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Exhibit 10.16
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 2nd day of February,
2001 by and among: (i) Chronimed Holdings Inc. ("Buyer") and (ii) American
Prescription Providers of Georgia, Inc., a Georgia corporation, (iii)
American Prescription Providers of Florida, Inc., a Florida corporation, (iv)
American Prescription Providers of New York, Inc., a New York corporation,
(v) American Prescription Providers of Pennsylvania, Inc., a Pennsylvania
corporation (collectively, the "Selling Group" and each individually, a
"Selling Group Member"), and (vi) American Prescription Providers, Inc., a
Delaware corporation (the "Parent").
R E C I T A L S
WHEREAS, Selling Group is engaged in the specialty retail pharmacy
business (the "Business");
WHEREAS, Parent, directly or indirectly, owns all of the issued and
outstanding equity interests of each Selling Group Member;
WHEREAS, Parent is also engaged in the specialty pharmacy mail order
business;
WHEREAS, Selling Group desires to sell and assign to Buyer, and Buyer
desires to purchase and assume from Selling Group, substantially all of Selling
Group's assets and business operations (other than Selling Group's "Excluded
Property," as hereinafter defined) and certain of its rights and obligations
under specified contracts, all on the terms and subject to the conditions
hereinafter set forth; and
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
(a) As used herein, the following terms shall have the following meanings
in addition to those additional terms as defined herein:
AGREEMENT. The term "Agreement" shall mean this Asset Purchase Agreement,
together with all exhibits and schedules hereto, and any and all amendments,
modifications and supplements hereto entered into in accordance with the terms
hereof.
APP GROUP. The term "APP Group" shall mean Parent, the Selling Group, and
each other corporation or other business entity which controls, or is controlled
by Parent, directly or indirectly. For these purposes, "control" shall mean the
ownership of (i) fifty-one percent (51%) or more of the stock or other equity
interest in a corporation or business entity, or (ii) the ability to control the
corporation or business entity, including but not limited to the ability to
elect a
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majority of the Board of Directors or other governing body of such corporation
or business entity.
ASSUMED AGREEMENTS. The term "Assumed Agreements" shall mean all Contracts
of any Selling Group Member that relate to the Business: (i) which are listed in
Schedule 4.9 hereto as items which shall constitute Assumed Agreements
(including Assumed Leases) or (ii) which, pursuant to the terms of Section 4.9
hereof, are not required to be disclosed on Schedule 4.9 but which have been
entered into by a Selling Group Member in the ordinary course of business and
are not adverse, including without limitation, sales orders, sales contracts,
purchase orders, purchase contracts, quotations and bids; and any Contracts of
members of the APP Group other than Selling Group Members that relate to the
Business and which are listed in Schedule 4.9 hereto as items which shall
constitute Assumed Agreements.
ASSUMED LEASES. The term "Assumed Leases" shall mean all leases of any
Selling Group Member that relate to real estate currently used in the Business
and which are listed on Schedule 4.9 as leases being assumed.
ASSUMED OBLIGATIONS. The term "Assumed Obligations" shall mean the
obligations and any related liabilities to the extent expressly assumed by Buyer
pursuant to Section 2.2 hereof, and no others.
BUSINESS DAY. The term "Business Day" means a day on which national
banks are open for business in New York.
CLOSING. The term "Closing" shall mean the closing of the transactions
contemplated herein.
CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended, and all rules and regulations promulgated thereunder.
EMPLOYEE BENEFIT PLAN. The term "Employee Benefit Plan" shall mean (i) any
"employee benefit plan" (as defined in Section 3(3) of ERISA), whether a single
employer, a multiple employer or a multi-employer plan, for the benefit of
employees or former employees of a Selling Group Member, or (ii) any other plan,
policy, program, practice or arrangement providing compensation or benefits
under which any Selling Group Member has any obligation or liability to any
employee or former employee of a Selling Group Member (or any dependent or other
beneficiary thereof) including, without limitation, incentive, bonus, deferred
compensation, vacation, holiday, medical, severance, disability, death, option,
purchase or other similar benefit, whether written or unwritten.
EXCLUDED PROPERTY. The term "Excluded Property" shall mean all of the
Selling Group's right, title and interest in each of the following:
(a) The cash or cash equivalents of each Selling Group Member;
(b) All accounts receivable of any Selling Group Member, including but not
limited to all accounts receivable that reflect amounts due from Parent or any
Affiliate of Parent;
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(c) The assets, properties and rights, if any, of any Selling Group Member
used exclusively in the Mail Order Business, all of which are listed on Schedule
1.01 hereto;
(d) The seals, certificates of formation, minute books, partnership
records, equity ownership ledgers, or other corporate records having to do with
the organization or formation of any Selling Group Member;
(e) The rights, which accrue or will accrue, to a Selling Group Member
under this Agreement and the Related Agreements;
(f) All capital stock, partnership interests and other equity interests in
any Person held by any Selling Group Member, all of which are listed on Schedule
1.02 hereto;
(g) All right, title and interest in and under all contracts with any
Selling Group Member relating to any Excluded Property, all of which contracts
are listed on Schedule 1.03 hereto;
(h) All Existing Employment Contracts and other Contracts that are not
Assumed Agreements;
(i) The assets, properties and rights listed on Schedule 1.01 and Schedule
1.01(a) hereto, including assets, if any, which are jointly used by Selling
Group and Parent or any other member of the APP Group in the Business and the
Mail Order Business but which are primarily for the benefit of the Mail Order
Business, as set forth on Schedule 1(d) hereto, including the XXXxxxxxxxx.xxx
website;
(j) Tax refunds due Parent or a particular Selling Group Member for
periods ending on or before the Closing Date or straddling the Closing Date,
other than tax refunds to the extent such taxes are: (i) imposed with respect to
the Purchased Assets and (ii) the obligation of the Buyer with respect to a
portion of a Straddle Tax Period;
(k) All Excluded Intellectual Property listed on Schedule 1.01 hereto;
(l) The trade names and website domain names of each Selling Group Member,
all of which are listed on Schedule 1.01 hereto;
(m) Financial books and records of members of the APP Group other than
each Selling Group Member (it being specifically understood and agreed that the
financial books and records of each Selling Group member are included in the
Purchased Assets), provided; however, that Parent shall, at all reasonable
times, make the financial books and records which are relevant to the Business
which are excluded hereunder available for inspection by Buyer, and also shall
provide copies of such excluded financial books and records which are relevant
to the Business to Buyer where reasonably requested, including copies in
electronic form. Buyer shall, at all reasonable times, make all financial books
and records sold under this Agreement available for inspection by Parent.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES OR "GAAP" means United States
generally accepted accounting principles which are applied on a basis consistent
with prior periods.
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GOVERNMENTAL AUTHORITY. The term "Governmental Authority" shall mean the
Federal Government, or any state or political subdivision thereof, or any agency
or body of the Federal Government or any state or other political subdivision
thereof, or any court asserting jurisdiction over any Selling Group Member or
Parent, which is exercising executive, legislative, judicial, regulatory or
administrative functions.
INTELLECTUAL PROPERTY. The term "Intellectual Property" shall mean all
patents, trademarks, trade names, domain names, world wide web or Internet
sites, service marks, logos, copyrights, including, in each case, applications
for registrations therefor, inventions, computer software (whether fully
developed or in process and including documentation and related object and
source codes), trade secrets, and all other proprietary rights related thereto.
LAWS. The term "Laws" shall mean all federal, state, local or foreign
laws, treaties, regulations, rules, orders or administrative or judicial
determinations having the effect of law.
LIENS. The term "Liens" shall mean all liens, pledges, charges,
encumbrances, security interests, mortgages, leases, options, conditions,
community property rights or other adverse claims of any kind or description.
MAIL ORDER BUSINESS. The term "Mail Order Business" shall mean the
specialty pharmacy mail order business of Parent or its Affiliates as currently
operated and as it may evolve in the ordinary course of business, it being
specifically understood, however, that in no event shall "Mail Order Business"
include the operation of a Retail Pharmacy or Retail Pharmacies except only as
permitted in Article XI hereof.
MATERIAL ADVERSE CHANGE. The term "Material Adverse Change" means, with
respect to a Person, a material adverse change in the business, condition
(financial or otherwise), prospects, properties, assets, liabilities or results
of operations of such Person taken as a whole. When evaluated in the context of
any Selling Group Member, the term "Material Adverse Change" shall take into
account only such Selling Group Member (not all Selling Group Members taken as a
whole). When evaluated in the context of the Buyer, the term "Material Adverse
Change" shall take into account all of the Buyer Members taken as a whole.
MATERIAL ADVERSE EFFECT. The term "Material Adverse Effect" means: (a) an
adverse effect on the validity or enforceability of this Agreement or any of the
Related Agreements in any material respect, (b) an adverse effect that would
reasonably be expected to result in a Material Adverse Change, or (c) an
impairment of the ability of any Selling Group Member to fulfill its obligations
under this Agreement or any of the Related Agreements in any material respect.
NON-ASSUMED LIABILITIES. The term "Non-Assumed Liabilities" shall mean any
and all obligations and liabilities of a Selling Group Member or any other
member of the APP Group, except only for the Assumed Obligations, whether now
existing or hereafter arising, whether accrued, absolute, contingent, known or
unknown, or otherwise, including without limitation the following:
(i) Any obligation or liability of any Selling Group Member to
Parent or any member of the APP Group (whether by contract, lease or otherwise),
including without
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limitation any liability for goods or services furnished by Parent or any member
of the APP Group to any Selling Group Member;
(ii) Any obligation or liability of any Selling Group Member
relating to the Mail Order Business;
(iii) Any obligation or liability of any Selling Group Member: (a)
arising up to and including the Closing Date, or as a result of the Closing, to
any employees (including, but not limited to, any severance, bonus or vacation
pay or other benefit obligations), agents or independent contractors of such
Selling Group Member, (b) arising as a result of the termination by Selling
Group at the Closing of any employees, agents or independent contractors, or (c)
any obligation or liability to any employee for vacation pay or other benefits
arising up to and including the Closing Date;
(iv) Any obligation or liability of any Selling Group Member in
connection with any Employee Benefit Plan, including but not limited to its
Profit Sharing Plan, (or its termination), or in accordance with any "stay
bonus," "completion bonus," or other change in control bonus or payment that may
be triggered by the transactions contemplated by this Agreement;
(v) Any obligation or liability of any Selling Group Member for any
expenses (including without limitation, fees of attorneys, accountants,
financial or other advisors to any Selling Group Member) incurred in connection
with the transactions contemplated hereby;
(vi) Any obligation or liability arising out of or resulting from
non-compliance by any Selling Group Member (or their respective predecessors)
with any Law (including Medicare and Medicaid programs), or any third-party
claims related thereto;
(vii) Any obligation or liability of any Selling Group Member
relating to any breach of warranty, product return, product defect, product
liability, malpractice or breach of contract claim (whether based upon
negligence, breach of warranty, breach of express or implied contract, strict
liability or otherwise), or relating to any litigation, claim, proceeding or
other dispute, whether presently existing or threatened or hereafter arising out
of any act or omission taken, or omitted to be taken, or condition or state of
facts existing, or arising out of any products (or component parts) which were
manufactured or sold, or in respect of services which were performed, on or
before the Closing Date, including those with respect to "script fill"
liability;
(viii) Any obligation or liability of any Selling Group Member
arising out of, resulting from, or related to any Excluded Property;
(ix) Any obligation or liability of any Selling Group Member, Parent
or Parent's Affiliates for Taxes for any period, including, but not limited to,
those Taxes incident to or arising as a consequence of the consummation of the
transactions contemplated hereby; provided, that Buyer shall be responsible for
property and ad valorem taxes which are imposed on the Purchased Assets acquired
by Buyer for any tax period ending after the Closing Date; provided, further,
that for any such tax period beginning before and ending after the Closing Date
(a "Straddle Tax Period"), Buyer shall only be responsible for such property and
ad valorem taxes to the extent they are imposed with respect to the portion of
such Straddle Tax Period which begins on the Closing Date, by applying to the
total tax due for the entire Straddle
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Tax Period a ratio determined by calculating the number of days from the Closing
Date (inclusive) to the end of the Straddle Tax Period and dividing that number
of days by the total number of days in the Straddle Tax Period;
(x) Any indebtedness of any Selling Group Member for borrowed money
(including capital leases or financing leases) or any guarantees in respect of
borrowed money;
(xi) Any brokerage, success, placement or finder's fee payable by
any Selling Group Member in connection with the transactions contemplated
hereby;
(xii) Any obligation or liability of any Selling Group Member
arising out of this Agreement or any Related Agreement;
(xiii) Any obligation or liability arising out of any litigation,
investigation or review, pending or threatened, or any audit or recoupment by
any Governmental Authority with respect to any Selling Group Member or Parent
relating to or arising from actions or omissions occurring on or prior to the
Closing Date by a Selling Group Member, Parent or their respective predecessors;
(xiv) Any obligation or liability of any Selling Group Member in
connection with any claim of overpayment, refund, rebate, recoupment,
settlement, off-set or the like, with respect to the operation of the Business
prior to the Closing Date, including, without limitation, any third-party claims
related thereto; and
ORDINARY COURSE OF BUSINESS. The term "ordinary course of business" means,
with respect to any entity, actions which (a) are consistent with the past
practices of the designated entity, (b) are similar in nature and style to
actions customarily taken by the designated entity, and (c) do not require, and
in the past have not received, specific authorization by the Board of Directors,
Board of Managers, or such similar governing body, of the designated entity.
PERMITTED LIENS. None, the Purchased Assets shall be subject to no
lien.
PERSON. The term "Person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust or unincorporated
organization, or a government or any agency or political subdivision thereof.
PURCHASED ASSETS. The term "Purchased Assets" shall mean (i) all of the
Selling Group's right, title and interest in and to the business of each Selling
Group Member as a going concern, and (ii) all of the properties, assets, and
rights of any kind, whether tangible or intangible, real or personal, of each
Selling Group Member or in which each Selling Group Member has any interest
(other than assets constituting Excluded Property) wherever situated and
whenever acquired, including without limitation, the following:
(a) The Intellectual Property identified on Schedule 1.04 hereto, and any
and all improvements, processes, methods, data, trade secrets, confidential
information, technology, know-how, owned or used in the Business, and any and
all drawings, records, books or other indicia, however evidenced, of the
foregoing, together with any and all rights to use any or all of the foregoing,
and any and all goodwill associated with any of the foregoing;
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(b) Any and all rights existing under the Assumed Agreements;
(c) Any and all machinery, equipment (including without limitation, all
transportation, laboratory, testing, and office equipment), vehicles, trade
fixtures, computer hardware, data processing equipment, and furniture, and any
and all interests in all leasehold improvements and fixed assets, including
without limitation, the assets listed on Schedule 1.04 hereto;
(d) Any and all office, production or data processing supplies, spare
parts, other miscellaneous supplies, and other tangible property of any kind,
including without limitation, any and all tangible property located in any
warehouse, office or other space;
(e) Any and all raw materials, work-in-process, finished goods, consigned
goods and other supplies or inventories;
(f) Any and all deposits and prepayments or prepaid expenses to the extent
described on Schedule 4.6(c) and determined by Buyer prior to the Closing Date
to be necessary for the conduct of the business as proposed to be conducted by
Buyer, and the value of revenues from pharmaceutical manufacturers' agreements
received by the Business prior to the Closing Date that pertain to any period
after the Closing Date;
(g) Except to the extent arising from or relating to any Excluded Property
or any Non-Assumed Liability, any and all claims, causes of action, choses in
action, rights of recovery and rights of setoff of any kind, including without
limitation, any liens, mechanic's liens or any rights to payment or warranties
or to enforce payment or warranties in connection with work performed or goods
delivered on or prior to the Closing Date, and any and all claims to insurance
proceeds due or to become due under Selling Group's applicable insurance
policies in connection with any Assumed Obligations, and in connection with any
damage or loss to any Purchased Asset occurring on or prior to the Closing Date;
(h) Any and all records (including prescription files and records) and
lists pertaining to payors, customers, suppliers or employees who are hired by
Buyer and any and all books, ledgers, files and business records and all copies
of the same in every medium, including without limitation electronic or computer
copies, and any and all financial books and records of each Selling Group
Member, it being understood that Buyer shall, at all reasonable times, make such
financial books and records of each Selling Group Member available for
inspection by Parent;
(i) Any and all advertising materials and other printed or written
materials;
(j) Any and all governmental and other licenses, permits, franchises,
concessions, authorizations, approvals and certificates (to the extent
transferable);
(k) Any and all goodwill as a going concern (excluding goodwill
attributable to the Excluded Property) and any and all other intangible
properties;
(l) Any and all store telephone listings, store telephone numbers,
switches and hardware;
(m) Any and all other assets of Selling Group not referred to in (a)
above, to the extent such assets are not Excluded Property.
