporate documents pertaining to
the Division as may be reasonably requested. Until the Closing to the extent
such information pertains to the Division, and for a period of not less than
three (3) years from the date hereof to the extent such information does not
pertain to the Division, each Buyer shall hold all non-published and
confidential information obtained from Seller in strict confidence and shall not
disclose any such information to persons other than those of its officers,
directors, employees and representatives who have a need to know, or make any
commercial use thereof whatsoever. If this Agreement is terminated prior to
Closing
-23-
for any reason, all such information and copies thereof shall be
returned to Seller within five (5) business days.
6.3. NOTICES AND CONSENTS. Seller will give the notices to third
--------------------
parties, and up to and after the Closing (to the extent not obtained at Closing)
will use its commercially reasonable efforts to obtain the third party consents
described on Schedule 4.22(b). Each of the Parties will give the notices to,
----------------
make the filings with, and use its commercially reasonable efforts to obtain the
authorizations, consents, and approvals of governments and governmental agencies
described on Schedule 4.22(a) and Schedule 5.4.
---------------- ------------
To the extent Seller is unable prior to Closing to obtain a consent
described on Schedule 4.22(b) necessary to transfer any Asset, such Asset shall
----------------
not be transferred at Closing (each a "Non-Transferable Asset"), and Seller
shall subcontract its interest in such Non-Transferable Asset to a Buyer and
take all such other actions as shall be necessary to provide to such Buyer the
economic benefit of such Non-Transferable Asset, including, without limitation,
at the request and expense of such Buyer, enforcement of any rights of Seller on
behalf and for the account of such Buyer. Seller further agrees to execute and
deliver to the appropriate Buyer at such time as any such consent to the
transfer of any such Non-Transferable Asset is obtained by Seller after the
Closing an assignment and assumption agreement satisfactory to such Buyer and
Seller and any such other documents or instruments as may be reasonably
necessary or advisable to transfer to such Buyer all of Seller's interest in and
title to such Non-Transferable Asset.
6.4. FURTHER ASSURANCES. Upon the terms and subject to the
------------------
conditions contained herein, each of the Parties hereto agrees (a) to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement, (b) to execute
any further documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder, and (c) to cooperate with each other in connection with
the foregoing.
6.5. COLLECTION OF ACCOUNTS RECEIVABLE. At the Closing, Seller will
---------------------------------
retain hereunder, and subject to the limitations of this Section 6.5, shall have
the right and authority to xxxx (for a period of ninety (90) days after Closing
to the extent unbilled as of the Closing) and collect for its own account, all
Accounts Receivable and to take actions consistent with its past practices in
furtherance thereof. Seller shall, on a monthly basis, provide PharmaCare with
a trial balance of the Accounts Receivable on a customer-by-customer basis,
showing the aging thereof. Seller shall notify PharmaCare prior to taking any
collection actions with respect to the Accounts Receivable that are inconsistent
with its past practices; within thirty (30) days of such notice, PharmaCare and
Seller will agree on a proper course of action in collecting the Accounts
Receivable which reasonably accommodates both Seller's interests in collecting
the Accounts Receivable and the Buyers' interests in preserving customer
goodwill. Each Buyer shall within seventy-two (72) hours after receipt of any
payment in respect of any Account Receivable, properly endorse and deliver to
Seller any such payments received on account of any Account Receivable.
Payments received by a Buyer shall be applied to the invoice designated by the
payer of such payment, or, if no invoice is so designated by the payer, such
payment shall be applied to the outstanding invoices to such account debtor in
chronological order, beginning with the oldest invoice. Each Buyer shall within
seventy-two hours transfer or deliver to Seller any cash or other property that
such Buyer may receive in respect of any asset of Seller not constituting a part
of the Assets. As promptly as practicable after the Closing, the Parties shall
agree on the substance of, and shall send, a notice to the customers of the
Division indicating that Accounts Receivable should be paid to the order
-24-
of Seller and that accounts receivable arising out of sales made by the Buyers
after the Closing Date should be paid to the order of the Buyers.
6.6. COOPERATION. Buyers will cooperate with Seller to obtain any
-----------
and all approvals and consents necessary to effect the transactions contemplated
by this Agreement.
6.7. NOTICE OF DEVELOPMENTS.
----------------------
(a) Seller will give prompt written notice to Buyers of any
development causing a breach of any of its representations and warranties in
Article IV (other than Sections 4.1, 4.2, 4.3 (as to title only), 4.5(c), 4.7,
4.22, 4.24 and 4.27, which are governed by Section 6.7(b) below)). Unless
Buyers have the right to terminate this Agreement pursuant to Section 11.1(ii)
by reason of the development and exercise that right within the period of twenty
(20) calendar days after notice thereof to Buyers, the written notice pursuant
to this Section 6.7(a) will be deemed to have amended the Disclosure Schedule,
to have qualified the representations and warranties contained in Article IV,
and to have cured any misrepresentation or breach of warranty that otherwise
might have existed hereunder by reason of the development.
(b) Each Party will give prompt written notice to the other Party
of any development causing a breach of any of its own representations and
warranties in Sections 4.1, 4.2, 4.3 (as to title only), 4.5(c), 4.7, 4.22, 4.24
or 4.27, in the case of Seller, and Article V, in the case of Buyers. No
disclosure by any Party pursuant to this Section 6.7(b), however, shall be
deemed to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation or breach of warranty.
6.8. CASUALTY LOSSES. In the event that there shall have been
---------------
suffered between the date hereof and the Closing any casualty loss relating to
the Assets that becomes known to Seller, Seller will promptly notify Buyers of
such event and, if a Closing occurs, shall assign to the appropriate Buyer
Seller's right to all insurance proceeds payable as a result of the occurrence
of the event resulting in such loss or damage.
ARTICLE VII.
OTHER AGREEMENTS OF THE PARTIES
-------------------------------
The Parties agree as follows:
7.1. GENERAL. In case at any time after the Closing any further
-------
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as the 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 X
hereof).
7.2. LITIGATION SUPPORT. In the event and for so long as any Party
------------------
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Division, the other Party will
-25-
cooperate with the contesting or defending Party and its counsel in the contest
or defense, make available its personnel at reasonable times and upon reasonable
notice, and provide such testimony and access to its books and records as shall
be necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Article X hereof).
7.3. COVENANT NOT TO COMPETE. Seller agrees that for a period of
-----------------------
five (5) years (the "Non-Compete Period") from and after the Closing Date,
Seller will not engage directly or indirectly, whether as a stockholder,
partner, member, joint venturer, advisor, consultant or independent contractor,
in the traditional mail order pharmacy business, specialty mail order pharmacy
business, or retail pharmacy network business anywhere in the United States or
induce or attempt to induce any person or entity that is a customer or supplier
of any Buyer in any of such businesses or otherwise a contracting party with any
Buyer with respect to any of such businesses to terminate any written or oral
agreement or understanding with such Buyer with respect to such businesses or
otherwise modify its relationship with such Buyer with respect to such
businesses in a manner adverse to such Buyer; provided, however, that (i)
-------- -------
nothing contained in this Section 7.3 shall restrict the sale by Seller of
medication management products and/or services to physicians, patients, or
managed care providers or payors (other than the sale of traditional mail order
pharmacy services, specialty mail order pharmacy services or retail pharmacy
network services to third-party payors, which Seller shall be prohibited from
doing for the Non-Compete Period), including via the Internet, and (ii) no owner
of less than 1% of the outstanding stock of any publicly traded corporation
shall be deemed to engage solely by reason thereof in any of such corporation's
businesses. During the Noncompete Period, Seller shall not induce or attempt to
induce any Rehired Employee to leave their employ, or otherwise solicit the
employment of any Rehired Employee. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section 7.3
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
7.4. BULK TRANSFER LAWS. The Parties agree to waive compliance with
------------------
the requirements of any applicable bulk sales law provisions of the uniform
commercial codes of the states in which the Assets are situated or which may
otherwise be applicable to the transactions contemplated hereby, other than
those relating to Taxes.
