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Exhibit 2.1
AGREEMENT AND PLAN OF CORPORATE SEPARATION
AND REORGANIZATION FOR QK HEALTHCARE, INC.
Agreement made as of ____________, 2001 among Quality King
Distributors, Inc., a New York corporation (the "Company"), QK Healthcare, Inc.,
a Delaware corporation (the "New Company"), and each of Xxxxxxx Xxxxxxxx and
Xxxxxx Xxxxxxxx as Trustees U/D Xxxxx Xxxxxxxx Trusts dated November 1, 1998 and
November 2, 0000, Xxxxx Xxxxxxxx and Xxxxxx Xxxxxxxx, Trustees U/D Xxxxxxx
Xxxxxxxx Trusts dated November 1, 1998 and November 2, 1998 and Xxxxxxx Xxxxxxxx
and Xxxxx Xxxxxxxx, Trustees U/D Xxxxxx Xxxxxxxx Trusts dated November 1, 1998
and November 2, 1998 (collectively, the "Shareholders").
RECITALS
A. The Shareholders will be the owners of all of the issued and
outstanding stock of the Company on the Spin-off Closing Date (as hereinafter
defined).
B. The Company has been engaged for more than five years in the
business of distributing pharmaceutical products and medical supplies and
related activities (the "Pharmaceutical Business") and the business of
distributing groceries, hair care products and health and beauty products and
related activities (the "Other Business").
C. A separation of the Pharmaceutical Business from the Other Business
is deemed advisable by the parties.
D. The Company has received a ruling by the Internal Revenue Service to
the effect that the transactions herein agreed upon will qualify as a tax-free
exchange and distribution under Section 355 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the obligations of
the parties pursuant hereto, the parties hereto agree as follows.
1. Separation of Businesses. The Company having received a ruling by
the Internal Revenue Service to the effect that the transactions herein agreed
upon will qualify as a tax-free exchange and distribution under Section 355 of
the Internal Revenue Code of 1986, as amended, the Company's Pharmaceutical
Business and Other Business will be separated in the manner provided for herein.
2. New Corporation. The Company has formed the New Company, with the
powers and capitalization set out in the Second Amended and Restated Certificate
of Incorporation attached hereto as Exhibit A.
3. Transfer of Pharmaceutical Business. In consideration of the
issuance of 22,999,999 shares of the Common Stock, $.001 par value, of the New
Company, effective as of the Reorganization Closing Date (as hereinafter
defined), the Company shall transfer (the "Asset Transfer") the following assets
of the Pharmaceutical Business, as may be more fully described in Exhibit B,
subject to an intercompany liability of the New Company to the Company in
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amount equal to the book value of such assets (the "Intercompany Liability") and
the New Company shall accept and assume such assets and acknowledge the
Intercompany Liability:
(a) All of the inventory of the Pharmaceutical Business;
(b) All equipment and leasehold improvements upon the site on which
the Pharmaceutical Business is operated and rights under
contracts, warranties and leases relating thereto;
(c) All vehicles identified with the Pharmaceutical Business;
(d) All trademarks and trade names (including pending applications
therefor) and trade secrets identified with the Pharmaceutical
Business;
(e) All books and records and customer lists of the Pharmaceutical
Business;
(f) All accounts receivable of the Pharmaceutical Business;
(g) Open purchase orders and rights under agreements and contracts
with customers of the Pharmaceutical Business;
(h) Governmental licenses and permits related to the Pharmaceutical
Business to the extent assignable to the New Company;
(i) All other assets of the Pharmaceutical Business; and
(j) Working capital equal to the excess of the current assets over
current liabilities.
4. Sublease. On the Reorganization Closing Date the Company will
deliver or cause to be delivered to the New Company a sublease for the premises
from which the Pharmaceutical Business is conducted, substantially in the form
of Exhibit D attached hereto (the "Sublease").
5. Credit Facility. On the Reorganization Closing Date, the New Company
shall execute and deliver appropriate documentation evidencing its guarantee of
the Company's obligations under its current revolving credit facility.