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In the case of the types of assets listed in (d), (e), and (f), it is
understood and agreed that the Purchased Assets shall mean those types of assets
as they may be sold or consumed in the ordinary course of business and as they
may be purchased, acquired, or increased in the ordinary course of business
during the time period from the date of this Agreement to the Closing Date, it
being specifically understood that the Selling Group shall maintain the levels
and amounts of such assets consistent with its past practices.
In addition, the Purchased Assets also shall mean all of each member of
the APP Group's (other than the Selling Group who are addressed above) right,
title and interest in any properties, assets, and rights of any kind, whether
tangible or intangible, real or personal, which are necessary for the Business
as presently conducted, or which are used in the Business as presently
conducted, except for those assets specifically listed on Schedule 1.01 hereto.
For purposes of clarification, the term "Purchased Assets" shall not
include any Excluded Property.
RETAIL PHARMACY. The term "Retail Pharmacy" shall mean a pharmacy at whose
location patients appear in person to submit prescriptions, or at whose location
prescriptions are picked up or received by patients who are present in person.
SELLING GROUP'S KNOWLEDGE. The term "Selling Group's Knowledge" shall mean
the good faith actual knowledge of each of the following individuals: Xxxxx
X'Xxxxxxx, Xxxxxx Xxxx, Xxxxx XxXxxxx, Xxxx Nalabof, and each individual who is
the pharmacist in charge at each of the pharmacies operated by the Selling
Group, after due and proper inquiry and such due diligence as is reasonably
required for such Person to make an informed representation or warranty as to
such Person's "knowledge" of a matter.
SELLING GROUP AND SELLING GROUP MEMBER. The terms "Selling Group" and
"Selling Group Member" have the meanings set forth in the Preamble to the
Agreement.
SPECIALTY PHARMACY. The term "Specialty Pharmacy" shall mean any pharmacy
location or pharmacy business that has as its primary source of revenue or
primary service feature, the provision of pharmacy and ancillary services the
focus of which is specific to one or more disease states or conditions,
including, without limitation, HIV/AIDS, multiple sclerosis, cancer,
infertility, hemophilia, hepatitis, organ transplant, rheumatoid arthritis, RSV,
endometriosis, immune deficiency disorders, neutropenia, cystic fibrosis, and
human growth hormone deficiency. Covered pharmacy and ancillary services
include, without limitation, oral and injectable treatment protocols and
infusion services for the conditions referenced in the foregoing sentence.
TAXES. The term "Taxes" shall mean, with respect to any Person, all
foreign, federal, state and local taxes (including deficiencies, interest,
additions to tax and penalties relating thereto) of any kind, including, without
limitation: (a) all income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupancy, social security, Medicare,
premium, property or windfall profits tax, customs, duty or other taxes or
governmental fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts, imposed
by any taxing authority (domestic or foreign) upon such Person; (b) all
liabilities of any Person for the payment of any amount of the type described in
the immediately preceding clause; and (c) as a result of being a party to any
tax sharing agreement or purchase
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and sale agreement or as a result of any express or implied obligation
(including, but not limited to, an indemnification obligation).
TAX RETURNS. The term "Tax Returns" shall mean all returns, declarations,
reports, workpapers, estimated returns and information returns and statements of
any Person required to be filed or sent by or with respect to it in respect of
any Taxes.
ARTICLE II
ACQUISITION OF PURCHASED ASSETS
SECTION 2.1 PURCHASE AND SALE. At the Closing, upon the terms and
conditions set forth in this Agreement, each Selling Group Member, and each
other Member of the APP Group, shall grant, sell, convey, assign, transfer and
deliver to Buyer, and Buyer shall purchase, accept and receive all of the
Purchased Assets, free and clear of any and all Liens, at the price and in the
manner set forth herein.
SECTION 2.2 ASSUMPTION OF OBLIGATIONS. On the Closing Date, Buyer shall
assume the following, and only the following, obligations and related
liabilities (the "Assumed Obligations") of Selling Group: (a) the obligations
and related liabilities of each Selling Group Member in respect of the Assumed
Agreements to the extent arising after the Closing Date and attributable to
periods thereafter, except that Buyer shall not be required to assume or agree
to pay, discharge or perform any such liabilities or obligations to the extent
attributable to periods prior to the Closing Date (including those arising out
of any breach or non-performance by a Selling Group Member on or prior to the
Closing Date of any provision of any Assumed Agreement), including but not
limited to, liabilities or obligations arising out of a Selling Group Member's
failure to perform in accordance with its terms on or prior to the Closing; and
(b) the accrued vacation owed by the Selling Group to any employees of the
Selling Group who are hired by Buyer, but only to the extent such accrued
vacation is taken into account and treated as a liability in the adjustment made
pursuant to Section 2.6 hereof.
Except only for the Assumed Obligations, Buyer shall not assume any
liabilities or obligations of any nature whatsoever of any member of the APP
Group, and the APP Group, and each member thereof, shall remain responsible for
all non-assumed liabilities and obligations.
SECTION 2.3 PURCHASE PRICE.
In reliance on the representations, warranties, covenants and agreements
of Selling Group contained herein, and upon the terms and subject to the
conditions hereinafter set forth, Buyer shall at Closing pay to Selling Group an
amount equal to Sixteen Million Three Hundred Thousand ($16,300,000) Dollars US
without reduction for any Assumed Obligation (the "Purchase Price"), but subject
to adjustment in accordance with Section 2.6.
SECTION 2.4 PAYMENT OF PURCHASE PRICE.
On the Closing Date (or, if such day is not a Business Day, on the first
Business Day following the Closing Date), Buyer shall pay Purchase Price by
delivering to Selling Group, by one (1) or more wire transfers of immediately
available funds, to such account as Parent shall designate in writing, an amount
equal to Sixteen Million Three Hundred Thousand ($16,300,000) Dollars. The
Purchase Price is subject to adjustments in accordance with Section 2.6.
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SECTION 2.5 NON-ASSUMED LIABILITIES. In the case of all Non-Assumed
Liabilities which relate to or which in any way may affect the Business or the
Purchased Assets, Parent and the Selling Group shall promptly, and in any event,
at the time payment or performance is due in accordance with the terms thereof,
pay or perform all such Non-Assumed Liabilities. Without limiting the generality
of the foregoing, Parent and Selling Group shall be responsible for and promptly
pay or perform:
(a) all liabilities and obligations owed to employees of the Selling
Group, including but not limited to, any severance payments, health coverage,
accrued vacation pay, accrued sick pay, and unpaid wages.
(b) all liabilities and obligations to suppliers, creditors, and third
party payors of the Business or relating to the Purchased Assets shall be paid
and satisfied;
(c) Parent and the Selling Group shall be responsible for all warranty
obligations, product returns, credits or product replacements relating to
products sold or services provided by the Parent or Selling Group on or prior to
the Closing Date.
Each of Parent and the Selling Group, jointly and severally, shall
indemnify, save, and hold Buyer harmless from and against all Non-Assumed
Obligations.
SECTION 2.6 ADJUSTMENT FOR INVENTORY VALUE AND ACCRUED VACATION. At or
promptly after the time of the Closing, Buyer shall, with representatives of the
Selling Group participating, (a) determine the amount of the liability for the
accrued vacation assumed by Buyer with respect to employees of the Seller Group
who are hired by Buyer, and (b) conduct an inventory count and valuation of all
of the inventory acquired by Buyer from the Selling Group on the Closing Date.
If, in the course of taking such inventory any items of non-merchantable
inventory are discovered, including but not limited to, inventory which is
defective, is not marketable, is excessive (i.e., not salable within six (6)
months in the ordinary course of business of the Selling Group), is not properly
packaged, or is beyond normal dating standards for such item of inventory, such
items shall be excluded from the count and the items thus excluded shall be
retained by the Selling Group. The counted inventory shall be valued in
accordance with GAAP, it being specifically understood that for these purposes
the inventory will be valued at the lower of cost, determined on an FIFO basis,
or market. The amount of the liability for accrued vacation assumed by Buyer
shall be determined in accordance with GAAP.
If, after completion of this process, the value of (i) the inventory
acquired by Buyer reduced by (ii) the amount of the liability for accrued
vacation is less than $1,534,896, then the deficit shall be immediately due and
payable from Parent and the Selling Group to Buyer and if the value of the
inventory acquired by Buyer is more than $1,534,896, then the excess shall be
immediately due and payable from Buyer to Parent.
The total of $1,534,896 was the value of the inventory of the Selling
Group as of August 31, 2000. There were two components to this amount: Rx
inventory of $740,015, and over-the counter ("OTC") inventory of $794,881.
Notwithstanding the foregoing provisions, the parties have agreed that the
valuation of the OTC inventory shall not be reduced by more than $300,000, for
any reason other than a shortfall in the count of the OTC inventory. Thus
(except to the extent due to count shortfall), if more than $300,000 worth of
the OTC inventory does not meet the valuation test above, the amount over
$300,000 shall still be credited as acceptable for
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purposes of the inventory valuation and shall be acquired by Purchaser. The
$300,000 of OTC inventory which was not credited as acceptable shall be retained
by the Selling Group.
SECTION 2.7 SALES AND TRANSFER TAXES. All Taxes, including sales, use and
transfer taxes and those relating to bulk sales, if any, arising from the
transfer of the Purchased Assets shall be borne solely and timely paid by the
Selling Group.
SECTION 2.8 ALLOCATION OF PURCHASE PRICE. Within forty-five (45) days
after the Closing Date, Buyer and Parent and Selling Group will mutually agree
to an allocation of the Purchase Price, including any Assumed Obligations in
existence immediately after the Closing which are treated as accrued liabilities
assumed by Buyer for income tax purposes (the "Tax Purchase Price") among the
Purchased Assets (the "Purchase Price Allocation"). Selling Group and Buyer
agree to jointly complete Form 8594 based upon such allocation and to separately
file such form with their respective federal income tax returns for their
respective tax years in which the Closing Date occurs. Selling Group and Buyer
will file all other income tax returns required to be filed by them with any
governmental or taxing authority for their respective tax years in which the
Closing Date occurs in a manner consistent with the Purchase Price Allocation in
Form 8594. To the extent any governmental agency takes any position in any
audit, proceeding or otherwise in connection with any income tax return that is
inconsistent with the Purchase Price Allocation, the party subject to such
audit, proceeding or otherwise shall promptly notify in writing the other party
of such challenge.
SECTION 2.9 PRORATIONS. All payments required to be made by Parent or
Selling Group under the Assumed Leases, including without limitation all rents,
assessments, personal property taxes, real estate taxes, utility charges and
heating fuels, shall be apportioned to the best of the parties' abilities
between Buyer and Selling Group as of the Effective Date (as reflected on a
Closing Statement to be prepared by Selling Group and verified and approved by
Buyer) and appropriate payments or credits shall be reflected in the payments
made on the Closing Date. When the actual amounts become known, such prorations
shall be recalculated by Buyer and Selling Group, and Buyer or Selling Group
shall make any additional payments or refunds, as the case may be, not later
than sixty (60) days after the Closing Date.
SECTION 2.10 ADJUSTMENTS TO CLOSING PAYMENT. In connection with obtaining
the required Consent to Assignment of the Miami Lease, Parent and Selling Group
agreed to an increase in the rental payments required under that Lease. The
parties have agreed that Buyer is entitled to $69,506.00 to compensate Purchaser
for the increased expense this rental increase represents, which amount has been
calculated on a present value basis. The amount paid at Closing by Purchaser
will be reduced by said amount.
The parties have agreed that Buyer will retain from the Purchase Price
payable at Closing the total amount of $300,000 to provide for any shortfall in
the adjustment for inventory value pursuant to Section 2.6. If, when the
determinations made in accordance with Section 2.6 have been completed, there is
either no deficit or the amount of the deficit is less than $300,000, then the
difference shall promptly, and in any event within three business days, be paid
by Buyer to Parent. If after the determination is completed the deficit is more
than $300,000, then the additional amount due from Parent and the Selling Group
shall be promptly, and in any event within three business days, paid by Parent
and the Selling Group to Buyer.
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SECTION 2.11 EFFECTIVE DATE. The parties have agreed that the transactions
provided for in this Agreement shall be effective as of 12:01 a.m., February 3,
2001 (the "Effective Date"). Thus, all revenues from operation of the Business
from and after the Effective Date shall be for the account of Buyer and Buyer
shall be responsible for all expenses of operations from and after the Effective
Date.
ARTICLE III
CLOSING; TERMINATION
SECTION 3.1 CLOSING. The Closing shall take place at the offices of Buyer
(or at Buyer's election, the offices of Buyer's attorneys), at 10:00 a.m.,
Central Standard Time, on February __[2], 2001, or such other date mutually
agreed to in writing by Parent, Selling Group and Buyer.
SECTION 3.2 DELIVERIES BY SELLING GROUP MEMBERS AND PARENT AT CLOSING.
(a) At Closing, Selling Group or Parent, as the case may be, shall
deliver to Buyer:
(i) A xxxx of sale and general assignment in the form attached
hereto as Exhibit 3.2;
(ii) Assignments of leases in form reasonably acceptable to Buyer;
(iii) Assignments of contracts in form reasonably acceptable to
Buyer;
(iv) All of Selling Group's books, records and files included in the
Purchased Assets (and all copies thereof);
(v) The original Assumed Agreements (or copies to the extent
originals are not in Selling Group's possession);
(vi) A current search or searches, certified by the entity providing
the search showing all financing statements on file against the Purchased
Assets, together with all lien releases and UCC-termination statements,
including lien releases and UCC termination statements from McKesson Corporation
in form and substance reasonably satisfactory to Buyer, or payoff letters
providing for the delivery of such documents as may be necessary to permit the
conveyance of the Purchased Assets free and clear of all Liens as contemplated
hereunder;
(vii) Such agreements, opinions, certificates, and other documents
and instruments referred to in Article VII hereof; and
(viii) All such other instruments and agreements as reasonably shall
be requested by Buyer to vest in Buyer title in and to the Purchased Assets in
accordance with the provisions hereof;
All instruments to be delivered to Buyer pursuant hereto shall be in form
and substance, and shall be executed in a manner, reasonably satisfactory to
Buyer, sufficient to vest all right, title and interest of Selling Group in the
Purchased Assets in Buyer and, where appropriate, sufficient to be recorded or
filed, but shall not function to increase or decrease the assets being
transferred to Buyer hereunder or the liabilities and obligations to be assumed
by Buyer hereunder.
(b) Simultaneously with the delivery of items referenced in paragraph (a)
above, Selling Group shall take all steps as may be required to put Buyer in
actual possession and
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operating control of the Purchased Assets, free of all tenants and occupants
other than as contemplated by this Agreement or the Related Agreements.
(c) Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement by Selling Group to transfer to
Buyer any of the Excluded Property.
SECTION 3.3 DELIVERIES BY BUYER AT CLOSING. At Closing, Buyer shall
deliver to Selling Group:
(i) The Purchase Price in accordance with Section 2.4;
(ii) An agreement of assumption in form reasonably acceptable to
Parent and Selling Group evidencing Buyer's assumption of the Assumed
Obligations; and
(iii) Such agreements, opinions, certificates and other documents
and instruments referred to in Article VIII hereof.