7.5. TAX MATTERS.
-----------
(a) Seller will be responsible for the preparation and filing of
all Tax returns for all activities of the Division for all periods ending on or
before the Closing Date (including the consolidated, unitary, and combined Tax
returns for Seller which include the operations of the Division for any period
ending on or before the Closing Date). Seller will make all payments required
with respect to any such Tax return; provided, however, that Buyers will
-------- -------
reimburse Seller concurrently therewith to the extent any payment Seller is
making relates to the operations of the Division for any period beginning after
the Closing Date.
(b) Buyers will be responsible for the preparation and filing of
all Tax returns for all activities of the Division for all periods beginning
after the Closing Date (other than for Taxes with
-26-
respect to periods for which the consolidated, unitary, and combined Tax returns
of Seller will include the operations of the Division). Buyers will make all
payments required with respect to any such Tax return; provided, however, that
-------- -------
Seller will reimburse Buyers concurrently therewith to the extent any payment
Buyers are making relates to the operations of the Division for any period
ending on or before the Closing Date.
(c) In the case of any real or personal property or other ad
valorem Tax imposed on the Assets for a Tax period that includes, but does not
end on, the Closing Date, the portion of such Tax related to the portion of such
Tax period ending on the Closing Date shall be deemed to be the amount of such
Tax for the entire Tax period multiplied by a fraction, the numerator of which
is the number of days in the Tax period ending on the Closing Date and the
denominator of which is the number of days in the entire Tax period. Seller
shall be responsible for any such Tax relating to the portion of such Tax period
ending on the Closing Date, and Buyers shall be responsible for any such tax
relating to the portion of such Tax period beginning after the Closing Date.
7.6. EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
------------------------------------
(a) Each Buyer shall extend offers of employment to those Division
Employees whom it desires to hire in its sole discretion (such employees who
accept such offers of employment are hereinafter referred to as "Rehired
Employees"), which offers shall be on terms and conditions comparable to the
terms and conditions offered by such Buyer to its current employees of like
position; provided, however, that any such offer of employment shall not be
-------- -------
construed to limit the ability of such Buyer to terminate any such employee
following the Closing Date for any reason. Seller shall terminate the
employment of all Rehired Employees immediately prior to the Closing and any
cost, expense or liability resulting from, or incurred in connection with, such
terminations, other than vacation entitlements, accrued on or prior to the
Closing Date shall be the sole responsibility of Seller. The appropriate Buyer
shall assume responsibility and all liabilities and obligations for vacation
entitlements through the Closing Date of Rehired Employees.
(b) Buyers agree that each Rehired Employee shall receive full
credit for service with Seller for purposes of determining such employee's
eligibility for and determining the amount of benefit entitlement for holidays,
sick days, vacations, and also for purposes of determining eligibility
(including, without limitation, waiting periods under group health plans),
vesting and benefits provided under any other employee benefit plan, program,
policy or other arrangement covering such employee established, continued or
otherwise sponsored by a Buyer or an Affiliate of a Buyer after the Closing
Date; provided, however, that such crediting of service shall not operate to
-------- -------
duplicate any benefit or the funding of any such benefit for any such period of
service and shall be permitted under the applicable plan of a Buyer or its
Affiliate.
7.7. POST-CLOSING CONDUCT OF BUSINESS. Buyers agree to use their
--------------------------------
commercially reasonable efforts to maximize Actual Volume from the Closing Date
through the Anniversary Date; provided that nothing contained herein shall
impose upon any Buyer an obligation to exceed the efforts of Seller to maximize
Actual Volume as utilized for periods prior to the Closing.
7.8. RIGHT TO USE SELLER'S TRADEMARKS. Buyers acknowledge, without
--------------------------------
limitation, that the "Allscripts" trademark, tradename and related tradedress,
(the "Xxxx(s)"), is a Company-Wide Proprietary Right; however, effective on the
Closing Date, Seller hereby grants to Buyers the limited, non-exclusive,
royalty-free right to use the Marks for the sole purpose of (i) selling the
Closing Inventory
-27-
branded with the Marks, (ii) allowing customers to use pharmacy cards that are
branded with the Marks, to the extent that such cards were previously issued in
conjunction with Seller's operation of the Division and are in effect on the
Closing Date, and (iii) printing and distributing prescription labels, receipts,
packaging and other printed materials necessary to do business as a mail order
pharmacy, provided, however, that any such printed materials shall be provided
-------- -------
to Seller for its prior approval, which approval shall not be unreasonably
withheld. Each of such rights shall separately expire upon (i) with regard to
the Closing Inventory, the earlier to occur of the date such Closing Inventory
is depleted or the Anniversary Date, (ii) with regard to the pharmacy cards, for
so long as such cards are in effect, but in no event later than the Anniversary
Date, and (iii) with regard to the printed materials, the date falling 180 days
after the Closing Date. Notwithstanding the foregoing, nothing herein shall be
deemed to permit Buyers to use the Marks in any manner to advertise, promote or
otherwise exploit the Marks. Other than as specifically provided herein, Seller
reserves and retains any and all rights in and to the Marks.
7.9. USE OF PERMITS. The Parties acknowledge that the Permits are
--------------
not transferable by Seller to the Buyers. Buyers hereby agree to use their best
efforts to secure appropriate replacement licenses and permits for the Permits
as promptly as practicable after the date hereof. Seller hereby agrees to, to
the extent permitted by applicable law, (i) allow Buyers to use the Permits, and
(ii) execute powers of attorney and such other documents as may be required to
allow Buyers to operate such aspects of the business of the Division requiring
pharmacy or drug permits and/or licenses that Buyers cannot obtain prior to the
Closing, in each case for a period ending on the first to occur of (i) the 180th
day after Closing, and (ii) the obtaining by Buyers of the relevant replacement
permit; provided, however, that any power of attorney executed by Seller with
-------- -------
respect to its DEA license shall be effective for no more than sixty (60) days.
ARTICLE VIII.
CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------
The obligations of Seller to consummate the transactions provided for
hereby are subject to the satisfaction, on or prior to the Closing Date, of each
of the following conditions, any of which may be waived in writing by Seller:
8.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations
-----------------------------------------
and warranties of Buyers contained in this Agreement shall be true and correct
in all material respects (except those representations and warranties which are
qualified by materiality, which shall be true and correct in all respects) at
and as of the date of this Agreement and at and as of the Closing Date, and each
Buyer shall have performed and satisfied all agreements and covenants required
hereby to be performed by it prior to or on the Closing Date. Each Buyer shall
have delivered to Seller a certificate dated the Closing Date to such effect.
8.2. NO PROCEEDINGS. No Action by any governmental authority or
--------------
other person shall have been instituted which prevents the consummation of the
transactions contemplated hereby.
8.3. GOVERNMENTAL APPROVALS. Seller and Buyers shall have received
----------------------
all other material authorizations, consents, and approvals of governments and
governmental agencies described on Schedule 8.3.
------------
8.4. FAIRNESS OPINION. The fairness opinion of DRW referred to in
----------------
Section 4.27 hereof shall not have been withdrawn or materially modified.
-28-
8.5. CLOSING DOCUMENTS. Buyers shall have made the deliveries to
-----------------
Seller described in Section 3.2(b).
8.6. OPINION OF COUNSEL FOR BUYERS. Seller shall have received the
-----------------------------
opinion, dated the Closing Date, of Xxxxxxx & Xxxxxx, LLP, counsel for Buyers,
the substance of which is substantially as set forth on Schedule 8.6.