6. Assumption of Liabilities. On the Spin-off Closing Date, (a) the
Intercompany Liability and all other intercompany obligations of the New Company
to the Company, other than pursuant to the Sublease, the Support Services
Agreement (as hereinafter defined), the Indemnification Agreement (as
hereinafter defined) and the Software License (as hereinafter defined), shall be
cancelled, (b) the New Company shall assume the liabilities allocable to the
Pharmaceutical Business as listed in Exhibit C (such liabilities being herein
referred to as the "Assumed Liabilities"), and (c) the New Company will assume
the portion of the Company's current revolving credit facility allocable to the
Pharmaceutical Business and the New Company shall execute and deliver the
appropriate documentation evidencing its status as a co-borrower under such
facility.
7. Distribution. On the Spin-off Closing Date, the Company shall
distribute all of the shares of capital stock of the New Company held by it to
the Shareholders, in proportion to their ownership of stock in the Company.
8. Further Instruments. As of the Reorganization Closing Date, each
party shall execute and deliver such further instruments as may be reasonably
requested by any other party to carry out the purpose and intent of this
Agreement, including but not limited to, the following:
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(a) Indemnification, Noncompetition and Tax Cooperation Agreement
among the Company, the New Company and Pro's Choice Beauty Care,
Inc., substantially in the form of Exhibit E attached hereto (the
"Indemnification Agreement").
(b) Support Services Agreement between the Company and the New Company
substantially in the form attached hereto as Exhibit F (the
"Support Services Agreement").
(c) Software License between the Company and the New Company
substantially in the form attached hereto as Exhibit G (the
"Software License").
9. Closing. (a) The asset transfers contemplated by Section 3 of this
Agreement shall take place at the offices of Xxxxxxx & Xxxxxx, LLP, 000
Xxxxxxxxx Xxx., Xxx Xxxx, Xxx Xxxx 00000 on or about ______________, 2001 (the
"Reorganization Closing Date").
(b) The assumption of the liabilities and other transactions
contemplated by Section 6 of this Agreement and the distribution of shares
contemplated by Section 7 of this Agreement, shall take place at the offices of
Xxxxxxx & Xxxxxx, LLP, 000 Xxxxxxxxx Xxx., Xxx Xxxx, Xxx Xxxx 00000 on a date
specified by the Company upon written notice to the other parties hereto (the
"Spin-off Closing Date").
10. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, except those contemplated
hereunder or not inconsistent herewith.
11. Governing Law. This Agreement has been executed in the State of New
York and shall be governed by the laws thereof.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
QUALITY KING DISTRIBUTORS, INC.
By:___________________________
Name:
Title:
QK HEALTHCARE, INC.
By:___________________________
Name:
Title:
U/D XXXXX XXXXXXXX TRUST DATED
NOVEMBER 1, 1998
By:___________________________
Xxxxxx Xxxxxxxx, Trustee
By:___________________________
Xxxxxxx Xxxxxxxx, Trustee
U/D XXXXX XXXXXXXX TRUST DATED
NOVEMBER 2, 1998
By:___________________________
Xxxxxx Xxxxxxxx, Trustee
By:___________________________
Xxxxxxx Xxxxxxxx, Trustee
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U/D XXXXXXX XXXXXXXX TRUST DATED
NOVEMBER 1, 1998
By:___________________________
Xxxxxx Xxxxxxxx, Trustee
By:___________________________
Xxxxx Xxxxxxxx, Trustee
U/D XXXXXXX XXXXXXXX TRUST DATED
NOVEMBER 2, 1998
By:___________________________
Xxxxxx Xxxxxxxx, Trustee
By:___________________________
Xxxxx Xxxxxxxx, Trustee
U/D XXXXXX XXXXXXXX TRUST DATED
NOVEMBER 1, 1998
By:___________________________
Xxxxx Xxxxxxxx, Trustee
By:___________________________
Xxxxxxx Xxxxxxxx, Trustee
U/D XXXXXX XXXXXXXX TRUST DATED
NOVEMBER 2, 1998
By:___________________________
Xxxxx Xxxxxxxx, Trustee
By:___________________________
Xxxxxxx Xxxxxxxx, Trustee
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