All instruments to be delivered to Selling Group pursuant hereto shall be
in form and substance, and shall be executed in a manner, reasonably
satisfactory to Parent and each Selling Group Member, but shall not function to
increase or decrease the assets being transferred to Buyer hereunder or the
liabilities and obligations to be assumed by Buyer hereunder.
SECTION 3.4 LICENSE. Selling Group hereby grants to Buyer a royalty-free,
fully-paid, non-exclusive license to use the tradenames "APP" and "American
Prescription Providers" and any related logos or the like for the 12-month
period immediately following the Closing. Commencing three months after the
Closing, such tradenames and logos shall be used in conjunction with the
tradenames and logos utilized by Buyer; for example, Buyer's tradenames and/or
logos could appear followed by the language such as "formerly APP" or "formerly
known as APP," or similar language.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
BY EACH SELLING GROUP MEMBER AND PARENT
In order to induce Buyer to enter into this Agreement and purchase the
Purchased Assets, each Selling Group Member and Parent hereby jointly and
severally represent and warrant to Buyer that the following representations and
warranties are true and correct on the date hereof and will be true and correct
on the Closing Date as if made on said date, except only that representations
and warranties which speak as of a specific date shall continue to be true as of
the date as of which they speak. The representations and warranties are as
follows:
SECTION 4.1 EXISTENCE AND QUALIFICATION.
(a) Parent (i) is a corporation, duly incorporated, validly existing and
in good standing under the laws of its state of formation, and (ii) has all
corporate power and authority and all governmental licenses, permits,
authorizations, consents and approvals to own and lease its properties and
assets and to carry on its business as presently conducted.
(b) Each Selling Group Member: (i) is a corporation, duly incorporated,
validly existing and in good standing under the laws of its state of formation,
(ii) has all corporate power and authority and all governmental licenses,
permits, authorizations, consents and approvals to own and lease its properties
and assets and to carry on the Business as presently conducted, and
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(iii) is qualified as a foreign entity to do business and is in good standing
under the laws of each jurisdiction in which the conduct of its business or
where the ownership or leasing of its properties or assets requires such
qualification, except for such jurisdictions where the failure to be so
qualified or to have such licenses, permits, authorizations, consents or
approvals would not have a Material Adverse Effect.
SECTION 4.2 OWNERSHIP OF SELLING GROUP MEMBERS; INTERESTS IN OTHER
ENTITIES.
(a) Parent is the sole shareholder of each Selling Group Member, and no
other Person owns any equity interest (or any interest convertible or
exchangeable into such an equity interest) in any Selling Group Member.
(b) No Selling Group Member owns, directly or indirectly, beneficially or
of record, any stock, partnership interest, option, warrant or other equity
interest in any Person.
(c) No Selling Group Member is subject to any obligation or requirement to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any other Person.
(d) Xxxxx X'Xxxxxxx and Xxxxxx Xxxx, in conjunction with any trusts for
the benefit of their relatives, together own more than 50 percent of the voting
stock of Parent and more than 50 percent of any other classes of stock of
Parent.
SECTION 4.3. AUTHORIZATION; ENFORCEABILITY.
(a) Parent, and to the extent applicable, each member of the APP Group,
has full corporate power and authority to enter into this Agreement, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder. The execution, delivery and performance of this Agreement
and the consummation by Parent and each Selling Group Member and to the extent
applicable, each member of the APP Group, of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of each such Person. This Agreement has been duly executed and delivered by
Parent and constitutes the valid and binding obligation of Parent, enforceable
against Parent in accordance with its terms.
(b) Each Selling Group Member has full corporate power and authority to
enter into this Agreement, to consummate the transactions contemplated hereby
and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by each Selling Group Member and the consummation
by each Selling Group Member of the transactions contemplated hereby have been
duly authorized by all requisite director and stockholder action on the part of
each Selling Group Member. This Agreement has been duly executed and delivered
by each Selling Group Member and constitutes valid and binding obligations of
each Selling Group Member, enforceable against each Selling Group Member in
accordance with its terms.
(c) All corporate, shareholder, and other proceedings necessary to be
taken by Parent and each Selling Group Member and each other member of the APP
Group in connection with the transaction provided for by this Agreement, have
been duly and validly taken.
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SECTION 4.4 NO BREACH OR VIOLATION.
(a) Parent's execution and delivery of this Agreement, its compliance with
and fulfillment of the terms of this Agreement, and the consummation of the
other transactions contemplated hereby, do not and will not, with notice or
passage of time or both, after giving effect to consents described on Schedule
4.5 attached hereto which are conditions precedent to the Closing: (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in the creation of any Lien upon any of
Parent's assets pursuant to, (iv) give any Person the right to accelerate any
obligation under, or (v) result in a violation of: (a) any Law applicable to
Parent, (b) Parent's certificate of incorporation or by-laws, (c) any material
franchise, permit, license, authorization, concession, order, judgment, writ,
injunction or decree to which Parent is subject, or by which any of its assets,
properties or rights are bound, or (d) any material lease, mortgage, indenture,
deed of trust, trust agreement, note agreement or other agreement, contract,
understanding or instrument to which Parent is subject, or by which any of its
assets, properties or rights are bound.
(b) Each Selling Group Member's execution and delivery of this Agreement,
its compliance with and fulfillment of the terms of this Agreement, the sale and
delivery of the Purchased Assets to the Buyer and the assumption of the Assumed
Obligations by the Buyer, and the consummation of the other transactions
contemplated hereby, do not and will not, with notice or passage of time or
both, after giving effect to consents described on Schedule 4.5 attached hereto
which are conditions precedent to the Closing: (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in the creation of any Lien upon the Purchased Assets
pursuant to, (iv) give any Person the right to accelerate any obligation under,
or (v) result in a violation of, (a) any Law applicable to such Selling Group
Member, (b) certificate of incorporation, (c) any material franchise, permit,
license, authorization, concession, order, judgment, writ, injunction or decree
to which a Selling Group Member is subject, or by which any of their respective
assets, properties or rights are bound, or (d) any material lease, mortgage,
indenture, deed of trust, trust agreement, note agreement or other agreement,
contract, understanding or instrument to which a Selling Group Member is
subject, or by which any of their respective assets, properties or rights are
bound.
SECTION 4.5 CONSENTS AND APPROVALS. Except as set forth on Schedule 4.5
hereto, no material consent, approval, exemption, audit, waiver, order or
authorization of, or registration, qualification, designation, declaration,
notice or filing with, any governmental or regulatory authority (foreign or
domestic), or any other Person, is required in connection with the execution,
delivery and performance of this Agreement or the sale or delivery of the
Purchased Assets or the assumption of the Assumed Obligations, or the other
transactions contemplated by this Agreement. There are no existing agreements,
options, commitments or rights with, of or to any Person to acquire any Selling
Group Member's assets, properties or rights included in the Purchased Assets or
any interest therein, except for those Contracts for the sale of inventory
entered into by a Selling Group Member in the ordinary course of business.
SECTION 4.6 FINANCIAL STATEMENTS.
(a) Attached hereto as: (i) Schedule 4.6(a)(i) are true and complete
copies of consolidating statements of operations (including retail) and balance
sheets (including retail) for the fiscal years ended August 31, 2000 and August
31, 1999 for each Selling Group Member (the
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"Annual Financials"); and (ii) Schedule 4.6(a)(ii) are interim statements of
operations and balance sheets (in each case retail only) for the first quarter
ending November 30, 2000, and the month ending December 31, 2000 (the "Interim
Financials").
(b) Each Selling Group Member has made and kept books, records and
accounts in reasonable detail, which accurately and fairly reflect in all
material respects its activities and transactions and the purchase and
disposition of any of its assets. Each Selling Group Member has not engaged in
any material transaction with respect to the Business which is not reflected in
such books, records and accounts.
(c) No unrecorded funds or assets of Selling Group have been established
for any purpose; no accumulation or use of funds of Selling Group has been made
without being properly accounted for in the respective books and records of
Selling Group; all payments by or on behalf of Selling Group have been duly and
properly recorded and accounted for in Selling Group's books and records; no
false or artificial entry has been made in the books and records of Selling
Group for any reason; no payment has been made by or on behalf of Selling Group
with the understanding that any part of such payment is to be used for any
purpose other than that described in the documents supporting such payment; and
Selling Group has not made, directly or indirectly, any illegal contributions to
any political party or candidate, either domestic or foreign, or any
contribution, gift, bribe, rebate, payoff, influence payment or kickback,
whether in cash, property or services, to any individual, corporation,
partnership or other entity, to secure business or to pay for business secured.
(d) Except as stated on Schedule 4.6(d), the Annual Financials have been
prepared in accordance with GAAP and fairly and accurately represent the
financial condition and assets and liabilities (whether accrued, absolute,
contingent, or otherwise) of the Seller Group as of the dates indicated and the
results of operations of the Seller Group for the periods that ended. Except as
set forth on Schedule 4.6(d), and except for the absence of footnotes and
subject to normal year-end adjustments (none of which will be material), the
Interim Financials have been prepared in accordance with GAAP and fairly and
accurately represent the financial condition and assets and liabilities (whether
accrued, absolute, contingent, or otherwise) of the Seller Group as of the dates
indicated and the results of operations of the Seller Group for the periods then
ended.
(e) The unearned purchase discount from McKesson totaled $280,181.26 for
the year ended August 31, 2000 and was properly charged to the retail
consolidating statements of operations, and reflected in the Annual Financials.
SECTION 4.6A CONSOLIDATED FINANCIAL STATEMENTS. Parent has delivered to
Buyer copies of (i) the consolidated annual financial statements of Parent and
its subsidiaries for the periods ending August 31, 1999 and August 31, 2000 (the
"Audited Financials"), and (ii) the interim consolidated financial statements of
its Affiliates for the time period commencing September 1, 2000, and ending
December 31, 2000 (the "Interim Affiliates Financials").
The Audited Financials were audited and certified by McGladrey & Xxxxxx,
certified public accountants. The Audited Financials are true, complete and
correct and have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods indicated. The Audited
Financials fairly and accurately present, on a
17
consolidated basis, the financial condition and assets and liabilities (whether
accrued, absolute, contingent or otherwise) of Parent and its subsidiaries as of
the dates indicated, and the results of operations of Parent and its
subsidiaries for the periods then ended.
The Interim Affiliates Financials are true, complete and correct and have
been prepared in accordance with generally accepted accounting principles,
consistently followed, subject however to the absence of footnotes and to normal
year-end accruals, none of which, except as noted on Schedule 4.6A will be
material. The Interim Affiliates Financials fairly and accurately present, on a
consolidated basis, the financial condition and assets and liabilities (whether
accrued, absolute, contingent or otherwise) of Parent and its subsidiaries as of
the dates indicated, and the results of operations of Parent and its
subsidiaries for the periods then ended.
SECTION 4.7 INVENTORY. All inventory of Selling Group used or useful in
the conduct of the Business reflected on the Annual Financials and Interim
Financials Information, including inventory acquired since August 31, 2000 was
acquired by each Selling Group Member in the ordinary course of business; is of
good and merchantable quality and consists substantially of a quality, quantity
and condition believed by Selling Group to be usable, or saleable within six (6)
months in the ordinary course of business; is valued at the lower of cost or
market on a FIFO basis and otherwise in accordance with GAAP; and is not subject
to any material write-down or write-off for which appropriate reserves have not
been included in the Interim Financials. No Selling Group Member is subject to
any liability or obligation with respect to the return of inventory by
customers.
SECTION 4.8 INSURANCE. The assets, properties and operations of each
Selling Group Member are insured under one or more policies of general
liability. All such policies are in full force and effect in accordance with
their terms, no notice of cancellation has been received by any Selling Group
Member or any other responsible party, and there is no existing default or event
which, with the giving of notice or lapse of time or both, would constitute a
default thereunder. Such policies are, to the best of Parent and Selling Group's
knowledge, in amounts which are adequate in relation to the business and assets
of Selling Group and all premiums to date have been paid in full. Schedule 4.8
sets forth a description of the insurance carried by the Selling Group Members.
SECTION 4.9 MATERIAL CONTRACTS AND OBLIGATIONS. Attached hereto as
Schedule 4.9 is a true, complete and accurate list, categorized by subject
matter, together with an indication by an asterisk (*) if the same shall
constitute an Assumed Agreement, of all of the following contracts, agreements,
plans, leases and commitments, whether written or oral, (A) which were entered
into by a Selling Group Member or by which a Selling Group Member is bound, or
(B) which were entered into by any Member of the APP Group other than a Selling
Group Member and which are related to or involve the Business or the Purchased
Assets ("Contracts"):
(i) All purchase orders and Contracts for the purchase of goods or
supplies which are for a term of more than three (3) months, or which involve or
are reasonably expected to involve aggregate payments by a Selling Group Member
of more than $10,000 during any fiscal year of such Selling Group Member, or
which were entered into other than in the ordinary course of business;
(ii) All sales agreements and other sales orders (including sales by
any Selling Group Member to any Governmental Authority) and Contracts for the
sale of goods or provision
18
of services which are for a term of more than three (3) months, or which involve
or are reasonably expected to involve aggregate payments to a Selling Group
Member of more than $10,000 during any fiscal year of such Selling Group Member,
or which were entered into other than in the ordinary course of business;
(iii) All Contracts with any officer, director, consultant or
employee of the Business (the "Existing Employment Contracts") or any management
contract;
(iv) All Contracts or arrangements providing for the grant of equity
interests, equity appreciation rights, bonuses, pensions, severance payments,
deferred or incentive compensation, retirement payments, profit-sharing,
insurance or other benefit plan or program for any employees;
(v) All Contracts for construction or for the purchase of real
estate, improvements, equipment, and other items which under GAAP constitute
capital expenditures or which involve or are reasonably expected to involve
expenditures in the aggregate in excess of $5,000 during any fiscal year;
(vi) All Contracts relating to the rental or use of equipment,
vehicles, other personal property or fixtures, or relating to the provision of
services, which involve or are reasonably expected to involve payment of rentals
or sums in the aggregate in excess of $1,000 during any fiscal year;
(vii) All Contracts relating in any way to direct or indirect
indebtedness for borrowed money or evidenced by a bond, debenture, note or other
evidence of indebtedness (whether secured or unsecured) of or to a Selling Group
Member, including but not limited to, indebtedness by way of lease or
installment purchase arrangement, guarantee, reimbursement obligations
pertaining to letters of credit, repurchase agreements, purchase price discount
obligations, other intercompany account agreements, or other undertakings on
which others rely in extending credit, or otherwise, and all mortgages, pledges,
conditional sales contracts, chattel and purchase money mortgages and other
security arrangements with respect to any real estate, improvements, equipment,
other personal property or fixtures in excess of $1,000;
(viii) All Contracts substantially limiting the freedom of a Selling
Group Member to engage in or to compete in any line of business of a Selling
Group Member, or with any Person or in any geographical area in connection
therewith, or to use or disclose any information relating to a Selling Group
Member in its possession;
(ix) All license agreements, either as licensor or licensee,
franchise agreements, either as franchisor or franchisee, and agreements
pertaining to any website for the Business, including all linking and hosting
agreements;
(x) All partnership or joint venture Contracts, whether or not
involving a sharing of profits;
(xi) All Contracts between a Selling Group Member and any member,
partner or any Affiliate of a Selling Group Member or Parent;
(xii) All Contracts with HMO organizations, insurance companies,
third party administrators or payors, pharmacy providers, state and local
governments, pharmaceutical manufacturers, and clinics and foundations with
respect to the Business;
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(xiii) All Contracts involving purchase price discounts in excess of
$10,000 in any fiscal year of a Selling Group Member offered by a Selling Group
Member based on purchase volume;
(xiv) All Contracts which are presently expected to result in any
loss upon completion or performance thereof;
(xv) All Contracts involving research and development efforts on
behalf of a Selling Group Member;
(xvi) All Contracts for any charitable or political contribution
in excess of $5,000;
(xvii) All Contracts substantially limiting the freedom of any
Person to engage in or to compete in any line of business of a Selling Group
Member, or with any Selling Group Member, or in any geographical area in
connection therewith, or to use or disclose any information relating to a
Selling Group Member in its possession;
(xviii) All contracts for advertising or otherwise relating to
advertising;
(xix) All Contracts not made in the ordinary course of business; and
(xx) All other Contracts, except Contracts which are not material
and which are (i) cancelable on 30 days or less notice without any penalty or
other financial obligation or (ii) if not so cancelable, involve or are
reasonably expected to involve aggregate payments by or to a Selling Group
Member of $1,000 or less during any fiscal year of a Selling Group Member.