------------
8.7. ADDITIONAL AGREEMENTS. (a) PharmaCare shall have executed a
---------------------
Transition Services Agreement (the "Transition Services Agreement")
substantially in the form of Schedule 8.7(a).
---------------
(b) PharmaCare shall have executed a Participating Pharmacy
Agreement with Seller, which shall be substantially in the form of Schedule
--------
8.7(b) hereto.
-------------
8.8. ACCEPTANCE OF EMPLOYMENT. Each of Xxx Xxxxxx and Xxxx Xxxxx
------------------------
shall have accepted CVS ProCare's offer of employment, which offer shall be on
terms not materially less favorable than those currently enjoyed by such persons
with Seller.
ARTICLE IX.
CONDITIONS TO BUYERS' OBLIGATIONS
---------------------------------
The obligations of Buyers to consummate the transactions provided for
hereby are subject to the satisfaction, on or prior to the Closing Date, of each
of the following conditions, any of which may be waived in writing by Buyers:
9.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations
-----------------------------------------
and warranties of Seller contained in this Agreement shall be true and correct
in all material respects (except those representations and warranties which are
qualified by materiality, which shall be true and correct in all respects) at
and as of the date of this Agreement and at and as of the Closing Date, and
Seller shall have performed and satisfied all agreements and covenants required
hereby to be performed by it prior to or on the Closing Date. Seller shall have
delivered to Buyers a certificate dated the Closing Date to such effect.
9.2. NO PROCEEDINGS OR LITIGATION. No Action by any governmental
----------------------------
authority or other person shall have been instituted which prevents the
consummation of the transactions contemplated hereby.
9.3. GOVERNMENTAL APPROVALS. Seller and Buyers shall have received
----------------------
all other material authorizations, consents, and approvals of governments and
governmental agencies described on Schedule 8.3.
------------
9.4. CLOSING DOCUMENTS. Seller shall have made the deliveries to
-----------------
Buyers described in Section 3.2(a).
9.5. OPINION OF COUNSEL FOR SELLER. Buyers shall have received the
-----------------------------
opinion, dated the Closing Date, of Xxxxxxx, Carton & Xxxxxxx, counsel for
Seller, the substance of which is substantially as set forth on Schedule 9.5.
------------
9.6. ADDITIONAL AGREEMENTS. Seller shall have executed the
---------------------
Transition Services Agreement.
-29-
9.7. ACCEPTANCE OF EMPLOYMENT. Each of Xxx Xxxxxx and Xxxx Xxxxx
------------------------
shall have accepted CVS ProCare's offer of employment, which offer shall be on
terms not materially less favorable than those currently enjoyed by such persons
with Seller.
ARTICLE X.
INDEMNIFICATION
---------------
10.1. SURVIVAL OF REPRESENTATIONS. The representations and
---------------------------
warranties of Seller contained in Sections 4.3 (other than as to title), 4.4,
4.5, 4.6, 4.8 through 4.11, 4.13, 4.14, 4.15, 4.17, 4.20, 4.21, 4.23, 4.25,
4.26, 4.28 and 4.29 herein shall survive the consummation of the transactions
contemplated hereby for the period ending one (1) year after the Closing Date.
All of the other representations and warranties of the Parties contained herein
shall survive the Closing and continue in full force and effect forever
thereafter (subject to any applicable statutes of limitations). No claim for
breaches of representations and warranties may be made after the applicable
survival period expires; provided, however, that any claim made during the
--------- -------
applicable survival period not resolved during such period shall survive the
expiration of such survival period and the terms of this Article shall apply to
such claim as if such survival period had not expired.
10.2. INDEMNIFICATIONS.
----------------
(a) By the Seller. Seller shall indemnify, save and hold harmless
-------------
Buyers and their respective shareholders, officers, directors, employees,
subsidiaries, representatives, agents and Affiliates (collectively "Related
Parties"), from and against any and all costs, losses, Taxes, liabilities,
obligations, damages, lawsuits, claims, demands, and expenses (whether or not
arising out of third-party claims), including without limitation reasonable
attorneys' fees and all amounts reasonably paid in investigation, defense or
settlement of any of the foregoing (herein, "Damages"), suffered by any Buyer or
its Related Parties and caused by (i) any breach of any representation or
warranty made by Seller in this Agreement (each representation and warranty
being read for this purpose without regard to any "materiality"; "Material
Adverse Effect", "in any material respect" or similar exception or qualifier
contained in any such representation or warranty); (ii) any breach of any
covenant or agreement made by Seller in this Agreement; or (iii) any Excluded
Liability (including without limitation any liability imposed upon any Buyer as
a result of the parties' failure to comply with any bulk sales or similar law);
provided, however, that there will be an aggregate ceiling equal to 30% of the
-------- -------
Purchase Price on the obligations of Seller to indemnify, save and hold harmless
Buyers and their respective Related Parties from and against Damages pursuant to
Section 10.2(a)(i) and (ii) (and no ceiling on the obligations of Seller under
Section 10.2(a)(iii)). Seller will not have any liability (for indemnification
or otherwise) under Section 10.2(a)(i) or (ii) until the total of all Damages
with respect to such matters exceeds One Hundred Fifty Thousand Dollars
($150,000) in the aggregate, and then only to the extent of such excess (and no
such threshold with respect to matters covered by Section 10.2(a)(iii)). For
purposes of this Section 10.2(a), to the extent any claim for indemnification
may be properly made pursuant to Section 10.2(a)(iii) and either Section
10.2(a)(i) or (ii), then such claim for indemnification to such extent shall be
deemed to be made pursuant only to Section 10.2(a)(iii) and not pursuant to
Section 10.2(a)(i) or (ii).
(b) By Buyers. Buyers, on a joint and several basis, shall
---------
indemnify and save and hold harmless Seller and its Related Parties from and
against any and all Damages suffered by Seller or its Related Parties and caused
by (i) any breach of any representation or warranty made by any Buyer in this
Agreement; (ii) any breach of any covenant or agreement made by any Buyer in
this Agreement (except as provided in (iv) below); (iii) any Buyer's use of any
Permit, Non-Transferable Asset or Xxxx, but only
-3-
to the extent such Damages arise out of such Buyer's actions after the Closing;
(iv) any breach by any Buyer of its covenants or agreements set forth in
Sections 2.3, 2.4, 2.5, the last paragraph of Section 6.3 and Sections 6.5 and
7.7 hereof; or (v) any Assumed Liability; provided, however, that there will be
-------- -------
an aggregate ceiling equal to 30% of the Purchase Price on the obligations of
Buyers to indemnify, save and hold harmless Seller and its Related Parties from
and against Damages pursuant to Section 10.2(b)(i) and (ii) (and no ceiling on
the obligations of Buyers under Sections 10.2(b)(iii), (iv) or (v)). Buyers will
not have any liability (for indemnification or otherwise) under Section
10.2(b)(i) or (ii) until the total of all Damages with respect to such matters
exceeds One Hundred Fifty Thousand Dollars ($150,000) in the aggregate, and then
only to the extent of such excess (and no such threshold with respect to matters
covered by Section 10.2(b)(iii), (iv) or (v)). For purposes of this Section
10.2(b), to the extent any claim for indemnification may be properly made
pursuant to Section 10.2(b)(iii), (iv) or (v) and either Section 10.2(b)(i) or
(ii), then such claim for indemnification to such extent shall be deemed to be
made pursuant to Section 10.2(b)(iii), (iv) or (v) and not pursuant to Section
10.2(b)(i) or (ii).