Except as set forth on Schedule 4.9, all Contracts required to be
disclosed to Buyer pursuant to this Section 4.9 are valid, binding and in full
force and effect and neither Selling Group Member, nor, to Parent's and Selling
Group's Knowledge, any other party thereto, is in breach or violation of, or
default under, nor is there any valid basis for such a claim of breach or
violation of, or default under, the terms of any such Contract (to Parent's and
Selling Group's Knowledge with respect to the other parties to the Contracts)
and no event has occurred which constitutes or, with the lapse of time or the
giving of notice or both, would constitute, such a breach, violation or default
by a Selling Group Member thereunder. Each Selling Group Member has enforced, or
attempted to enforce, all material rights in favor of Selling Group with respect
to the Contracts described in Schedule 4.9.
SECTION 4.10 EMPLOYEES. Each Selling Group Member has complied in all
material respects with all applicable Laws relating to the employment of labor,
including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining, age, pregnancy, disability, sex, race, national origin
and other forms of unlawful discrimination and the payment and withholding of
social security and other Taxes due in respect thereof.
SECTION 4.11 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on
Schedule 4.11 hereto, since August 31, 2000, no Selling Group Member has, and in
addition, no such event has occurred with respect to the Business:
(a) Incurred any liabilities, other than liabilities incurred in the
ordinary course of business, or discharged or satisfied any lien or encumbrance
or paid any liabilities, other than in the ordinary course of business, or
failed to pay or discharge when due any liabilities of which the failure to pay
or discharge has caused or would reasonably be expected to cause any material
damage or risk of material loss to the Business or any of its assets or
properties;
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(b) Sold, assigned or transferred any assets or properties which would
have been included in the Purchased Assets if the Closing had been held on
August 31, 2000 or on any date since then, except for the sale of inventory and
for the disposition of assets in the ordinary course of business which are
worn-out, in need of substantial repair, or are obsolete and which do not have a
market value in excess of $10,000 in the aggregate for all such assets;
(c) (i) Created, incurred, assumed or guaranteed any indebtedness for
borrowed money, other than in the ordinary course of business, or (ii)
mortgaged, pledged or subjected any of its assets to any mortgage, lien, pledge,
security interest, conditional sales contract or other encumbrance of any nature
whatsoever;
(d) Made or suffered any material amendment or termination of any Contract
to which it is a party or by which it is bound, or canceled, modified or waived
any material debts or claims held by it or waived any rights of material value;
(e) Suffered any damage, destruction or loss, whether or not covered by
insurance, of any item or items carried on its books of account individually or
in the aggregate at more than $20,000 or suffered any repeated, recurring or
prolonged shortage, cessation or interruption of supplies or utilities or other
services required to conduct the operations of the Business;
(f) Suffered any Material Adverse Change;
(g) Received notice or obtained knowledge of any actual or threatened
labor trouble, strike, union organizing efforts, or other occurrence, event or
condition of any similar character;
(h) Made any acquisition of substantial assets or any commitments or
agreements for capital expenditures or capital additions or betterments
exceeding $10,000 individually or in the aggregate, except such as may be
involved in ordinary repair, maintenance or replacement of assets in the
ordinary course of business;
(i) Increased the salaries or other compensation of, or made any advance
(excluding advances for ordinary and necessary business expenses) or loan to,
any of their respective employees or made any increase in, or any addition to,
other benefits to which any of their respective employees may be entitled. All
increases to salaries or compensation since August 31, 2000 are listed on
Schedule 4.11;
(j) Entered into or amended any Contract with any of their respective
Affiliates;
(k) Made or suffered any material changes in, or terminations of,
relationships with third party payors, including but not limited to benefit
plans and insurance companies;
(l) Increased any benefits to any employees of the Seller Group under any
Employee Benefit Plan or added, or amended in any material respect, any Employee
Benefit Plan;
(m) Transferred any assets to any member of the APP Group (other than
transfers from one member of the Seller Group to the other), except for payments
of cash to Parent;
(n) Suffered a termination of or amended any license or permit of any
member of the Seller Group used in the Business;
(o) Changed its methods of accounting in any respect;
(p) Made any distributions to its stockholders; or
(q) Entered into any transaction other than in the ordinary course of
business.
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SECTION 4.12 UNDISCLOSED LIABILITIES. No Selling Group Member has any
material liabilities or obligations, whether accrued, absolute, contingent or
otherwise, due or to become due, or whether direct or indirect, arising out of
any action or inaction, or with respect to or based upon transactions or events
occurring, or any state of facts or condition existing, in connection with such
Selling Group Member's conduct of the Business, and, to the best knowledge of
the Selling Group, there is no basis for any claim against any Selling Group
Member for any such material liability or obligation, except: (i) to the extent
specifically described in this Agreement or disclosed in the Schedules hereto,
(ii) to the extent fully reflected or reserved against on the Annual Financials
or Interim Financials, (iii) liabilities and obligations arising or incurred in
the ordinary course of business and not materially adverse under any Contract
disclosed on Schedule 4.9 or not required to be disclosed because of the term or
amount involved, and (iv) liabilities or obligations arising or incurred in the
ordinary course of business which will be paid or discharged prior to the due
date thereof or at the Closing.
SECTION 4.13 TAX MATTERS. Except as set forth on Schedule 4.13 hereto, (a)
all Tax Returns with respect to the Purchased Assets or the Selling Group --
other than state or local Tax Returns which are not material, individually or in
the aggregate, that are required to be filed on or prior to Closing Date have
been duly filed on a timely basis and all Taxes thereon have been timely paid;
(b) all Tax Returns with respect to the Purchased Assets or for the Selling
Group for periods ending on or before the Closing Date but that are not required
to be filed until after the Closing Date will be timely filed and all Taxes
reflected thereon will be timely paid; (c) none of the Purchased Assets is
subject to any Lien for payment of any unpaid Taxes or levy proceedings; (d) all
Taxes which any Selling Group Member is (or was) required by Law to withhold or
collect have been duly withheld or collected, and have been timely paid over to
the proper taxing authorities to the extent due and payable; (e) no Selling
Group Member is a party to any agreement that would require it to make any
payment that would constitute an "excess parachute payment" for purposes of
Sections 280G and 4999 of the Code; (f) no Selling Group Member is a "foreign
person" as such term is defined in the Code; (g) no Selling Group Member has any
express or implied obligation (including, but not limited to, an indemnification
obligation) with respect to the payment of Taxes for any party other than a
Selling Group Member; and (h) no Selling Group Member has received any notice of
any additional assessments since the date of any Tax Return nor has any such
Selling Group Member received any notice of any audit or review of such Tax
Returns.
SECTION 4.14 REAL PROPERTY OWNED AND LEASED. No Selling Group Member owns
any real property and the real property leased by each Selling Group Member
related to the Business has never been owned by a Selling Group Member. Set
forth on Schedule 4.14 are true and accurate listings of all real property
leases to which a Selling Group Member is a party setting forth: (i) the name of
the Selling Group Member that is the lessee; (ii) the name of the lessor, (iii)
a description of the property leased, including estimated total square footage,
and (iv) whether such premises are currently being used for the operation of the
Business. Except as set forth on Schedule 4.14: (i) all of the leases set forth
on such Schedule are in full force and effect and are valid, binding and
enforceable in accordance with their respective terms, (ii) all accrued and
currently payable rents and other payments required by such leases have been
paid, (iii) each Selling Group Member and, to the best knowledge of Parent and
Selling Group, each other party thereto has complied with all respective
covenants and provisions of such leases in all material respects, (iv) neither
Selling Group Member nor, to the best knowledge of Parent and Selling Group, any
other party, is in default in any material respect under any such leases, (v) no
party
22
has asserted any defense, set off, or counter claim thereunder, (vi) no waiver,
indulgence or postponement of any obligations thereunder has been granted by any
party, and (vii) the validity or enforceability of any such lease will be in no
way affected by the sale of the Purchased Assets to Buyer, provided all required
consents (all of which are listed on Schedule 4.14) have been obtained from the
other parties to such lease.
SECTION 4.15 TITLE TO PURCHASED ASSETS; CONDITION OF ASSETS; NECESSARY
PROPERTY.
(a) Set forth on Schedule 4.15(a) are true, correct, and complete listings
of all Liens on the Purchased Assets. Each Selling Group Member will convey to
Buyer at Closing, good title to the Purchased Assets, free and clear of all
Liens. To the best knowledge of Parent and the Selling Group, the material items
of the tangible property included among the Purchased Assets are in good working
order and repair, reasonable wear and tear excepted, have been maintained and
repaired on a regular basis so as to preserve their utility and value, are
usable in the ordinary course of business, and conform in all material respects
to all applicable Laws relating to their construction, use and operation. No
Person other than Selling Group owns, leases or has any rights in any Purchased
Assets.
(b) Schedule 4.15(b) sets forth a list of all assets, other than Excluded
Property, which are licensed to a Selling Group Member, or licensed to Parent or
any other member of the APP Group and used in the Business. Schedule 4.15(b)
also sets forth a list of all assets, other than Excluded Property, which are
used in both the Business and in another business of Parent or an Affiliate of
Parent. None of the joint use assets set forth on Schedule 4.15(b) are used
principally in the Business.
(c) Except as set forth on Schedule 4.15(c), the Purchased Assets,
including the Assumed Agreements, constitute all of the real and personal
property, whether tangible or intangible, owned, leased, or licensed (other than
Excluded Property), which is used in or necessary to the conduct of the Business
in the manner and to the extent presently conducted by Selling Group. No other
material real or personal property, whether tangible or intangible, owned,
leased, or licensed, is required for the conduct of the Business in the manner
and to the extent presently conducted by Selling Group.
SECTION 4.16 PROPRIETARY RIGHTS. Except for Intellectual Property being
retained by Selling Group described on Schedule 4.16(a) hereto (the "Excluded
Intellectual Property"), the Intellectual Property includes all intellectual
property and rights used in or necessary to the operation of the businesses of
the Selling Group as they are currently conducted. Except as otherwise set forth
on Schedule 4.16(b) hereto, no royalties or fees are payable by any Selling
Group Member to any Person by reason of the ownership or use of any of the
Intellectual Property. Each Selling Group Member owns or possesses adequate
licenses or other rights to use the Intellectual Property, all of which are set
forth on Schedule 4.16(b) attached hereto. Except as set forth on Schedule
4.16(b), each Selling Group Member has the sole and exclusive right to use the
Intellectual Property used by it. To the best of Parent's and Selling Group's
Knowledge there is no infringement upon the Intellectual Property by any other
Person. The Purchased Assets, and the conduct of the Business as currently
conducted, do not infringe any other Person's intellectual property or
proprietary rights. No charge or claim been made within the past two years and
to the best of Parent's and Selling Group's Knowledge, no charge or claim has
been threatened challenging the rights of the Company with respect to the
Intellectual
23
Property or charging any of the Selling Group or the Business or Purchased
Assets, with infringement of any other Person's intellectual property. Except as
set forth on Schedule 4.16(b), no present or former employee of any Selling
Group Member or any other Person owns or has any proprietary, financial or other
interest, direct or indirect, in whole or in part, in any Intellectual Property.
SECTION 4.17 NECESSARY LICENSES AND PERMITS. Each Selling Group Member
possesses all material licenses, permits, consents, concessions and other
authorizations of governmental, regulatory or administrative agencies or
authorities, whether foreign, federal, state, or local, required to own and
lease the Purchased Assets, to sell and/or service any inventory of Selling
Group or to otherwise conduct the Business as presently conducted and as
proposed to be conducted by Selling Group. Schedule 4.17 hereto sets forth a
list of each such license, permit, consent, concession or other authorization so
possessed.
SECTION 4.18 ENVIRONMENTAL.
(a) At all times prior to the Closing, each Selling Group Member has
complied and at the Closing will be in compliance, in all material respects,
with all Environmental Laws, and no Selling Group Member has received any
notice, report, or information (including information that any 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 Laws. For the purposes of this
Agreement, "Environmental Laws" 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 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 Purchased Assets or any other property
currently or previously owned or operated by a Selling Group Member in a manner
which: (i) violates any applicable Environmental Laws, or (ii) requires
response, remedial, corrective action or cleanup of any kind under any
applicable Environmental Law, the cost of which would be material. In the case
of Hazardous Substances due or attributable to Persons other than the APP Group
and affiliates thereof, it is understood that the warranty in the previous
sentence is made to the best of Parent's and Selling Group's Knowledge. 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.
SECTION 4.19 CORPORATE DOCUMENTS, BOOKS AND RECORDS. The books, records
and accounts of each Selling Group Member accurately and fairly reflect in all
material respect the
24
transactions and the assets and liabilities of each Selling Group Member. No
Selling Group Member has engaged in any transaction with respect to the
Business, maintained any bank account for the Business, or used any of the funds
of Selling Group in the conduct of the Business, except for transactions, bank
accounts and funds which have been and are reflected in the normally maintained
books and records of Selling Group.
SECTION 4.20 COMPLIANCE WITH LAW. No Selling Group Member is in default in
any material respect under, or in violation of, nor has such Selling Group
Member violated (and not cured) any Law (including, without limitation, Laws
relating to the issuance or sale of securities, anti-trust, restraint of trade,
or occupational safety, or any Law or any activities which are prohibited under
federal Medicare and Medicaid statutes (including 42 U.S.C. Section 1320a-7,
1320a-7a, and 1320a-7b), the Federal False Claims Act (31 U.S.C. Section 3729 et
seq.), statutes regarding physician self-referrals (42 U.S.C. Section 1395nn and
1396b(s)), and the Federal Controlled Substances Act (21 U.S.C. Section 801 et
seq.), or the regulations promulgated pursuant to such statutes or related
federal, state or local statutes or regulations), or any licenses, franchises,
permits, authorizations or concessions granted by, or any judgment, decree,
writ, injunction or order of, any governmental or regulatory authority,
applicable to such Selling Group Member or any of the Purchased Assets. No
investigation or review by any Governmental Authority with respect to any
Selling Group Member is pending or, to the best knowledge of Parent and Selling
Group, threatened.
SECTION 4.21 LITIGATION. Except as set forth in Schedule 4.21 hereto,
there is no suit, claim, action, proceeding or investigation pending or, to the
best knowledge of Parent or Selling Group, threatened against a Selling Group
Member or otherwise affecting the Purchased Assets or the Business, at law or in
equity or before any Governmental Authority or instrumentality or before any
arbitrator of any kind. To the best knowledge of Parent and Selling Group, there
is no basis for any such suit, claim, action, proceeding, or investigation.
Except as set forth on Schedule 4.21, no Selling Group Member has been a party
to any such suit, claim, action, proceeding or investigation during the past two
years, and to Selling Group's Knowledge, no such suit, claim, action, proceeding
or investigation has been threatened. No Selling Group Member is a party or
subject to any judgment, order, writ, injunction or decree applicable to the
Business or the Purchased Assets.
SECTION 4.22 INDEBTEDNESS TO AND FROM EMPLOYEES. No Selling Group Member
is indebted to any employee except for amounts due as normal salaries, wages, or
reimbursement of ordinary business expenses, and no employee is indebted to any
Selling Group Member.