(c) Defense of Claims. If a claim for Damages (a "Claim") is to be
-----------------
made by a Party entitled to indemnification hereunder (the "Indemnified Party")
against the other Party (the "Indemnifying Party"), the Indemnified Party shall
give written notice (a "Claim Notice") to the Indemnifying Party as soon as
practicable after the Indemnified Party becomes aware of any fact, condition or
event which may give rise to Damages for which indemnification may be sought
under this Section 10.2. If any lawsuit or enforcement action is filed against
an Indemnified Party, written notice thereof shall be given to the Indemnifying
Party as promptly as practicable (and in any event within fifteen (15) calendar
days after the service of the citation or summons). The failure of any
Indemnified Party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the Indemnifying Party
demonstrates actual damage caused by such failure. After such notice, if the
Indemnifying Party shall acknowledge in writing to the Indemnified Party that
the Indemnifying Party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the Indemnifying Party
shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
its own choice to handle and defend the same (unless the named parties to such
action or proceeding include both the Indemnifying Party and the Indemnified
Party and the Indemnified Party has been advised in writing by counsel that
there may be one or more legal defenses available to such Indemnified Party that
are different from or additional to those available to the Indemnifying Party,
in which event the Indemnified Party shall be entitled at the Indemnifying
Party's cost, risk and expense, to separate counsel of its own choosing) and
(iii) to compromise or settle such claim, which compromise or settlement shall
be made only with the written consent of the Indemnified Party (such consent not
to be unreasonably withheld) unless the proposed settlement involves only the
payment of money damages by the Indemnifying Party. If the Indemnifying Party
fails to assume the defense of such claim within thirty (30) calendar days after
receipt of the Claim Notice, the Indemnified Party against which such claim has
been asserted will (upon delivering notice to such effect to the Indemnifying
Party) have the right to undertake, at the Indemnifying Party's cost and
expense, the defense, compromise or settlement of such claim on behalf of and
for the account and risk of the Indemnifying Party; provided, however, that such
-------- -------
Claim shall not be compromised or settled without the written consent of the
Indemnifying Party, (such consent not to be unreasonably withheld), unless the
proposed settlement involves only the payment of money damages by the
Indemnifying Party. In the event the Indemnified Party assumes the defense of
the claim, the Indemnified Party will keep the Indemnifying Party reasonably
informed of the progress of any such defense, compromise or settlement.
(d) Certain Benefits. The amount of any indemnification payable
under this Article X shall be net of any net insurance proceeds actually paid to
the Indemnified Party under any policy or policies
-31-
of insurance covering the loss giving rise to the claim. The Indemnified Party
will use reasonable efforts to collect any such insurance and will account to
the Indemnifying Party therefor. The Parties agree to respond within a
reasonable time to any inquiry by the other Party as to the status of any such
insurance payment. All indemnification payments pursuant to this Article X shall
be deemed adjustments to the Purchase Price.
(e) Buyers' Right of Offset. Buyers shall have the right to offset
-----------------------
any unpaid indemnification obligations of Seller hereunder against any amount
due to Seller as Contingent Purchase Price.
(f) Exclusive Remedy. The Parties acknowledge and agree that the
----------------
foregoing indemnification provisions in this Article X shall be the exclusive
remedy of Buyers and Seller and their respective Related Parties with respect to
the Division and the transactions contemplated by this Agreement.
ARTICLE XI.
TERMINATION; REMEDIES
---------------------
11.1. TERMINATION. At any time before the Closing, this Agreement
-----------
may be terminated (i) by mutual written consent of the Parties; (ii) by either
Buyers, on the one hand, or Seller, on the other hand, if there has been a
material misrepresentation, a material breach of warranty, any breach of any
representation or warranty qualified as to materiality, or a material breach of
covenant by the other; (iii) by either Buyers, on the one hand, or Seller, on
the other hand, if the Closing does not occur on or before April 30, 1999 (or
such later date as the Parties shall mutually agree), unless the failure of the
Closing to occur by such date shall be due to the action or failure to act of
the Party seeking to terminate this Agreement, which action or failure to act
constitutes a breach of this Agreement; or (iv) by Seller, in connection with
the acceptance of a Takeover Proposal, whereupon Seller shall promptly pay
Buyers the sum of $300,000 plus Buyers' reasonable out-of-pocket expenses
incurred through the date of termination in connection with the transaction
contemplated by this Agreement, including attorneys' fees and expenses (which
amounts are expressly acknowledged by the Parties to not be a penalty), by wire
transfer of immediately available funds.
11.2. EFFECT OF TERMINATION. In the event of the termination of this
---------------------
Agreement pursuant to Section 11.1, written notice thereof shall forthwith be
given to the other Party specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become null and void and
of no further force or effect, and no Party hereto (or any of its Affiliates,
directors, officers, agents or representatives) shall have any liability or
obligation hereunder (except for any liability of any Party then in breach);
provided, however, that the provisions of Sections 6.2 (Access) and 12.6
-------- -------
(Expenses) shall survive any such termination.
ARTICLE XII.
MISCELLANEOUS
-------------
12.1. ASSIGNMENT. Neither this Agreement nor any of the rights or
----------
obligations hereunder nor any of the assets comprising the business currently
operated as the Division may be assigned by any Party without the prior written
consent of the other Party; except that a Buyer may, without such consent,
transfer any of the assets comprising the business currently operated as the
Division (including by way of merger) and/or assign all such rights and
obligations, in each case, to one or more Affiliates of a Buyer
-32-
or to a successor in interest to such Buyer that shall expressly assume all
obligations and liabilities of such Buyer under this Agreement. Such assumption
of the obligations and liabilities of a Buyer shall not relieve such Buyer of
its obligations and liabilities under this Agreement, including, without
limitation, such Buyer's obligations under Section 7.7 of this Agreement
(provided that the commercial reasonableness of such Buyer's efforts to maximize
Actual Volume under Section 7.7 shall be determined as if no such assignment by
such Buyer had occurred). Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and except as provided in Article X, no other
person shall have any right, benefit or obligation under this Agreement as a
third-party beneficiary or otherwise.
12.2. NOTICES. All notices, requests, demands and other
-------
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.,
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. In each case notice shall be sent to:
If to Seller,
addressed to: Allscripts, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: J. Xxxxxxx Xxxx
Fax No.: 000-000-0000
With a copy to: Xxxxxxx, Carton & Xxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Fax No.: 000-000-0000
If to any Buyer,
addressed to: c/o CVS Corporation
Xxx XXX Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Fax No.: 000-000-0000
With a copy to: Xxxxxxx & Xxxxxx, LLP
0000 XxxxXxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxxx, Esq.
Fax No: 000-000-0000
or to such other place and with such other copies as either Party may designate
as to itself by written notice to the others.
-33-
12.3. CHOICE OF LAW. This Agreement shall be construed, interpreted
-------------
and the rights of the parties determined in accordance with the laws of the
State of Illinois (without reference to the choice of law provisions of Illinois
law), except with respect to matters of law concerning the internal corporate
affairs of any corporate entity which is a party to or the subject of this
Agreement, and as to those matters the law of the jurisdiction under which the
respective entity derives its powers shall govern.
12.4. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement,
----------------------------------------
together with all exhibits and schedules hereto and thereto (including the
Disclosure Schedule), constitutes the entire agreement between the Parties
pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
Parties. THE REPRESENTATIONS AND WARRANTIES BY SELLER IN THIS AGREEMENT AND ANY
EXHIBITS OR SCHEDULES HERETO, AND ANY OTHER AGREEMENTS OR DOCUMENTS TO BE
EXECUTED BY SELLER IN CONNECTION HEREWITH, CONSTITUTE THE SOLE AND EXCLUSIVE
REPRESENTATIONS AND WARRANTIES OF SELLER TO BUYERS IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREBY, AND BUYERS UNDERSTAND, ACKNOWLEDGE AND AGREE
THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE EXPRESSED OR
IMPLIED (INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL
FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE
DIVISION) ARE SPECIFICALLY DISCLAIMED BY SELLER. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
Parties hereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the Party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
12.5. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.6. EXPENSES. Except as otherwise specified in this Agreement, each
--------
Party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such Party in
preparation for carrying this Agreement into effect.