SECTION 4.23 LABOR AGREEMENTS AND EMPLOYEE RELATIONS. No Selling Group
Member is a party to any collective bargaining or similar agreement covering any
of their respective employees. No labor organization or group of employees of
any Selling Group Member has made a demand for recognition, has filed a petition
seeking a representation proceeding or given a Selling Group Member notice of
any intention to hold an election of a collective bargaining representative. No
Selling Group Member has suffered any strike, slowdown, picketing or work
stoppage by any group of employees affecting the Business during the past five
years.
SECTION 4.24 BROKERS' FEES. No Selling Group Member nor any Person on such
Selling Group Member's behalf has retained any broker, finder or agent or agreed
to pay any brokerage fee, finder's fee or commission with respect to the
transactions contemplated by this Agreement.
25
SECTION 4.25 ALL MATERIAL INFORMATION. No representation or warranty made
herein by Parent or Selling Group Member, and no statement contained in any
certificate or other instrument furnished or to be furnished to Buyer in
connection with the transactions contemplated by this Agreement, contains any
untrue statement of a material fact or omits to state any material facts
necessary in order to make any statement therein not misleading.
SECTION 4.26. EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Except as set
forth on Schedule 4.26:
(a) No Selling Group Member maintains or contributes to (or has an
obligation to contribute to) any Employee Benefit Plan.
(b) No event has occurred, and to the best knowledge of Parent and Selling
Group, there exists no condition or set of circumstances, in connection with
which any Member of the APP Group could be subject to any liability under the
terms of any such Employee Benefit Plan, ERISA, the Code or any other applicable
law.
(c) The execution, delivery and performance of this Agreement will not
result in any (i) increase in the compensation or benefits otherwise payable
under any of the Employee Benefit Plans or pursuant to any agreement with
respect to any employee of the Business; or (ii) acceleration of the time of
payment or vesting of any such compensation or benefits due to any employee of
the Business; or (iii) renew or extend the term of any agreement regarding
compensation of an employee of the Business which, in the case of (i), (ii) or
(iii) above, would create any liability to Buyer after the Closing Date. No
payment or benefit which may be made by any Selling Group Member with respect to
any employee of the Business will be classified as an "excess parachute payment"
within the meaning of Section 280G of the Code.
(d) Except as may otherwise be specifically provided by this Agreement, no
Buyer Member will have any liability or obligation of any kind whatsoever under
or with respect to any Employee Benefit Plan.
(e) Schedule 4.26 also lists, in addition to Employee Benefit Plans,
vacation, sick pay, and all other arrangements in effect at the Selling Group
for providing benefits to employees.
(f) All obligations of the Selling Group, or of any other Member of the
APP Group, to employees who are employed in the Business, whether arising by
operation of law, by contract, or by past custom, for payments to employees or
to or with respect to Employee Benefit Plans of employees, or with respect to
employment compensation benefits, social security benefits, or the like, shall
have been paid prior to Closing, or, if due after Closing, shall be paid when
due under applicable laws, regulations, or provisions of benefit plans or
policies, as the case may be. Without limitation, the Selling Group, promptly
after Closing, shall satisfy all obligations to employees employed in the
Business for vacation pay, holiday pay, sick pay, and personal time, as well as
for bonuses or other compensation or benefits which may be due to such
employees.
SECTION 4.27 BENEFIT CLAIMS. To the best knowledge of Parent and Selling
Group, no Selling Group Member has any liability for any benefit which has been
or could be claimed as a result of any event occurring prior to the Closing
under any Employee Benefit Plan, or under any workers' compensation or similar
law: (i) which is not fully covered by insurance; or (ii) if not
26
so insured, for which Selling Group has not established an adequate reserve on
Selling Group's Historical Financial Statements.
SECTION 4.28 MEDICARE AND MEDICAID; REIMBURSEMENT BY PAYORS; RELATED
LEGISLATION AND REGULATIONS.
(a) For each Selling Group Member, Schedule 4.28(a) contains a list of
those jurisdictions in which each is licensed under Medicare or Medicaid. Except
as set forth on Schedule 4.28(a), the Selling Group Members have not received
any notice of investigation, evaluation, or suspension of any such licenses,
permits, orders, approvals or authorizations. To the Selling Group's and
Parent's best knowledge, no suspension or cancellation of any such licenses,
permits, orders, approvals and authorizations has been threatened or is
contemplated.
(b) One or more of the Selling Group Members participate in Medicare and
Medicaid Programs (the "Programs"). Schedule 4.28(b) contains a list of all
Medicare and Medicaid provider numbers assigned to the Selling Group Members and
other documents evidencing such participation.
(c) Except as set forth in Schedule 4.28(c), the Selling Group Members
have not received notice of any offsets against future reimbursements under or
pursuant to the Programs and no factual basis for any such offsets exist. Except
as set forth in Schedule 4.28(c), there are no pending appeals, adjustments,
challenges, audits, litigation and notices of intent to recoup past or present
reimbursements with respect to the Programs. Except as set forth in Schedule
4.28(c), the Selling Group Members have not been subject to, or threatened with,
loss or waiver of liability for utilization review denials with respect to the
Programs during the past 12 months, nor have the Selling Group Members received
notice of any pending, threatened or possible decertification, or audit,
offset, other action or other loss of participation in any of the Programs.
Except as set forth in Schedule 4.28(c), no validity review or program integrity
review related to any of the Selling Group Members has been conducted by any
Governmental Authority in connection with any of the Programs and no such
review, audit or audit assessment is scheduled, pending or to Parent's and
Selling Group's best knowledge threatened against any of the Selling Group
Members, their businesses or their assets.
(d) Except as set forth in Schedule 4.28(d), (i) the Selling Group Members
have not failed to file cost reports or other documentation or reports, if any,
in connection with applicable contractual provisions and/or laws, regulations
and rules, and (ii) there are no claims (including notices of any offsets
against future reimbursements) pending, scheduled or, to Parent's and Selling
Group's best knowledge threatened before any Person, including without
limitation any intermediary, carrier, the Health Care Financing Administration,
or any other state or federal agency with respect to Medicare or Medicaid Claims
filed by the Selling Group Members, or program compliance matters, in either
case (i.e., clause (i) or clause (ii)) which would result in a Material Adverse
Change. The Selling Group Members have delivered to Buyer accurate and complete
copies of any claims, actions, inquiries or other correspondence or appeals
listed in Schedule 4.28(d).
(e) (i) The Selling Group Members deliver goods and services, charge rates
and xxxx for services which are in all material respects legal and proper, (ii)
the Selling Group Members in all material respects properly pay any appropriate
refunds, xxxx and use all reasonable efforts to collect deductibles and
co-payment amounts and apply all payments received, (iii) the Selling Group
Members have not engaged in any activities in connection with the Businesses
which are
27
prohibited under, and have complied in all material respects with, the
Controlled Substances Act, 21 U.S. C. Section 801 et seq., all legislation
relating to the Programs and regulations promulgated pursuant to such statutes
and any related state or local statutes or regulations concerning the dispensing
and sale of controlled substances and the provision of healthcare products and
service to the general public and (iv) the Selling Group Members have complied
in all material respects with all substantive laws and regulations pertaining to
the return of pharmaceutical products.
SECTION 4.29 LICENSES AND PERMITS. All licenses, permits, franchises,
approvals, and governmental authorizations held by any member of the Selling
Group or required for the Purchased Assets or for operation of the Business as
it is presently conducted, are listed in Schedule 4.17. No other material
licenses, permits, franchises, approvals, or other governmental authorizations
are required for the Purchased Assets or for the operation of the Business as
presently conducted. True, current, correct, and complete copies of such
licenses, permits, franchises, approvals, and governmental authorizations have
been delivered by the Selling Group to Buyer. The Selling Group, or as
applicable, other members of the APP Group, have performed in all material
respects all obligations required to be performed to date under, and are not in
default under, any such licenses, permits, franchises, approvals, other
governmental authorizations, and all such licenses, permits, franchises,
approvals, and governmental authorizations are in full force and effect, and, to
the extent assignable, and if desired by Buyer, will be assigned to Buyer at the
Closing.
SECTION 4.30 THIRD PARTY PAYORS. Schedule 4.30 lists all significant
insurance companies, health benefit plans and other third party payors who make
payments or reimbursements with respect to any member of the Selling Group or
otherwise in connection with the Business. Except as listed on Schedule 4.30
since August 31, 1998, no third party payor which was in the top 25 in terms of
amounts paid by the third party payors to the Selling Group in the applicable
fiscal year, has (i) either ceased to do business with any member of the Selling
Group, (ii) had any material claim against any member of the Selling Group, or
had any material dispute with products or services provided by any member of the
Selling Group, or (iii) conducted any billing audit, nor is any billing audit
pending, scheduled, or to Parent's and Selling Group's best knowledge,
threatened.
SECTION 4.31 MAIL ORDER BUSINESS. Since August 31, 1999, no member of the
APP Group has engaged in activities designed to cause or induce any patients of
the retail pharmacies operated by the Selling Group to become, in whole or in
part, patients of the Mail Order Business; provided, however, that this
representation does not apply to activities of general application such as
general mailings, which activities do not utilize any information of the Selling
Group or of the APP Group relating to the retail pharmacies and their patients.
As of January 15, 2001, the retail pharmacies operated by the Selling
Group, and the Mail Order Business, had no more than five (5) percent common
patients, using as the denominator for these purposes the number of patients of
the retail pharmacies on January 15, 2001. For these purposes, a common patient
shall mean a patient who has utilized the services of either a retail pharmacy
or the Mail Order Business since December 31, 1999.
28
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to each
Selling Group Member and the Parent:
SECTION 5.1 ORGANIZATION OF BUYER. Buyer is: (a) a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, (b) has all necessary power and authority and all
governmental licenses, permits, authorizations, consents and approvals to own
and lease its properties and assets and to carry on its business as presently
conducted, and (c) is qualified as a foreign corporation to do business and is
in good standing under the laws of each jurisdiction in which the conduct of its
business or where the ownership or leasing of such properties or assets requires
such qualification, except for such jurisdictions in which the failure to be so
qualified or to have such licenses, permits, authorizations, consents or
approvals would not have and would not reasonably be expected to have a Material
Adverse Effect.
SECTION 5.2 AUTHORIZATION. Buyer has full authority and all approvals
required by applicable Laws to enter into this Agreement, to consummate the
transactions contemplated hereby, and to perform its obligations hereunder. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby by Buyer have been duly authorized by all
requisite action on the part of the Buyer. This Agreement has been duly executed
and delivered by Buyer and constitutes valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms.
SECTION 5.3 NO BREACH OR VIOLATION. Buyer's execution and delivery of this
Agreement, its compliance with and fulfillment of the terms of this Agreement,
and its consummation of the other transactions contemplated hereby, do not and
will not, with notice or passage of time or both, after giving effect to
consents described on Schedule 5.5 attached hereto which shall be obtained prior
to Closing: (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in the creation of
any Lien upon the capital stock or assets, properties or rights of Buyer
pursuant to, (iv) give any Person the right to accelerate any obligation under,
or (v) result in a violation of, (a) any Law, (b) their respective charter and
by-laws, (c) any material franchise, permit, license, authorization, concession,
order, judgment, writ, injunction or decree to which Buyer is subject, or by
which any of its assets, properties or rights are bound, or (d) any material
lease, mortgage, indenture, deed of trust, trust agreement, note agreement or
other agreement or instrument to which Buyer is subject, or by which any of its
assets, properties or rights are bound.
SECTION 5.4 LITIGATION. There is no suit, claim, action, proceeding or
investigation pending or, to the best knowledge of Buyer, threatened against or
affecting Buyer or the consummation by Buyer of the transactions contemplated
hereby, at law or in equity or before any Governmental Authority or
instrumentality or before any arbitrator of any kind. Buyer is not a party to or
subject to any judgment, writ, injunction, order or decree.
SECTION 5.5 CONSENTS AND APPROVALS. Except as set forth on Schedule 5.5
hereto, no material consent, approval, exemption, audit, waiver, order or
authorization of, or declaration, qualification, designation, notice, filing or
registration with, any governmental or regulatory authority (foreign or
domestic) or any other Person, is required on the part of Buyer in
29
connection with the execution, delivery and performance of this Agreement, or
the consummation of the transactions contemplated hereby.
SECTION 5.6 BROKERS' FEES. Except as listed on Schedule 5.6, neither Buyer
nor anyone acting on its behalf has retained any broker, finder or agent or
agreed to pay any brokerage fees, finder's fee or commission with respect to the
acquisition contemplated by this Agreement.
ARTICLE VI
COVENANTS
SECTION 6.1 ACCESS TO INFORMATION; FINANCIAL STATEMENTS.
Until the Closing or the earlier termination of this Agreement, Parent and
Selling Group shall cooperate with Buyer in preparing for the transition of
ownership of the Business and shall afford to Buyer, and to its officers,
employees and authorized representatives, full access, during normal business
hours, to all properties, books, records and corporate documents relating to the
Purchased Assets, Assumed Obligations and the Business, and to all employees of
the Business, as may be reasonably requested. Until the Closing or earlier
termination of this Agreement, Buyer shall hold all non-published and
confidential information obtained from Selling Group in 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 for any reason, all such information and copies thereof shall be
returned to Selling Group within thirty (30) Business Days or shall be
destroyed. Selling Group will cause Selling Group's Accountants to furnish the
Buyer and Buyer's Accountants all workpapers applicable to the Business relating
to any of the periods covered by the Annual Financials or Interim Financials.
SECTION 6.2 CONDUCT OF BUSINESS.
(a) From the date hereof through the Closing Date or earlier termination
of this Agreement, each Selling Group Member shall operate its business in the
ordinary course of business and shall not take any action inconsistent with this
Agreement or which may interfere with, delay or prevent the consummation of the
Closing.
(b) Without limiting the generality of the foregoing, each Selling
Member shall:
(i) Keep in full force and effect its corporate existence and all
material rights, franchises and goodwill relating to the Business;
(ii) Endeavor to retain its employees and preserve its present
relationships with customers, suppliers, contractors, distributors, and others
with whom it has business dealings;
(iii) Use its best efforts to maintain its Intellectual Property so
as not to affect adversely the validity or enforcement thereof;
(iv) Continue to maintain insurance reasonably comparable to that
in effect on the date of this Agreement;
30
(v) Promptly notify Buyer in writing if any of the representations
and warranties contained in Article IV ceases to be accurate and complete in any
material respect.
(c) Without limiting the generality of the foregoing, except as set forth
in Schedule 6.2, no Selling Group Member shall, except as specifically
contemplated by this Agreement or consented to in writing by Buyer, which
consent shall not be unreasonably withheld:
(i) Enter into, extend, materially modify, terminate or waive any
material right under any Assumed Agreement or Assumed Lease;
(ii) Sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Purchased 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 $10,000 in the aggregate;
(iii) Merge or consolidate with, purchase substantially all of the
assets of, or otherwise acquire any business or any proprietorship, firm,
association, limited liability company, corporation or other business
organization;
(iv) Increase or decrease the rate of compensation of, or pay any
unusual compensation to, any officer, employee or consultant of or to any
Selling Group Member (other than regularly scheduled increases in base salary or
compensation and annual bonuses consistent with prior practice);
(v) Enter into any collective bargaining agreement, or create or
modify any pension or profit-sharing plan, bonus, deferred compensation, death
benefit, or retirement plan, or any other Employee Benefit Plan (except as
required by Law), or increase the level of benefits under any such plan, or
increase or decrease any severance or termination pay benefit or any other
fringe benefit;
(vi) Incur any trade accounts payable other than in the ordinary
course of business or make any commitment to purchase quantities of any item of
inventory in excess of quantities normally purchased by Selling Group in the
ordinary course of business;
(vii) Adopt or implement any change in any of its accounting
principles or practices (including any material change in the determination of
its bad debt reserve), except as required by GAAP, provided that Buyer is
notified thereof;
(viii) Fail to maintain its assets in substantially their current
state of repair, excepting normal wear and tear;
(ix) Make any loans or advances to any Person except for expense
reimbursements incurred by agents or employees in the ordinary course of
business;
(x) Solicit or induce any patient of the Business who is not a
patient of the Mail Order Business on the date of this Agreement to transfer to
or become a patient of the Mail Order Business, or encourage, solicit or induce
any patient who is a joint patient of the Business and the Mail Order Business
to cease being a patient of the Business or to become an exclusive patient of
the Mail Order Business; however, that this does not prohibit marketing
activities of general application such as general mailings, which activities do
not utilize any information of
31
the Selling Group or of the APP Group relating to the retail pharmacies and
their patients, and do not target such patients.
(xi) Intentionally do or permit any other act which would cause any
representation or warranty of any Selling Group Member or Parent in this
Agreement to be or become untrue in any material respect;
(xii) Adopt or implement any change (other than routine and
insignificant changes) in any of its marketing, referral or business development
practices (including without limitation, any programs involving waiver of
co-pays or the offer of special rebates or incentives); or
(xiii) Enter into any agreement, or otherwise become obligated, to
do any action prohibited hereunder.
SECTION 6.3 NOTICES, CONSENTS AND POWERS OF ATTORNEY.
(a) Selling Group will give the notices to third parties, and up to and
after the Closing (to the extent not obtained at Closing) will use its
reasonable best efforts to obtain the third party consents and authorizations,
consents, and approvals of governments and governmental agencies described on
Schedule 4.5, including timely payment of any application or processing fee due
such third party in connection with the solicitation of its consent. It is
understood, however, that such consents shall continue to be a condition of
Buyer's obligation to close.
(b) To the extent Selling Group is unable prior to Closing to obtain a
consent described on Schedule 4.5 necessary to transfer any Purchased Asset
(each a "Non-Transferable Asset"), each Selling Group Member agrees to execute
and deliver to Buyer at such time as any such consent to the transfer of any
such Non-Transferable Asset is obtained by such Selling Group Member after the
Closing, an assignment and assumption agreement reasonably satisfactory to the
parties and any such other documents or instruments as may be reasonably
necessary or advisable to transfer to Buyer all of Selling Group's interest in
and title to such Non-Transferable Asset. It is understood, however, that such
consents shall continue to be a condition of Buyer's obligation to close.
(c) To the extent Buyer is unable to procure prior to or at the Closing
any of the requisite licenses, provider numbers or similar authorizations which
will permit Buyer to timely submit and collect claims for payment from products
shipped or dispensed or other services provided by Buyer from and after the
Closing, each Selling Group Member shall use its reasonable best efforts to
assist Buyer in procuring such licenses, provider numbers and other
authorizations and shall, at the Closing, grant to Buyer a power-of-attorney
("Power-of-Attorney"), in the form attached hereto at Exhibit 6.5(c), enabling
Buyer to utilize Selling Group's own licenses, provider numbers and other
authorization to the fullest extent permitted by applicable Law.
SECTION 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
32
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.
SECTION 6.5 COOPERATION; ACCESS TO RECORDS AFTER CLOSING; ACCOUNTS
RECEIVABLE.
(a) Buyer will cooperate with Selling Group to obtain any and all
approvals and consents necessary to effect the transactions contemplated by this
Agreement.
(b) Buyer recognizes that subsequent to the Closing, it may have
information and documents which relate to the Selling Group with respect to the
period prior to the Closing, including, without limitation, information
pertaining to Taxes, the Business, the Assumed Obligations, the Non-Assumed
Liabilities, the Purchased Assets, the Excluded Property and the Selling Group
Members' respective employees, and to which Parent may need access subsequent to
the Closing. Buyer shall provide Parent and its representatives access, during
normal business hours on reasonable notice, to all such information and
documents (but excluding attorney work product or other privileged
communication), and to such of Buyer's employees, which Parent reasonably
requests. The Parent and Selling Group Members recognize that subsequent to the
Closing they may have information and documents which relate to the Buyer with
respect to the period prior to the Closing, including, without limitation,
information pertaining to Taxes, the Business, the Assumed Obligations, the
Non-Assumed Liabilities, the Purchased Assets, the Excluded Property and the
Rehired Employees, and to which Buyer may need access subsequent to the Closing.
The Parent and Selling Group shall provide Buyer and its representatives access,
during normal business hours on reasonable notice, to all such information and
documents (but excluding attorney work product or other privileged
communication), and to Parent and Selling Group's employees, which Buyer
reasonably requests. Each party agrees that prior to the destruction or
disposition of any such documents or any books or records pertaining to or
containing such information at any time within four (4) years after the Closing,
such party shall provide not less than thirty (30) calendar days prior written
notice to the other party of any such proposed destruction or disposal,
provided, that in any matter involving Taxes, if such party receives a written
request from the other party not earlier than ninety (90) days before, but not
later than, the end of such four-year period (the "Disposal Date"), the
destruction or disposition of such Tax documents, books or records shall be
deferred for one (1) year after the Disposal Date. Thereafter, the destruction
or disposition of such Tax documents, books or records shall be deferred for
successive one (1) year periods, provided that such party receives annually a
similar written request from the other party not earlier than ninety (90) days
before, but not later than, the anniversary of the Disposal Date. In no event,
however, shall the destruction or disposition of such Tax documents, books or
records be deferred beyond the later of the expiration of all applicable
statutes of limitations (including extensions thereof) or the conclusion of all
litigation (including exhaustion of all appeals relating thereto) with respect
to such Taxes. If either party desires to obtain any such Tax documents, books
or records as to which the other party has advised it intends to destroy or
dispose, such party may do so by notifying the other party in writing at any
time prior to the scheduled date for such destruction or disposal. Such notice
must specify the documents, books or records which such party wishes to obtain.
The other party shall then promptly arrange for the delivery of such documents
and all out-of-pocket costs associated with the delivery thereof shall be paid
by requesting party.
33
(c) With respect to audits conducted by federal, state and local taxing
authorities, the Buyer agrees to cooperate with Parent to the extent it has any
information required by Parent to respond to information document requests
presented by such taxing authorities as promptly as practicable. Such
information document requests may include, but shall not be limited to, all tax
matters related to the Selling Group Members and their respective Affiliates for
all tax years currently open under the relevant jurisdictions' statute of
limitations. All out-of-pocket costs associated with the delivery of the
requested documents shall be paid by Parent.
SECTION 6.6 CASUALTY LOSSES. In the event that between the date hereof and
the Closing Date there shall have been suffered any casualty loss relating to
the Purchased Assets, Selling Group will promptly notify Buyer of such event
and, if the Closing occurs, shall assign to Buyer all of the right, title and
interest of Selling Group in and to insurance proceeds payable as a result of
the occurrence of the event resulting in such loss or damage. This shall not
affect, however, Buyer's right to elect not to close as a result of any such
casualty loss.
SECTION 6.7 ENVIRONMENTAL STUDIES. Prior to the Closing, Buyer shall have
the right, at its expense, to undertake such environmental studies of each of
the premises at which any of the Selling Group Members perform the Business (the
"Premises"), including reviewing records, inspecting the properties and testing
the air, subsoil, groundwater and building materials at the Premises, as it
shall deem necessary to determine whether the Premises are in compliance with
all applicable Environmental Laws and whether any Hazardous Substances are
present at the Premises, but shall indemnify and hold each Selling Group Member
harmless from any loss, cost, or damage proximately caused by such inspection.
Such inspection shall be scheduled and performed so as not to unreasonably
interfere with the business of the Selling Group.
SECTION 6.8 WEBSITE CHANGES. Promptly after closing, Parent and Selling
Group will remove from their APP Specialty Pharmacy web site (xxxxxxxxxxx.xxx)
the section labeled PHARMACY NETWORK, as well as any and all references to
"pharmacy network" and "retail locations."
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Buyer's obligation to consummate the transactions contemplated by this
Agreement is subject to the fulfillment or satisfaction (or waiver in whole by
Buyer in writing) on or before the Closing Date (or such sooner date as may be
specified) of each of the following conditions:
SECTION 7.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of each Selling Group Member and Parent contained
herein and in the certificates and other documents delivered to Buyer pursuant
hereto shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if made on and as of the date hereof (except
those representations and warranties qualified by materiality, which shall be
true and correct in all respects).
SECTION 7.2 NO ADVERSE CHANGE IN BUSINESS OR PROPERTIES. No Material
Adverse Change shall have occurred with respect to the Business since August 31,
2000.
SECTION 7.3 COMPLIANCE WITH AGREEMENT. Each Selling Group Member and
Parent shall have performed and complied in all material respects with their
respective agreements,
34
covenants and obligations under this Agreement required to be performed or
complied with on or prior to the Closing Date.
SECTION 7.4 CERTIFICATE OF SELLING GROUP MEMBER. Each Selling Group Member
shall have delivered to Buyer, a certificate of its officer, dated the Closing
Date, certifying to such officer's capacity and in such form as Buyer may
reasonably request, as to the fulfillment of the conditions set forth in this
Agreement.
SECTION 7.5 OPINION OF COUNSEL. Buyer shall have received from Xxxxxx
X. Xxxxxx, Esq., counsel to the Selling Group and Parent, an opinion of such
counsel, dated as of the Closing Date, in the form attached hereto as
Schedule 7.5.
SECTION 7.6 ABSENCE OF LITIGATION. No suit, action, investigation, inquiry
or other proceeding shall be pending before any court or Governmental Authority
to restrain or prohibit, or to obtain damages or other relief in connection
with, or to question the validity or legality of, this Agreement or the
consummation of the transactions contemplated hereby, or to restrict or impair
the ability of Buyer to operate the Business.
SECTION 7.7 CONSENTS. The consummation of the transactions contemplated by
this Agreement shall not be prohibited by any Law or Governmental Authority, and
shall not subject Buyer to any penalty. All consents, approvals and waivers of
Governmental Authorities that are set forth on Schedule 4.5 hereto shall have
been obtained. All consents, approvals and waivers of third parties that are set
forth on Section 4.5 hereto (including, without limitation, consents to
assignment from McKesson and all landlords who are parties to the Assumed
Leases, which shall not impose any change in rental required thereunder or any
other more onerous terms than is currently the case in the respective leases)
shall have been obtained.
SECTION 7.8 CERTIFIED CHARTER; GOOD STANDING. Each Selling Group Member
shall have delivered to Buyer: (i) a copy of the articles of incorporation of
each Selling Group Member which have been certified by the appropriate Secretary
of State in their respective jurisdictions of incorporation, and (ii) corporate
good standing certificates from each of their respective jurisdictions of
incorporation. Such certificates shall be dated a date not more than forty-five
(45) days prior to the Closing Date.
SECTION 7.9 PROOF OF ACTION. Buyer shall have received from each Selling
Group Member, copies, certified by a duly authorized officer thereof to be true
and complete as of the Closing Date, of the records which authorize the
execution, delivery and performance of this Agreement.
SECTION 7.10 LEASES. Lessors under the Assumed Leases shall have entered
into lease assignment agreements and executed estoppel certificates upon terms
and conditions reasonably satisfactory to Buyer.
SECTION 7.11 EMPLOYEES. Buyer shall have hired or entered into employment
agreements with those employees of the Business who are listed on Schedule 7.11
hereto. In connection with this condition, it is understood that Buyer will
offer such employees employment with base levels of compensation not less than
those currently enjoyed by such employees, and shall offer such employees the
normal benefit package offered by Buyer to similarly situated employees.
35
SECTION 7.12 CASUALTY. Prior to and through the Closing Date, the Business
and the Purchased Assets, or any portion thereof, shall not have been adversely
affected in any material way as the result of any fire, accident, flood, or
other casualty or act of God or the public enemy.
SECTION 7.13 TRANSITION SERVICES. At the Closing, Purchaser and Parent
shall have entered into the Transition Services Agreement substantially in the
form of Exhibit 7.13, attached hereto.
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLING GROUP'S OBLIGATIONS
Selling Group's obligation to consummate the transactions contemplated by
this Agreement are subject to the fulfillment or satisfaction (or waiver in
whole by Selling Group in writing) on or before the Closing Date (or such sooner
date as may be specified) of each of the following conditions:
SECTION 8.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Buyer contained herein and in the certificates
and other documents delivered to Selling Group pursuant hereto shall be true and
correct in all material respects as of the Closing Date (except those
representations and warranties qualified by materiality, which shall be true and
correct in all respects).
SECTION 8.2 COMPLIANCE WITH AGREEMENT. Buyer shall have performed and
complied in all material respects with its obligations under this Agreement
required to be performed or complied with on or prior to the Closing Date.
SECTION 8.3 CERTIFICATE OF BUYER. Buyer shall have delivered to Selling
Group a certificate of the officer, dated the Closing Date, certifying such
officer's capacity and in such form as Selling Group may reasonably request, as
to the fulfillment of the conditions of this Agreement.
SECTION 8.4 OPINION OF COUNSEL. Selling Group shall have received from
counsel to Buyer, an opinion of such counsel, dated as of the Closing Date, in
the form set forth on Schedule 8.4.
SECTION 8.5 ABSENCE OF LITIGATION. No suit, action, investigation, inquiry
or other proceeding shall be pending before any court or Governmental Authority
to restrain or prohibit, or to obtain damages or other relief in connection
with, or question the validity or legality of, this Agreement or the
consummation of the transactions contemplated hereby.
SECTION 8.6 PROCEEDINGS AND DOCUMENTS. All requisite action with respect
to the transactions contemplated hereby and all documents incident thereto shall
be satisfactory in form and substance to Selling Group and its counsel.
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ARTICLE IX
INDEMNIFICATION
SECTION 9.1 BY EACH SELLING GROUP MEMBER AND THE PARENT. From and after
the Closing Date, and regardless of any investigation made at any time by or on
behalf of Buyer, but subject to the limitations of this Article IX, each Selling
Group Member and the Parent, on a joint and several basis, agree to reimburse,
indemnify, save and hold harmless Buyer and its successors and assigns, and any
director, shareholder, employee or officer thereof (an "Indemnified Buyer Party"
and collectively the "Indemnified Buyer Parties") against and in respect of
costs of investigations and any and all damages, losses, claims, deficiencies,
liabilities, suits, demands, judgments, diminution in value, costs and expenses
(including costs of investigations and reasonable attorneys' fees) (each a
"Loss" and collectively "Losses") incurred or suffered by any Indemnified Buyer
Party arising from or relating to:
(a) Any and all Non-Assumed Liabilities;
(b) Any and all litigation, investigations and reviews described in
Schedules to this Agreement and any and all other actions, suits, claims, or
legal, administrative, arbitration, governmental or other proceedings or
investigations (including any audits and recoupments) against any Indemnified
Buyer Party that arise out of acts, omissions or events occurring prior to the
Closing Date and that relate to Parent, a Selling Group Member, or any other
member of the APP Group, in their capacity as such or any of their respective
predecessors or any shareholder, manager, member, officer, employee, agent,
distributor, supplier, representative or subcontractor of Parent, any Selling
Group Member, or any other member of the APP Group;
(c) Any misrepresentation, breach or inaccuracy in or omission from any
representation or warranty made by a Selling Group Member or Parent under this
Agreement or any certificate, schedule, statement, document or instrument
furnished to Buyer pursuant hereto;
(d) Any non-corrected breach or non-fulfillment of any agreement or
covenant on the part of a Selling Group Member or Parent under this Agreement to
be performed on or following the Closing Date;
(e) Without limiting any of the foregoing indemnification provisions, the
failure of a Selling Group Member to comply with the bulk sales law and any
other similar laws in any applicable jurisdiction in respect of the transactions
contemplated by this Agreement, and any liability under the WARN Act.