12.7. INVALIDITY. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
12.8. PUBLICITY. No Party will issue any press release or make any
---------
other public statement relating to the transactions contemplated hereby unless
(i) mutually agreed to by the Parties, or (ii) required by law, regulation,
court order or the rules of any applicable stock exchange or the Nasdaq Stock
Market or of any applicable regulatory authority and any such release or
statement shall be subject to prior review by PharmaCare and Seller.
-34-
12.9. KNOWLEDGE. The phrase "to the Seller's knowledge", or words of
---------
comparable import, shall mean facts or circumstances within the actual personal
knowledge, after reasonable inquiry, of any of Xxx Xxxxxx, Xxxxx Xxxxxx, Xxxx
Xxxx, Xxxx Xxxxxxx and Xxxxxxx Xxxx.
12.10. JOINT DRAFTING. The Parties have participated jointly in the
--------------
negotiation and drafting of this Agreement and the other agreements and
documents to be executed by the Parties in connection herewith. In the event an
ambiguity or question of intent or interpretation arises, this Agreement and the
other agreements and documents to be executed by the Parties in connection
herewith shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Agreement and the
other agreements and documents to be executed by the Parties in connection
herewith.
-35-
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed and delivered on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
BUYERS:
PHARMACARE MANAGEMENT SERVICES, INC.
BY: /S/ XXXX X. XXXXXXX
--------------------------
NAME: XXXX X. XXXXXXX
------------------
ITS: PRESIDENT/COO
-------------------
PHARMACARE DIRECT, INC.
BY: /S/ XXXX X. XXXXXXX
--------------------------
NAME: XXXX X. XXXXXXX
--------------------
ITS: PRESIDENT/COO
-------------------
PROCARE PHARMACY, INC.
BY: /S/ XXXXXX XXXXXX
------------------------
NAME: XXXXXX XXXXXX
------------------
ITS: PRESIDENT
----------------
SELLER:
ALLSCRIPTS, INC.
BY: /S/ XXXXX X. XXXXXX
--------------------------
NAME: XXXXX X. XXXXXX
---------------------
ITS: PRESIDENT
---------------
DEBENTURE WARRANT
-----------------
No. W-WarrantNo Warrant to Purchase Shares of
Common Stock (subject to
adjustment)
ALLSCRIPTS, INC.
Incorporated Under the Laws of the State of Illinois
THIS CERTIFIES THAT, for value received, Name or its assigns is entitled
to subscribe for and purchase during the period specified in this Warrant,
No Shares (subject to adjustment as hereinafter provided) fully paid and non-
assessable Common Shares, par value $.01 per share (the "Common"), of
ALLSCRIPTS, INC., an Illinois corporation (the "Corporation"), at the price of
$.01 per share, subject, however, to the provisions and upon the terms and
conditions hereinafter set forth.
1. Duration. The right to subscribe for and purchase shares of Common of
--------
the Corporation represented hereby shall expire at 5:00 P.M., Central Standard
Time, on April 15, 2003. The Corporation shall give 30 days' written notice to
the Holder of this Warrant to the effect that such right will expire on April
15, 2003. If, on such expiration date, the Corporation is then required,
pursuant to an effective request therefor, to effect, or is in the process of
effecting, a registration under the Securities Act for an underwritten public
offering in which shares of Warrant Stock are, pursuant to the Registration
Agreement, entitled to be included, or if the Corporation is in default of any
obligation created by Sections 2 and 3 of the Registration Agreement or of any
of its obligations under the Agreement regarding the transfer of this Warrant or
of any Warrant Stock or the registration of any Warrant Stock, or is in default
of any obligation created by (i) Sections 6.2 or 6.3 of the Agreement or (ii)
Sections 6.1(a) or (b) of the Agreement, if the Holder of this Warrant gives
written notice to the Corporation that the Corporation is in default under such
provisions, said right to subscribe for and purchase shares of Common shall
expire at 5:00 P.M., Central Standard Time on the later of (i) the 30th day
following the date on which such registration shall have become effective (but
in no event longer than 180 days beyond the date this Warrant would have
expired) or (ii) on the 30th day following the date all of such breaches have
been cured, as the case may be.
2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and
------------------------------------------------------------------
Exchange. The purchase right represented by this Warrant may be exercised at
--------
any time prior to expiration.
The Holder hereof may exercise this Warrant, in whole or in part, by the
surrender of this Warrant (with the subscription form attached hereto duly
executed) at the principal office of the Corporation, and by the payment to the
Corporation of the then applicable Warrant Price for the shares being purchased
upon such exercise by certified or official bank check or by surrender to the
Corporation of additional Warrants or other Securities. Any Warrant so
surrendered shall be valued at an amount equal to (i) the excess of the Fair
Market Value per share of Common over the Warrant Price, multiplied by (ii) the
number of shares of Common purchasable upon exercise of such Warrant, in each
case determined as of the date of surrender. Any other Security so surrendered
shall be valued at its Fair Market Value as of the date of surrender. In the
event of any exercise of the rights represented by this Warrant, (i) stock
certificates for the shares of Common so purchased shall be delivered to the
Holder
hereof forthwith, and unless this Warrant has expired, a new Warrant
representing the number of shares, if any, with respect to which this Warrant
shall not then have been exercised or surrendered as consideration or partial
consideration for the exercise of this Warrant shall also be delivered to the
Holder hereof forthwith, and (ii) stock certificates for the shares of Common so
purchased shall be dated the date of exercise of this Warrant, and the Holder
exercising this Warrant shall be deemed for all purposes to be the Holder of the
shares of Common so purchased as of the date of such exercise. This Warrant may
not be transferred, in whole or in part, except by means of (i) a transfer made
in accordance with Section 7.2 of the Agreement, or (ii) a transfer exempt from
registration under the Securities Act permitted under and made in conformance
with Section 7.4 of the Agreement or (iii) a transfer to an underwriter made in
accordance with Section 9 of the Registration Agreement. This Warrant, if so
permitted to be transferred, may be transferred on the books of the Corporation
by the Holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant at the principal office of the Corporation, properly endorsed and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer.
The issuance of stock certificates for shares of Common so purchased upon
exercise of this Warrant shall be made without charge to the Holder hereof for
any issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such exercise and the related issuance of shares of Common. The
Corporation shall assist and cooperate with any Holder required to make any
governmental filings or obtain any governmental approvals prior to or in
connection with any exercise of this Warrant (including, without limitation,
making any filings required to be made by the Corporation). Notwithstanding
any other provision hereof, if an exercise of any portion of this Warrant is to
be made in connection with a registered public offering or sale of the
Corporation, the exercise of any portion of this Warrant may, at the election of
the Holder hereof, be conditioned upon the consummation of the public offering
or sale of the Corporation in which case such exercise shall not be deemed to be
effective until the consummation of such transaction.
This Warrant is exchangeable at the aforesaid principal office of the
Corporation for Warrants for the purchase of the same aggregate number of shares
of Common, each new Warrant to represent the right to purchase such number of
shares of Common as the Holder hereof shall designate at the time of such
exchange. All Warrants issued on transfers or exchanges shall be dated the date
hereof and shall be identical with this Warrant except as to the number of
shares of Common issuable pursuant hereto.
3. Stock Fully Paid; Reservation of Shares. The Corporation covenants and
---------------------------------------
agrees that all shares of Common which may be issued upon the exercise of the
rights represented by this Warrant shall, upon issuance, be fully paid and non-
assessable and free from all taxes, liens and charges with respect to issuance.
The Corporation further covenants and agrees that during the period within which
the rights represented by this Warrant may be exercised, the Corporation shall
at all times have authorized and reserved for the purpose of the issue upon
exercise of the subscription rights evidenced by this Warrant a sufficient
number of shares of Common to provide for the exercise of the rights represented
by this Warrant. If the Warrant Price is at any time less than the par value of
the Common or if the Warrant at any time is exercisable by its delivery alone
and without payment of any additional consideration, the Corporation also
covenants and agrees to cause to be taken such action (whether by lowering the
par value of the Common, the conversion of the Common from par value to no par
value, or otherwise) as will permit the exercise of this Warrant, without any
additional payment by the Holder hereof (other than payment of the Warrant
Price, if any, and applicable transfer taxes, if any), and the issuance of the
Common, which Common, upon issuance, will be fully paid and non-assessable.
-2-
4. Adjustment of Number of Shares. The number of shares of Common
------------------------------
purchasable upon the exercise of this Warrant shall be subject to adjustment
from time to time upon the happening of certain events as follows:
(a) Reclassification, Consolidation or Merger. In case of any
-----------------------------------------
reclassification or change of outstanding Common issuable upon exercise of
the conversion right of this Warrant, or in case of any consolidation or
merger of the Corporation with or into another corporation which does not
constitute a liquidation under the Preferred Resolutions, this Warrant
shall, without payment of additional consideration therefor, be deemed
modified so as to provide that upon the exercise hereof, the Holder of this
Warrant shall procure, in lieu of each share of Common theretofore issuable
upon such exercise, the kind and amount of shares of Stock, other
securities, money and property receivable upon such reclassification,
change, consolidation or merger by the Holder of one share of Common
issuable upon exercise of the Warrant had such exercise occurred
immediately prior to such reclassification, change, consolidation or
merger. Such new Warrant shall be deemed to provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4. The provisions of this subsection (a)
shall similarly apply to successive reclassifications, changes,
consolidations and mergers.
(b) Subdivision or Combination of Shares. If the Corporation, at any
------------------------------------
time while this Warrant is outstanding, shall subdivide or combine its
Common, the number of shares of Common purchasable upon exercise of this
Warrant shall be proportionately increased, in case of subdivision of
shares, as of the effective date of such subdivision, or if the Corporation
shall take a record of Holders of its Common for the purpose of a
subdividing, as of such record date, whichever is earlier, or shall be
proportionately decreased, in the case of combination of shares, as at the
effective date of such combination or, if the Corporation shall take a
record of Holders of its Common for the purpose of so combining, as of such
record date, whichever is earlier.
(c) Certain Dividends and Distributions. If the Corporation, at any
-----------------------------------
time while this Warrant is outstanding, shall:
(i) Stock Dividends. Pay a dividend payable in, effect a split-up
---------------
of, or make any other distribution of, Common, the number of shares of
Common purchasable upon exercise of this Warrant shall be increased,
as of the date the Corporation shall take a record of the Holders of
its Common, for the purpose of receiving such dividend, stock split-up
or other distribution (or if no such record is taken, as of the date
of such payment, stock split or other distribution), to that number of
shares determined by multiplying the number of shares of Common
purchasable upon exercise of this Warrant as determined immediately
prior to such record date (or if no such record is taken, then
immediately prior to such payment or other distribution), by a
fraction (1) the numerator of which shall be the total number of
shares of Common outstanding immediately after such dividend, stock
split or distribution (plus in the event that the Corporation paid
cash for fractional shares, the number of additional shares which
would have been outstanding had the Corporation issued fractional
shares in connection with said dividend, stock split or distribution),
and (2) the denominator of which shall be the total number of shares
of Common outstanding immediately prior to such dividend, stock split
or distribution.
(ii) Liquidating Dividends, etc. Make a distribution of its
---------------------------
assets to the Holders of its Common as a dividend in liquidation or
partial liquidation or by way of
-3-
return of capital or other than as a dividend payable out of funds
legally available for dividends under the laws of the State of
Illinois, the Holder of the Warrant shall, upon exercise, be entitled
to receive, in addition to the number of shares of Common receivable
thereupon, and without payment of any consideration therefor, a sum
equal to the value of such assets as would have been distributable to
them as owners of that number of shares of Common of the Corporation
receivable by exercise of this Warrant, had such Holder been the
Holder of record of such Common on the record date for such
distribution; and all appropriate provisions therefor shall be made a
part of any such distribution, including, without limitation, the
placement by the Corporation of such sum into escrow.
(d) Issuance of Additional Shares of Common.
---------------------------------------
Prior to the completion of a Qualified Initial Public Offering, if at
any time the Corporation issues any Additional Shares of Common (excluding
issuances pursuant to transactions described in paragraphs (a), (b) or (c)
of Section 4 of the Warrant) at a time when this Warrant is outstanding and
not expired for a consideration per share of Common issued at less than the
Dilution Price in effect immediately prior to such issuance of Common,
then, upon each such issuance, the number of shares of Common purchasable
upon exercise of this Warrant shall be increased so that the number of
shares of Common purchasable upon exercise of this Warrant shall equal the
product of the Base Warrant Shares and a fraction (rounded to the nearest
thousandth), the numerator of which is the Initial Dilution Price and the
denominator of which is the Dilution Price in effect immediately after such
issuance.
The provisions of this subsection 4(d) shall not apply under any of
the circumstances for which an adjustment is provided in subsections 4(a),
(b) or (c) hereof. No adjustment of the number of shares of Common
purchasable upon exercise of this Warrant shall be made under this
subsection 4(d) upon the issuance of any Additional Shares of Common which
are issued pursuant to any Common Stock Equivalent if, upon the issuance or
amendment of any such Common Stock Equivalent (i) any such adjustment shall
previously have been made pursuant to subsection 4(e) hereof or (ii) no
adjustment was required pursuant to subsection 4(e) hereof.
(e) Issuance of Common Stock Equivalents. Prior to the completion of
------------------------------------
a Qualified Initial Public Offering, if the Corporation, at any time while
this Warrant is outstanding, shall issue any Common Stock Equivalent and
the price per share for which Additional Shares of Common may be issuable
thereafter pursuant to such Common Stock Equivalent shall be less than the
Dilution Price then in effect, or if, after any such issuance, the price
per share for which Additional Shares of Common may be issuable thereafter
is amended, and such price, as so amended, shall be less than the Dilution
Price at the time of such amendment, then the number of shares of Common
purchasable upon exercise of this Warrant shall be increased upon each such
issuance or amendment as provided in subsection (d) of this Section 4 on
the basis that (1) the Additional Shares of Common issuable pursuant to
such Common Stock Equivalents shall be deemed to have been issued as of the
earlier of (A) the date on which the Corporation shall enter into a
contract for the issuance of such Common Stock Equivalent, or (B) the date
of actual issuance of such Common Stock Equivalent, and (2) the
consideration for such Additional Shares of Common shall be deemed to be
the minimum consideration received and receivable by the Corporation for
the issuance of such Additional Shares of Common pursuant to such Common
Stock Equivalent. No adjustment in the number of shares of Common
purchasable upon exercise of this Warrant shall be made under this
subsection (e) upon the issuance of any
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Convertible Security which is issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any
adjustment in the number of shares of Common purchasable upon exercise of
this Warrant shall previously have been made upon the issuance of such
warrants or other rights pursuant to this subsection (e).
(f) [Intentionally Omitted]
(g) Other Provisions Applicable to Adjustments Under This Section 4.