SECTION 9.2 NOTICE OF CLAIMS; DEFENSE OF THIRD PARTY CLAIMS. A party
claiming indemnification under this Article IX (the "Asserting Party") must
notify (in writing and in reasonable detail) the party from which
indemnification is sought (the "Defending Party") of the nature and basis of
such claim for indemnification (a "Claim Notice"). An Asserting Party may make
more than one claim for indemnification. If no written objection to such claim
is made by the Defending Party within fifteen (15) days after the receipt of the
Claim Notice (a "Counter Notice"), the amount of the claim identified in the
Claim Notice and the liability of the Defending Party therefore, shall be deemed
admitted by the Defending Party who shall thereby waive all rights to object to
such claim identified in the Claim Notice in any forum whatsoever
37
(an "Accepted Claim"). A Counter Notice must state with reasonable specificity
the basis for the objection. In the event of a Counter Notice, the claim shall
only become a "Resolved Claim" in accordance with Section 9.6. If such claim
relates to a claim, suit, litigation or other action by a third party against
the Asserting Party or any fixed or contingent liability to a third party (a
"Third Party Claim"), the Defending Party may elect to assume and control the
defense of the Third Party Claim at its own expense with counsel selected by the
Defending Party from and after such time as such Third Party Claim becomes an
Accepted Claim and the Defending Party unconditionally agrees in writing to
accept, as against the Asserting Party, all liabilities on account of such Third
Party Claim. Assumption of such liability, as against the Asserting Party, shall
not be deemed an admission of liability as against any such third party.
Notwithstanding the foregoing, the Defending Party may not assume or control the
defense if the named parties to the Third Party Claim (including any impleaded
parties) include both the Defending Party and the Asserting Party and
representation of both parties by the same counsel (in such counsel's reasonable
determination) would be inappropriate due to actual or potential differing
interests between them, in which case the Asserting Party shall have the right
to defend the Third Party Claim and to employ counsel reasonably approved by the
Defending Party, and to the extent the matter is determined to be subject to
indemnification hereunder, the Defending Party shall reimburse the Asserting
Party for the reasonable costs of its counsel. If the Defending Party assumes
liability for the Third Party Claim as against the Asserting Party and assumes
the defense and control of the Third Party Claim pursuant to this Section 9.2,
the Defending Party shall not be liable for any fees and expenses of counsel for
the Asserting Party incurred thereafter in connection with the Third Party Claim
(except in the case of actual or potential differing interests, as provided in
the preceding sentence), but shall not agree to any settlement of such Third
Party Claim which does not include an unconditional release of the Asserting
Party by the third party claimant on account thereof. If the Defending Party
does not assume liability for and the defense of the Third Party Claim pursuant
to this Section 9.2, the Asserting Party shall have the right to assume the
defense of and, if such Asserting Party shall have notified the Defending Party
of the Asserting Party's intention to negotiate a settlement of the Third Party
Claim, which notice shall include the material terms of any proposed settlement
in reasonable detail, to settle the Third Party Claim (at the Defending Party's
expense to the extent the matter is determined to be subject to indemnification
hereunder) on terms not materially inconsistent with those set forth in such
notice, unless the Defending Party shall have notified the Asserting Party in
writing of the Defending Party's election to assume liability for and the
defense of the Third Party Claim pursuant to this Section 9.2 within ten (10)
days after receipt of such notice of intention to settle, and the Defending
Party promptly thereafter shall have taken appropriate action to implement such
defense. The Asserting Party shall not be entitled to settle any such Third
Party Claim pursuant to the preceding sentence unless such settlement includes
an unconditional release by the third party claimant on account thereof. The
Asserting Party and the Defending Party shall use all reasonable efforts to
cooperate fully with respect to the defense of any Third Party Claim covered by
this Article IX.
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SECTION 9.3 LIMITATIONS. Provided that there has been no intentional
misrepresentation of a material fact and no intentional failure to disclose a
material fact, the obligations of each Selling Group Member and the Parent to
indemnify the Indemnified Buyer Parties pursuant to this Article IX shall be
subject to the following limitations:
(a) No indemnification shall be required to be made by any Selling Group
Member or the Parent until the aggregate amount of the Indemnified Buyer
Parties' Losses exceeds $85,000 (the "Deductible"), whereupon indemnification
shall be required to be made by the Selling Group and the Parent to the full
extent of such Losses including the Deductible; provided, however, that the
Deductible shall not be applicable to Indemnified Buying Parties' Losses arising
from or relating to:
(i) The indemnification obligations under Section 9.1(a), (b),
(d), or (e) hereof ("Excluded Claims");
(ii) Breaches of the representations (the "Excluded
Representations") set forth in Sections 4.3 (Authorization; Enforceability), 4.4
(No Breach or Violation), 4.5 (Consents and Approvals), 4.13 (Tax Matters), the
second sentence of Section 4.15 (a) (Title to Purchased Assets) or Section 4.24
(Brokers' Fees); or
(iii) Fraud ("Fraud Claims").
(b) All representations and warranties contained in this Agreement shall
survive the Closing until the second (2nd) anniversary thereof; provided,
however, that the following claims shall survive for three months beyond the
applicable statute of limitations period (the applicable period of survival
being referred to herein as the "Survival Period"):
(i) Excluded Claims;
(ii) Excluded Representations; or
(iii) Fraud Claims.
To the extent a claim is made in respect of a representation or warranty
within the applicable Survival Period, such representation or warranty shall
survive after such Survival Period for purposes of such claim until such claim
is finally determined or settled.
(c) The liability of each Selling Group Member and the Parent for their
indemnification obligations under this Article IX shall be limited in the
aggregate to an amount equal to the Purchase Price.
SECTION 9.4 BUYER. From and after the Closing Date, but subject to the
limitations of this Article IX, Buyer agrees to reimburse, indemnify and hold
harmless each Selling Group Member and their respective successors and assigns,
and any director, shareholder, employee or officer thereof (an "Indemnified
Seller Party" and collectively the "Indemnified Seller Parties") against and in
respect of all Losses incurred or suffered by any Indemnified Seller Party
arising from or relating to:
(a) Any and all Assumed Obligations;
(b) Any misrepresentation, breach or inaccuracy in or omission from any
representation or warranty made by Buyer under this Agreement or any
certificate, schedule, statement, document or instrument furnished to a Selling
Group Member pursuant hereto; or
39
(c) Any breach or non-fulfillment of any agreement or covenant on the part
of Buyer under this Agreement to be performed on or following the Closing Date.
SECTION 9.5 LIMITATIONS - BUYER. The obligations of Buyer to indemnify the
Indemnified Seller Parties pursuant to this Article IX shall be subject to the
following limitations:
(a) Indemnification shall be required to be made by Buyer to the full
extent of such Losses.
(b) All representations and warranties contained in this Agreement shall
survive the Closing until the second (2nd) anniversary thereof; provided,
however, that the following claims shall apply for three months beyond the
applicable statute of limitations (the applicable period of survival being
referred to herein as the "Survival Period"):
(i) Assumed Liability Claims;
(ii) Fraud Claims.
To the extent a claim is made in respect of a representation or warranty
within the applicable Survival Period, such representation or warranty shall
survive after such Survival Period for purposes of such claim until such claim
is finally determined or settled.
(c) The liability of Buyer for its respective indemnification obligations
under this Article IX shall be limited in the aggregate to an amount equal to
the Purchase Price; provided, however, that there shall be no limit applicable
to Losses arising from or relating to Assumed Liability Claims and Fraud Claims.
SECTION 9.6 DISPUTE RESOLUTION.
(a) If the Defending Party timely delivers a Counter Notice to a Claim
Notice provided under Section 9.2, the dispute as to the underlying claim or
claims (each a "Dispute") shall be settled by means of the procedures set forth
in this Section 9.6. Promptly upon delivery of the Counter Notice, one senior
officer of the Asserting Party and a senior officer of the Defending Party shall
meet ("Initial Meeting") and attempt in good faith to resolve the Dispute on a
mutually satisfactory basis. If the Disputing Parties (as hereinafter defined)
are unable to resolve the Dispute by a non-binding procedure as provided herein
within thirty (30) days after delivery of the Counter Notice, then the Dispute
shall be settled by arbitration in Minneapolis, Minnesota, and, except as
otherwise expressly provided herein, in accordance with the commercial
arbitration rules of the American Arbitration Association then in effect ("AAA
Rules"). However, in all events, the arbitration provisions of this Section 9.6
shall govern over any conflicting rules which may now or hereafter be contained
in the AAA Rules. Any judgment upon the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction over the subject matter thereof. The
arbitrator(s) shall have the authority to grant any equitable and legal remedies
that could be available in any judicial proceeding instituted to resolve a
Dispute. For purposes of this Section 9.6, the term "Disputing Parties" shall
mean, with respect to any particular Dispute, those parties hereto (or their
successors or assigns) which are involved in the Dispute.
(b) Following the thirty (30) day period referenced above, each Disputing
Party may by written notice to the other Disputing Parties request that the
Dispute be referred to arbitration before a single arbitrator who is reasonably
knowledgeable and familiar with the retail pharmacy
40
industry (or such matters then in dispute, i.e. taxes) and mutually agreed to by
the Disputing Parties, provided, that if such parties are unable to agree on an
arbitrator within twenty (20) days after receipt of the written notice, the
arbitration shall be before three (3) arbitrators, each being reasonably
knowledgeable and familiar with the retail pharmacy industry (or such matters
then in dispute, i.e. taxes), 1 (one) of whom shall be appointed by Buyer and
one of whom shall be appointed by the Parent. Each Disputing Party shall provide
notice to the other Disputing Parties of the arbitrator so appointed by it or
them within thirty (30) days of the written notice requesting arbitration, and
the third arbitrator shall be appointed by the arbitrators so appointed and
shall be the chairman.
(c) The selected arbitrator(s) shall be compensated at a reasonable
hourly or daily consulting rate to be determined by Buyer and Parent. In the
event the Disputing Parties are unable to agree upon a rate of compensation,
such decision shall be made by the American Arbitration Association.
(d) Buyer, on the one hand, and Parent, on the other hand, shall each
initially pay fifty percent (50%) of the compensation to be paid to the
arbitrator(s) in any such arbitration and fifty percent (50%) of the costs of
transcripts and other normal and regular expenses of the arbitration proceedings
(but not including any fees and expenses of attorneys representing any of the
Disputing Parties). However, the decision of the arbitrator(s) may include an
award as to the reimbursement of such costs of a party to arbitration by the
other.
(e) If the amount in controversy is less than Five Hundred Thousand
Dollars ($500,000), the parties agree that discovery shall be limited and shall
be handled expeditiously. Discovery procedures available in litigation before a
court shall not apply in an arbitration if the amount in controversy is less
than Five Hundred Thousand Dollars ($500,000). However, each party shall produce
relevant and non-privileged documents or copies thereof requested by the other
parties within the time limit set and to the extent required by order of the
arbitrator. If the amount in controversy is in excess of Five Hundred Thousand
Dollars ($500,000), the parties shall be entitled to engage in reasonable
discovery, including requests for the production of relevant documents.
Depositions may be ordered by the arbitrator(s) upon a showing of need. All
disputes regarding discovery shall be promptly resolved by the arbitrator(s)
notwithstanding the amount in controversy.
(f) If the amount in controversy is less than Five Hundred Thousand
Dollars ($500,000), strict rules of evidence shall not apply in an arbitration
conducted pursuant to this Agreement. The parties may offer such evidence as
they desire and the arbitrator shall accept such evidence, as the arbitrator
deems relevant to the issues and accord it such weight as the arbitrator(s)
deems appropriate. If the amount in controversy exceeds Five Hundred Thousand
Dollars ($500,000), the arbitrator(s) shall apply the Federal Rules of Evidence.
The arbitrator or arbitration panel shall be the exclusive judge or judges of
relevancy and materiality notwithstanding the amount in controversy. It is the
intent of the parties in all arbitrations that the testimony of witnesses shall
be subject to cross-examination. Notwithstanding the above, it is agreed that
the direct testimony of a witness may be submitted by sworn affidavit, provided
that such affiant is subject to cross-examination.
41
(g) Upon the conclusion of any arbitration proceedings hereunder, the
arbitrators shall render findings of fact and conclusions of law in a written
opinion setting forth the basis thereof and shall deliver such opinion to each
of the Disputing Parties along with a signed copy of the award. Any such opinion
shall resolve the applicable Dispute, and such resolution shall be final and
binding upon the Disputing Parties (a "Resolved Claim").
(h) The arbitrator(s) shall not have the power to alter, amend or
otherwise affect the terms of this 9.6 or the other provisions of this
Agreement.
(i) Except for any party's right to seek injunctive relief or the
enforcement of any decision made by the arbitrators, arbitration shall be the
sole and exclusive forum for adjudication of any Dispute arising out of this
Agreement.
(j) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT TO A TRIAL BY JURY.
ARTICLE X
TERMINATION
SECTION 10.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned, by written notice given to
the other party hereto, at any time prior to the Closing:
(a) By mutual written consent of Buyer and Selling Group;
(b) By either Buyer or Selling Group, if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise permanently prohibiting the sale of the
Purchased Assets to Buyer (and in which case Buyer and Selling Group shall have
used all reasonable efforts to have such order, decree, ruling or other action
lifted or reversed) and such order, decree, ruling or other action shall have
become final and non-appealable;
(c) By Buyer, if any Selling Group Member shall have breached any of its
representations herein and such breach or breaches, in the aggregate, would
reasonably be expected to have a Material Adverse Effect or if any Selling Group
Member shall have materially breached any of its covenants hereunder (and any
such breach shall not have been cured to the reasonable satisfaction of Buyer
within 10 days after Buyer's notice to Selling Group of such breach);
(d) By Selling Group, if any Buyer Member shall have materially breached
any of its representations herein and such breach or breaches, in the aggregate,
would reasonably be expected to have a Material Adverse Effect or if any Buyer
Member shall have materially breached any of its covenants hereunder (and any
such breach shall not have been cured to the reasonable satisfaction of Selling
Group within ten (10) days after Selling Group's notice to Buyer of such
breach).
(e) By either party, upon written notice, if the Agreement has not
closed by February 15, 2001.
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SECTION 10.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 10.1, written notice thereof shall be given
by the terminating party to the other party specifying the provision hereof
pursuant to which such termination is being made and the Agreement shall become
null and void and of no further force or effect, and no party hereto (or any of
its Affiliates, directors, officers, managers, agents or representatives) shall
have any liability or obligation hereunder (except for any liability of any
party then in breach).
ARTICLE XI
RESTRICTIVE COVENANTS
SECTION 11.1 DEFINITIONS. As used in this Article XI, the following terms
shall have the meaning set forth below and where said meaning is intended, said
terms shall be capitalized:
(a) The term "Covenantors" (individually a "Covenantor") shall mean
and include each of the following:
(i) The APP Group and each member thereof;
(ii) Xxxxx X'Xxxxxxx ("X'Xxxxxxx"), his parents, siblings, and
spouse, any trust or other entity for the benefit of any of the foregoing
individuals, any trust or other entity established by X'Xxxxxxx for the benefit
of any of his lineal descendants and any trust, corporation, LLC, or other
entity controlled, directly or indirectly, by any of the foregoing individuals,
whether alone or in combination;
(iii) Xxxxxx Xxxx ("Xxxx"), his parents, siblings, and spouse,
any trust or other entity for the benefit of any of the foregoing individuals,
any trust or other entity established by Xxxx for the benefit of any of his
lineal descendants and any trust, corporation, LLC, or other entity controlled,
directly or indirectly, by any of the foregoing individuals, whether alone or in
combination;
(iv) Any trust, corporation, LLC, or other entity controlled,
directly or indirectly, by any of the persons or entities referred to in (ii) or
(iii), whether alone or in combination, specifically including, without
limitation, [Xxxxxxx Capital Management].
For purposes of this section, "control" shall have the meaning set forth in the
definition of "APP Group."
(b) "Term" shall mean period of time commencing on the Closing Date
and ending five (5) years thereafter.
SECTION 11.2 COVENANTS. In order to induce Buyer to enter into this
Agreement, and to ensure that Buyer obtains and maintains the value of the
Business and goodwill being acquired by Buyer hereunder, each Covenantor shall
observe and be bound by each of the following covenants for the benefit of
Buyer:
(a) Noncompete. During the Term, except as permitted below, each
Covenantor shall not, anywhere within the area consisting of the United States,
directly or
43
indirectly, own, manage, control, operate, franchise, provide assistance to, be
employed by or an agent for, or participate in, any business which is engaged in
the business of operating a Retail Pharmacy or Retail Pharmacies, as such
business may evolve during the Term (the "Retail Pharmacy Business").
Notwithstanding the foregoing, it is understood that a Covenantor shall be free
to provide goods or services to a Retail Pharmacy Business (but not as an
employee) where such services or products are (i) provided on a fair market
value basis, on the same price, terms, and conditions as they are provided to
businesses not engaged in the Retail Pharmacy Business, allowing, however, for
normal negotiations regarding pricing, and (ii) are offered and sold to the
general pharmacy or medical market, specifically including businesses not in the
Retail Pharmacy Business, and, in any event, are not specifically targeted or
designed for the Retail Pharmacy Business.
(b) Confidentiality. For purposes hereof, "Confidential Information"
means any information which relates to the Purchased Assets or Business acquired
by Buyer pursuant to this Agreement, that provides to Buyer or any subsidiary or
affiliate of Buyer independent economic value from being not generally known or
readily ascertainable by other persons who could obtain economic value from its
disclosure or use, and includes, but is not limited to, trade secrets, methods
of research and research findings, methods of doing business, methods of
calculating profits, patient lists, supplier lists and payor lists, and
financial information relating to each, and information relating to such matters
as cost and pricing, management systems and sales or marketing techniques. An
item of Confidential Information shall continue to be treated as Confidential
Information until such item ceases (other than due to any of Covenantors) to be
secret or confidential.
During and after the Term, each of the Covenantors shall not
directly or indirectly use for its own purposes or otherwise, or disclose, any
Confidential Information for the benefit of anyone other than Buyer. Parent, the
Selling Group and X'Xxxxxxx and Xxxx recognize that Confidential Information
constitutes a valuable asset acquired by Buyer and hereby agree to act in such a
manner as to prevent its disclosure and use by any person unless such use is for
the benefit of Buyer. The Covenantors' obligations under this Section are
unconditional and shall not be excused by any conduct on the part of Buyer,
except prior voluntary disclosure by Buyer of the information.
(c) Nonsolicitation. During the Term, each of the Covenantors shall
not, directly or indirectly, (i) recruit, solicit or otherwise induce any person
employed by Buyer or any subsidiary or affiliate of Buyer to become an employee
of any of the Covenantors, or to otherwise discontinue such person's employment
relationship with Buyer or any subsidiary or affiliate of Buyer, or otherwise
interfere with any such person's employment relationship with Buyer or any
subsidiary or affiliate of Buyer; or (ii) take any action that is designed or
intended to have the effect of discouraging any patient or payor, or any
supplier or provider of services or other person with whom Buyer or any
subsidiary or affiliate of Buyer does business, from maintaining its business
relationship with Buyer or any such subsidiary or affiliate.
(d) Assignment of Rights. At the Closing, the Selling Group shall
assign to Buyer all rights and benefits that the Seller Group presently holds
under protective covenants which protect the Business, the Purchased Assets, or
any portion thereof, including without
44
limitation, noncompete covenants, confidentiality covenants, and nonsolicitation
covenants. All such rights are listed on Exhibit 11.2 attached hereto. Except as
set forth on Exhibit 11.2, all of such rights are assignable to Buyer without
consent.
(e) Enforcement; General. Each of Parent, the Selling Group,
X'Xxxxxxx and Xxxx, all of whom are executing this Agreement and agreeing to be
bound by the provisions of this Article XI, recognize that the provisions of
this Article XI apply to other Covenantors in addition to Parent, the Selling
Group and X'Xxxxxxx and Xxxx. Each of Parent, the Selling Group and X'Xxxxxxx
and Xxxx understand and agree that it is their responsibility to, and they agree
to, cause each other Covenantor to comply with the provisions of this Article
XI, and further recognize and acknowledge that each of them, jointly and
severally, may be liable for any breaches by any Covenantors.
In the event of any actual or threatened breach of the covenants set
forth in this Section 11.2 by the Covenantors, Buyer shall be entitled to all
rights and remedies available at law or in equity, including without limitation
the right to obtain damages for such breach or non-adherence and the right to
enjoin the Covenantors and any person or entity in or threatening breach or
non-adherence from commencing or continuing, and to remedy, the activities which
constitute such breach or non-adherence. Parent, the Selling Group, and
X'Xxxxxxx and Xxxx agree that Buyer may recover reasonable costs, including
reasonable attorneys' fees incurred in bringing an action against any Covenantor
to enforce the terms of this Agreement.
Parent, the Selling Group and X'Xxxxxxx and Xxxx agree that the
scope of the restrictions set forth in this Article XI are reasonable to protect
the value of the assets, goodwill and business being acquired by Buyer. If the
scope of the restrictions contained in this Article XI is determined by a court
of competent jurisdiction to be excessive in its duration or in the area or
extent to which it applies, then such restrictions shall be enforced to the
maximum extent permitted by law, and Parent, the Selling Group and X'Xxxxxxx and
Xxxx hereby agree that such scope may be judicially modified accordingly and
then enforced as modified in any proceeding brought to enforce such restriction.
SECTION 11.3 SPECIFIC UNDERSTANDINGS. Notwithstanding the foregoing
provisions, the following understandings and agreements apply to the covenants
set forth in this Article XI:
(a) Certain Purchases. The foregoing provisions shall not prevent
the APP Group, any members thereof or any of their assets from being acquired by
a purchaser (such purchaser, together with its subsidiaries and affiliates is
referred to in this section as the "Purchaser Group") which Purchaser Group is
engaged in the Retail Pharmacy Business, provided that all of the following
requirements are satisfied:
(i) Buyer is advised of the prospective purchase not less than
15 days in advance of the earlier of the closing of said purchase or the date on
which said purchase is announced;
(ii) Following the acquisition, each Covenantor, including the
members of the APP Group, must continue to honor the covenants set forth above;
45
(iii) No Covenantor, and no individuals who now or hereafter
are employed by any member of the APP Group, can participate in or provide any
assistance to the Purchaser Group in the conduct of the Purchaser Group's Retail
Pharmacy Business. No information of any member of the APP Group, including but
not limited to Confidential Information, can be utilized by the Purchaser Group
in the conduct of its Retail Pharmacy Business;
(iv) The Purchaser Group must assume the obligations of the
Parent under Article IX of this Agreement to a maximum aggregate amount of
$2,000,000;
(v) The Purchaser Group must agree to abstain from using the
tradenames or service marks of the APP Group in connection with its Retail
Pharmacy Business; and
(vi) For a period of two (2) years from the Closing Date, the
Purchaser Group shall not establish any new pharmacy which is both (i) a Retail
Pharmacy, and (ii) a Specialty Pharmacy (a "Retail Specialty Pharmacy") and
whose location is within a fifty (50) mile radius of any of the pharmacies
purchased by Buyer under this Agreement (a "Purchased Pharmacy"), and for a
period of five (5) years from the Closing Date, the Purchaser Group shall not
establish any new Retail Specialty Pharmacy whose location is within a ten (10)
mile radius of any Purchased Pharmacy.
The Purchaser Group must, prior to the closing of its acquisition, agree
in writing to honor the provisions of this Section 11.3, and shall further agree
that it will honor, without exception, the covenants set forth in Sections
11.2(b), (c), (d) and (e) above, as if the Purchaser Group, and each of the
Purchaser Group, were a Covenantor thereunder.
These provisions apply to each purchaser who acquires the APP Group, any
members thereof or any of their assets, whether directly or indirectly, and
whether an initial purchaser or any subsequent purchaser.
(b) Special Provisions. The members of the APP Group shall continue
to be free to engage in the Mail Order Business, provided that they do not
engage in any way in the operation of a Retail Pharmacy or Retail Pharmacies;
provided, however, that if the APP Group is engaging or seeks to provide
products through its Mail Order Business into a state in which Medicaid
regulations require that a Retail Pharmacy must be operated within the state in
order to provide such products through the Mail Order Business, then one (and
only one) such Retail Pharmacy may be operated within the state under the
following conditions:
(i) The Retail Pharmacy must be a general Retail Pharmacy
and not a Specialty Pharmacy.
(ii) The Retail Pharmacy must be located not less than fifty
(50) miles from any Retail Pharmacy which is at that time operated by Buyer or
which Buyer is then planning to open, as demonstrated by reasonable evidence
provided by Buyer.
46
(iii) As a condition to operating such a Retail
Pharmacy, the APP Group must notify Buyer in advance of its intention to operate
such a Retail Pharmacy, and shall provide to Buyer the legal authority which
they believe justifies the conclusion that a Retail Pharmacy must be operated
within the state in order for the Mail Order Business to comply with Medicaid
regulations. If Buyer disputes the APP Group's conclusion, the parties shall
first negotiate for a period of twenty days to resolve their dispute.
Thereafter, if not resolved, the dispute will be subject to the dispute
resolution provisions hereinafter set forth.
(iv) It is specifically understood that if the
state's Medicaid regulations allow the APP Group to maintain any pharmacy
operation or license other than that of a Retail Pharmacy in order to comply
with such regulations, the APP Group may not maintain a Retail Pharmacy license
or operation and may only maintain such other form of pharmacy license or
operation.
(c) Certain Ownership. Notwithstanding the provisions of the
Noncompete covenant, Section 11.2(a) Xxxxx X'Xxxxxxx and/or Xxxxxx Xxxx may have
an ownership interest as an investor in: (i) a publicly traded company which is
engaged in the Retail Pharmacy Business, provided that the aggregate amount of
such investment shall not exceed 2% of the issued and outstanding stock of the
Company; or (ii) a company which is not publicly traded which is engaged in the
Retail Pharmacy Business, provided that, (A) the Retail Pharmacy Business is not
the company's primary business (for these purposes the Retail Pharmacy Business
will be deemed not primary if its revenues are less than 20% of the company's
revenues and the profits generated by the Retail Pharmacy Business are less than
20% of the company's profits); and (B) each of Xxxxx X'Xxxxxxx and Xxxxxx Xxxx
are passive investors and are not actively engaged in the management or
operation of the company or serving on the company's board; provided, however,
that each may serve on the board of a company described in part (ii) hereof,
provided that they do not provide any other services to the Retail Pharmacy
Business of such company. It is specifically understood that this exception
provides relief only from the Noncompete covenant, and only to the extent
provided herein, and that the other Covenants set forth above shall continue to
apply in full even with respect to companies in which Messrs. X'Xxxxxxx and Xxxx
are permitted to make investments.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 ASSIGNMENT; SUCCESSORS AND ASSIGNS. Neither this Agreement,
nor any right hereunder, may be assigned by any of the parties hereto except
that at Buyer's option, Buyer shall have the right to designate one or more
affiliates of Buyer to take title to the Purchased Assets for Buyer hereunder in
which event both Buyer and the affiliate of Buyer shall be subject to this
Agreement. This Agreement shall be binding upon and inure solely to the benefit
of each of the parties hereto and their respective successors and permitted
assigns.
SECTION 12.2 PAYMENT OF FEES AND EXPENSES. Each party to this Agreement
agrees to pay its own costs, fees and expenses incurred (including legal,
accounting, consulting, appraisal, investment banking and similar professional
fees) in connection with the transactions contemplated hereunder.
47
SECTION 12.3 FURTHER ACTS BY EACH SELLING GROUP MEMBER AND THE PARENT.
From and after the Closing Date, upon the reasonable request of Buyer, each
Selling Group Member, and the Parent shall execute, acknowledge and deliver all
such further acts, deeds, assignments, transfers, conveyances, powers of
attorney, and assurances as may be required to convey and transfer to and vest
in Buyer and protect its right, title and interest in the Purchased Assets to be
acquired hereunder, and as may be appropriate otherwise to carry out the
transactions contemplated by this Agreement.
SECTION 12.4 ENTIRE AGREEMENT, CONSTRUCTION, COUNTERPARTS, EFFECTIVENESS.
This Agreement, including the Schedules delivered pursuant hereto, constitutes
the entire agreement of the parties in respect of the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions of
the parties, whether written or oral, and may not be changed, terminated or
discharged orally. The Table of Contents and Headings appearing in this
Agreement have been inserted solely for the convenience of the parties and shall
be of no force and effect in the construction of the provisions of this
Agreement. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns. This
Agreement may be executed in several counterparts, and each executed counterpart
shall be considered an original of this Agreement. This Agreement shall not
become effective until it has been executed by all of the parties hereto.
SECTION 12.5 NOTICES. Any notice or other communication in connection with
this Agreement or any Related Agreement shall be deemed to be delivered if in
writing (or in the form of telecopy) addressed as provided below (a) when
actually delivered, (b) when telecopied to said address, or (c) in the case of a
letter, one (1) Business Day after deposit with a nationally recognized
overnight courier or five (5) Business Days after the same has been deposited in
the United States mails, postage prepaid and certified:
(i) If to Buyer:
Chronimed Holdings Inc.
00000 Xxx Xxxxxx Xx.
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
Telecopy No. (000) 000-0000
with a copy to:
Xxxx X. Xxxxxx
Xxxx Plant Xxxxx Xxxxx & Xxxxxxx, P.A.
3400 City Center
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopy No. (000) 000-0000
(ii) If to a Selling Group Member or Parent:
American Prescription Providers, Inc.
Two Huntington Quadrangle - 3NO1
48
Xxxxxxxx, Xxx Xxxx 00000
Attn: President
Telecopy No. (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxxxxxx Xxxxxxxxx, Xxxxx 0
Xxxxxxxx, Xxxxxxx 00000
Telecopy No. (000) 000-0000
Any party may change the address to which notices are to be addressed by giving
the other parties hereto notice in the manner herein set forth.
SECTION 12.6 CHANGES IN WRITING. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
SECTION 12.7 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law, but only
as long as the continued validity, legality and enforceability of such provision
or application does not materially (a) alter the terms of this Agreement, (b)
diminish the benefits of this Agreement or (c) increase the burdens of this
Agreement, for any person.
SECTION 12.8 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Minnesota, as applied to contracts made and performed
within the State of Minnesota, without giving effect to any choice or conflict
of law provision or rule that would cause the application of the domestic
substantive laws of any other state.
SECTION 12.9 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY EXPRESSLY
WAIVE ANY RIGHT THEY MAY HAVE TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING
EXISTING UNDER OR RELATING TO THIS AGREEMENT.
SECTION 12.10 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 hereto, or (ii) required by law,
regulation, court order or the rules of Nasdaq or any applicable stock exchange
or the New York Stock Exchange or of any applicable Governmental Authority and
any such release or statement shall be subject to prior review by the parties
hereto.
[Remainder of this page intentionally blank;
see following page for signatures.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
BUYER: SELLING GROUP:
CHRONIMED HOLDINGS INC. AMERICAN PRESCRIPTION PROVIDERS
OF GEORGIA, INC.
By: By:
---------------------------- -----------------------------------
Name: Name:
---------------------------- -----------------------------
Title: Title:
---------------------------- -----------------------------
AMERICAN PRESCRIPTION PROVIDERS OF
FLORIDA, INC.
By:
-----------------------------------
Name:
----------------------------
Title:
----------------------------
AMERICAN PRESCRIPTION PROVIDERS OF
NEW YORK, INC.
By:
-----------------------------------
Name:
----------------------------
Title:
----------------------------
AMERICAN PRESCRIPTION PROVIDERS OF
PENNSYLVANIA, INC.
By:
-----------------------------------
Name:
----------------------------
Title:
----------------------------
PARENT:
AMERICAN PRESCRIPTION PROVIDERS, INC.
By:
-----------------------------------
Name:
----------------------------
Title:
----------------------------
For the purpose of agreeing to the
provisions of Article XI hereof:
--------------------------------------
Xxxxx X'Xxxxxxx
--------------------------------------
Xxxxxx Xxxx