---------------------------------------------------------------
The following provisions shall be applicable to the making of adjustments
in the number of Common Shares purchasable upon exercise of this Warrant
hereinbefore provided in this Section 4:
(i) Computation of Consideration. The consideration received by
----------------------------
the Corporation shall be deemed to be the following: to the extent
that any Additional Shares of Common or any Common Stock Equivalents
shall be issued for a cash consideration, the consideration received
by the Corporation therefor, or, if such Additional Shares of Common
or Common Stock Equivalents are offered by the Corporation for
subscription, the subscription price, or if such Additional Shares of
Common or Common Stock Equivalents are sold to underwriters or dealers
for public offering without a subscription offering, the initial
public offering price, in each such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and without
deduction of any compensation, discounts, commissions, or expenses
paid or incurred by the Corporation for and in the underwriting of, or
otherwise in connection with, the issue thereof; to the extent that
such issuance shall be for a consideration other than cash, then,
except as herein otherwise expressly provided, the consideration
received by the Corporation shall be the fair market value of such
consideration at the time of such issuance as determined in good faith
by the Board. The consideration for any Additional Shares of Common
issuable pursuant to any Common Stock Equivalent shall be the
consideration received by the Corporation for issuing such Common
Stock Equivalents, plus the additional consideration payable to the
Corporation upon the exercise, conversion or exchange of such Common
Stock Equivalents. In case of the issuance at any time of any
Additional Shares of Common or Common Stock Equivalents in payment or
satisfaction of any dividend upon any class of Stock other than
Common, the Corporation shall be deemed to have received for such
Additional Shares of Common or Common Stock Equivalents a
consideration equal to the amount of such dividend so paid or
satisfied. In any case in which the consideration to be received or
paid shall be other than cash, the Board shall notify the Holder of
this Warrant of its determination of the fair market value of such
consideration prior to payment or accepting receipt thereof. If,
within ten days after receipt of said notice, the Holders of Warrants
exercisable for at least a majority of Warrant Stock then unissued
shall notify the Board in writing of their objection to such
determination, a determination of fair market value of such
consideration shall be made by arbitration in accordance with the
Rules of the American Arbitration Association, by an arbitrator in the
City of Chicago, Illinois.
(ii) Readjustment of Warrant. Upon the expiration of the right
-----------------------
to convert, exchange or exercise any Common Stock Equivalents the
issuance of which effected an adjustment in the number of shares of
Common purchasable upon exercise of this Warrant under subsection (d)
or (e) of this Section 4, if none of such Common Stock Equivalents
shall have been converted, exercised or exchanged, the Dilution Price
(and
-5-
therefore the number of shares of Common purchasable upon
exercise of this Warrant) shall forthwith be readjusted and thereafter
be the price which it would have been (but reflecting any other
adjustments in the number of shares of Common purchasable upon
exercise of this Warrant made pursuant to the provisions of this
Section 4 after the issuance of such Common Stock Equivalents) had an
adjustment of the Dilution Price not been effected as a result of the
issuance of such Common Stock Equivalents.
(h) Certain Events. If after the date hereof any event occurs of the
--------------
type contemplated by the provisions of this Section 4 but not expressly
provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Board shall make an appropriate adjustment
in the number of shares of Common purchasable upon exercise of this Warrant
(and in the Dilution Price) so as to protect the rights of the Holder of
this Warrant; provided that no such adjustment shall decrease the number of
shares of Common purchasable upon exercise of this Warrant (or increase the
Dilution Price) as otherwise determined pursuant to this Section 4.
(i) Adjustment of Warrant Price. Upon each adjustment in the number
---------------------------
of shares of Common purchasable hereunder pursuant to any provision of this
Section 4, the Warrant Price shall be adjusted, to the nearest one
hundredth of a cent, to the product obtained by multiplying the Warrant
Price immediately prior to such adjustment in the number of shares of
Common purchasable hereunder by a fraction, the numerator of which shall be
the number of shares of Common purchasable hereunder immediately prior to
such adjustment and the denominator of which shall be the number of shares
of Common purchasable hereunder immediately thereafter, provided, however,
-------- -------
that the product of the Warrant Price at any time and the number of shares
of Common purchasable hereunder at such time shall never exceed the product
of $.01 and the Base Warrant Shares.
(j) Default by Corporation. If the Corporation shall be in default
----------------------
under the agreement contained in the last sentence of Section 3 hereof so
that applicable law prevents the issuance of shares at the Warrant Price
adjusted in accordance with this Section 4, the Holder of this Warrant
shall be entitled to purchase shares at the lowest price at which this
Warrant may then be exercised. Such exercise shall not constitute a waiver
of any claim arising against the Corporation by reason of its default under
the agreement contained in the last sentence of Section 3 of this Warrant.
5. Notice of Adjustments. Whenever the number of shares of Common
---------------------
purchasable upon exercise of this Warrant shall be adjusted pursuant to Section
4 hereof, the Corporation shall make a certificate signed by its President or a
Vice President and by its Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made any
determination hereunder), and the number of shares of Common purchasable upon
exercise of this Warrant after giving effect to such adjustment, and shall cause
copies of such certificate to be mailed (by first class mail, postage prepaid)
to the Holder of this Warrant promptly after each adjustment.
6. Fractional Shares and Rounding. No fractional shares of Common shall
------------------------------
be issued in connection with any exercise hereof, but in lieu of such fractional
shares, the Corporation shall make a cash payment therefor equal in amount to
the product of the applicable fraction multiplied by the
-6-
Dilution Price then in effect. All computations in connection with the
adjustment of the Dilution Price shall be rounded to the fourth decimal place.
7. Liquidation Dividends. If the Corporation declares or pays a dividend
---------------------
upon the Common payable otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting principles,
consistently applied) except for a stock dividend payable in shares of Common (a
"Liquidating Dividend"), then the Corporation shall pay to the Holder of this
Warrant at the time of payment thereof the Liquidating Dividend which would have
been paid to such Holder on the number of shares of Common purchasable upon
exercise of this Warrant had this Warrant been fully exercised immediately prior
to the date on which a record is taken for such Liquidating Dividend, or, if no
record is taken, the date as of which the record holders of Common entitled to
such dividends are to be determined.
8. Definitions. For the purposes of this Warrant, the following terms
-----------
have the following meanings:
"Additional Shares of Common" shall at any time have the meaning given to
that term in the Agreement, as the Agreement may be amended at such time of
determination.
"Affiliates" shall mean any entity controlling, controlled by or under
common control with a designated Person. For the purposes of this definition,
"control" shall have the meaning specified for that word in Rule 405 promulgated
by the Securities and Exchange Commission under the Securities Act.
"Agreement" shall mean the Exchange Agreement, entered into in April, 1998,
between the Corporation and those Persons listed on Schedule I thereto
pertaining to the issuance of Series J Preferred and Warrants, as, from time to
time, such Agreement may be amended.
"Base Warrant Shares" shall be that number of shares of Common set forth in
the first paragraph of this Warrant.
"Common" shall mean the Corporation's Common Stock, par value $.01 per
share, and any Stock into which such Common Stock may hereafter be changed.
"Common Stock Equivalent" shall mean any Convertible Security or warrant,
option or other right to subscribe for or purchase any Additional Shares of
Common or any Convertible Security.
"Convertible Securities" shall mean evidences of indebtedness, shares of
Stock or other Securities which are or may be at any time convertible into or
exchangeable for Additional Shares of Common. The term "Convertible Security"
shall mean one of the Convertible Securities.
"Corporation" shall mean Allscripts, Inc., an Illinois corporation, and all
successor corporations thereof.
"Dilution Price" shall mean the Initial Dilution Price until there has been
an adjustment in the number of shares of Common purchasable upon exercise of
this Warrant pursuant to Section 4 hereof and thereafter the Dilution Price will
be increased or decreased as follows: (i) in the case of an adjustment pursuant
to subsection 4(c) or 4(d) hereof, it shall be decreased by the full amount by
which the Dilution Price in effect immediately prior to each such adjustment
exceeds the issue price per share
-7-
of Common issued or deemed to have been issued giving rise to each such
adjustment, (ii) in the case of an adjustment pursuant to subsection 4(b)
hereof, it shall be increased or decreased proportionately to give effect to the
combination or subdivision of shares giving rise to such adjustment and (iii) in
the case of an adjustment pursuant to subsection 4(c)(i) hereof, it shall be
decreased to that price determined by multiplying the Dilution Price in effect
immediately prior to the dividend, stock split-up or other distribution giving
rise to such adjustment by a fraction (1) the numerator of which shall be the
total number of shares of Common outstanding immediately prior to such dividend,
stock split or distribution (plus in the event that the Corporation paid cash
for fractional shares, the number of additional shares which would have been
outstanding had the Corporation issued fractional shares in connection with said
dividend, stock split or distribution), and (2) the denominator of which shall
be the total number of shares of Common outstanding immediately after such
dividend, stock split or distribution. Dilution Price shall additionally be
subject to the computation considerations and the adjustments that are
applicable to determining the number of shares of Common purchasable upon
exercise of this Warrant and Dilution Price as set forth in Sections 4(g) and
4(h) hereof.
"Fair Market Value" shall mean (i) in the case of Common, (A) if the
Corporation's Common is traded on an established market which reports last sale
information, the price of the Common that may be purchased upon the exercise of
a Warrant surrendered in full or partial payment of the Warrant Price payable
upon the exercise of this Warrant as of the close on the date such Warrant is so
surrendered (or if no sales occurred that day the most recent day sales occurred
preceding such surrender); (B) if the Corporation's Common is quoted on The
Nasdaq Stock Market (but not of a nature for which last sale information is
available) ("Nasdaq"), the highest independent bid on the date such Warrant is
surrendered; (C) if the Corporation's Common is publicly held but not traded on
an established market which reports last sale information or quoted in Nasdaq,
the fair market value of such Common as determined by the Board of Directors in
good faith and in their sole discretion; (D) if the Common is not publicly held,
Fair Market Value shall mean that value that the Board of Directors shall have
determined as the fair market value in connection with the most recent grant of
options within the last six months preceding the date of exercise, or, in the
event that no such determination shall have been made within the last six months
preceding the date of exercise, Fair Market Value shall be determined by the
Board of Directors in good faith and in its sole discretion; and (ii) in the
case of any other Security, Fair Market Value shall be determined by the Board
of Directors in good faith and in its sole discretion. In the case of (i)(C),
(i)(D) or (ii) above, if the Holder of this Warrant shall notify the Board in
writing of the Holder's objection to the Board's determination, a determination
of Fair Market Value shall be made by arbitration in accordance with the Rules
of the American Arbitration Association, by an arbitrator in the City of
Chicago, Illinois.
"Holders" shall mean the Persons who shall from time to time, own of record
any Security. The term "Holder" shall mean one of the Holders.
"Initial Dilution Price" shall mean $0.01.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated organization or government organization or an agency or political
subdivision thereof.
"Preferred Resolutions" shall mean the board resolutions of the Corporation
fixing and determining the terms of the Series A Convertible Preferred Stock,
$1.00 par value, Series B Convertible Preferred Stock, $1.00 par value, Series C
Senior Convertible Preferred Stock, $1.00 par value, Series D Senior Convertible
Preferred Stock, $1.00 par value, Series F Senior Convertible Preferred Stock,
$1.00 par value, Series G Super Senior Convertible Preferred Stock, $1.00 par
value, Series H Superior Senior
-8-
Redeemable Preferred Stock, $1.00 par value, Series I Super Superior Senior
Redeemable Preferred Stock, $1.00 par value, and Series J Super Superior Senior
Redeemable Preferred Stock, $1.00 par value.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Qualified Initial Public Offering" shall mean a firm commitment
underwritten public offering of Common registered under the Securities Act (i)
with the per share price to the public equal to at least $0.80 (as adjusted for
stock splits, stock combinations, stock dividends and recapitalizations
affecting the Common), and (ii) in which the Corporation receives proceeds net
of all costs, expenses and underwriting discounts and commissions of not less
than $20,000,000 (including proceeds received by the Corporation upon exercise
of any over-allotment option by the underwriters) in each case as determined by
the amounts set forth on the cover page of the prospectus for such offering.
"Registration Agreement" shall mean the Eleventh Restated Registration
Agreement, entered into in April, 1998, between the Corporation and those
investors listed on the Schedules thereto, as such agreement may be amended,
amended and restated and/or redesignated from time to time.
"Securities" shall mean any debt or equity securities of the Corporation,
whether now or hereafter authorized, and any instrument convertible into or
exchangeable for Securities or a Security. "Security" shall mean one of the
Securities.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series J Preferred" shall mean the Corporation's Series J Super Superior
Senior Redeemable Preferred Stock, $1.00 par value, and any Stock into which
such Stock may hereafter be changed.
"Stock" shall include any and all shares, interests or other equivalents
(however designated) of, or participations in corporate stock.
"Subsidiary" shall mean any corporation more than 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the
Corporation or by one or more Subsidiaries or by the Corporation and one or more
Subsidiaries.
"Voting Stock," as applied to the Stock of any corporation, shall mean
Stock of any class or classes (however designated) having ordinary voting power
for the election of a majority of the members of the Board of Directors (or
other governing body) of such corporation, other than Stock having such power
only by reason of the happening of a contingency.
"Warrant" shall mean this Warrant.
"Warrants" shall mean the Warrants issued and sold pursuant to the
Agreement.
"Warrant Price" shall mean the price specified in the first paragraph of
this Warrant and such other prices as shall result from the adjustments
specified in Section 4 hereof.
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"Warrant Stock" shall mean Common issued upon exercise of any Warrant or
Warrants.
Dated: April 16, 1998 ALLSCRIPTS, INC.
By________________________
President
ATTEST:
_____________________________
Secretary
This Warrant has not been registered under the Securities Act of 1933.
Thus, notwithstanding any other provisions contained herein, no transfer,
hypothecation or other disposition of this Warrant or of the Common issuable
upon exercise of this Warrant, or of any interest in either thereof, including
any exercise of this Warrant in favor of any Person other than the Holder
hereof, shall be valid or effective unless registered under the Securities Act
of 1933 or unless an exemption from such registration is available, and until
the conditions specified in the Agreement have been fulfilled. A copy of the
Agreement is on file and may be inspected at the principal office of the
Corporation. Under certain circumstances specified in the Agreement, the
Corporation has agreed to deliver to the Holder hereof a new Warrant, not
bearing this legend, registered in the name of such Holder.
-10-
SUBSCRIPTION
ALLSCRIPTS, INC.
The undersigned __________, pursuant to the provisions of the within
Warrant, hereby elects to purchase ________ shares of Common of ALLSCRIPTS, INC.
covered by the within Warrant.
Dated: ___________ Signature__________________________
Address __________________________
ASSIGNMENT
FOR VALUE RECEIVED ____________ hereby sells, assigns and transfers unto
_____________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _________, attorney, to transfer the said
Warrant on the books of the within named Corporation.
____________________________________
Dated: __________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________ hereby sells, assigns and transfers unto
_____________ the right to purchase _________ shares of Warrant Stock evidenced
by the within Warrant with all rights therein, and does irrevocably constitute
and appoint _________, attorney, to transfer that part of the said Warrant on
the books of the within named Corporation.
______________________________________
Dated: ____________
FOR USE BY THE CORPORATION ONLY:
This Warrant No. W-_____ cancelled (or transferred or exchanged) this ____ day
of _____, 19__, _______ shares of Common issued therefor in the name of _______
Warrant No. W-_______ issued for ________ shares of Common in the name of
________.
