MEMBERSHIP INTEREST PURCHASE AGREEMENT

EXHIBIT 10.1

E XECUTION C OPY

MEMBERSHIP INTEREST PURCHASE AGREEMENT

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT is made as of April 7, 2008, by and among HEALTHEXTRAS, INC. , a Delaware corporation (the “Buyer”); HOSPISCRIPT SERVICES, LLC , a Delaware limited liability company (“HospiScript”), CONCEPT PHARMACEUTICALS, LLC , an Alabama limited liability company (“Concept” and, together with HospiScript and each Subsidiary of HospiScript or Concept, collectively, the “Company”); and each of the Persons listed on the signature pages hereto as a Seller and each Person who becomes a party hereto as a Seller by executing the Joinder Agreement attached hereto (each, a “Seller” and collectively, the “Sellers”).

RECITALS:

WHEREAS , HospiScript is a prescription benefits manager focusing on the needs of the hospice industry;

WHEREAS , Concept is a closed door pharmacy focusing on the needs of the hospice industry;

WHEREAS, Sellers collectively are the beneficial and record owners of 100% of the issued and outstanding common units of membership interest and preferred units of membership interest of the Company (collectively, the “Membership Interests”), with each Seller owning the number of such Membership Interests set forth on Schedule 3.1; and

WHEREAS , Sellers desire to sell, and Buyer desires to purchase, all of the Membership Interests, for the consideration and on the terms and conditions set forth in this Agreement.

NOW, THEREFORE , in consideration of the mutual representations, warranties, covenants and agreements contained herein, and upon the terms and subject to the conditions hereinafter set forth, the parties do hereby agree as follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement, the following terms have the meanings specified or referred to in this Article I:

“2008 Payment” is defined in Section 2.9(a)(i).

“2009 Payment” is defined in Section 2.9(a)(ii).

“2010 Payment” is defined in Section 2.9(a)(iii).

“Acquisition Proposal” is defined in Section 6.5.

“Adjustment Amount” is defined in Section 2.6(c).

“Adjustment Certificate” is defined in Section 2.6(c).

“Affiliate” means any Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified herein. The term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, the holding of proxies, by contract other than a commercial contract for goods or non-management services, or otherwise. Notwithstanding the foregoing, the term “Affiliate” or “affiliate” shall not include any Person (other than the Company) in which PBM Services Company, LLC, New Capital Partners Private Equity Fund, L.P., Morgan Keegan Mezzanine Fund, L.P. or Morgan Keegan Early Stage Fund, L.P. owns or holds any equity or debt securities.

“Agreement” means this Membership Interest Purchase Agreement and the Schedules hereto.

“Allocable Portion” means when referring to the Sellers as a group, with respect to any Seller, a fraction, (a) the numerator of which is the number of Common Units owned (including all Common Units owned as a result of the Conversion) and held by such Seller as of the Closing Date and (b) the denominator of which is the aggregate number of Closing Common Units.

“Applicable Contract” means any Contract (a) under which the Company has or may acquire any right, (b) under which the Company has or may become subject to any obligation or liability or (c) by which the Company or any of the assets owned or used by it is or may become bound.

“Authorized Action” is defined in Section 13.11(d).

“Balance Sheet” is defined in Section 4.4.

“Base Claim” is defined in Section 12.6.

“Board of Managers” means those individuals serving as managers of the Company in accordance with the Organizational Documents of the Company.

“Breach” means a breach or material inaccuracy of a representation or warranty, or the non-fulfillment or non-satisfaction of a covenant, obligation, or other provision of this Agreement or any instrument delivered pursuant to this Agreement.

“Business Day” means a day other than a Saturday or a Sunday on which banks in Alabama are not authorized or required by any Legal Requirement to close.

“Buyer” is defined in the Preamble to this Agreement.

 

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“Buyer Indemnified Persons” means Buyer and (after the Closing) the Company, and their respective Representatives, stockholders, members, controlling Persons, and Affiliates.

“Buyer’s Closing Documents” is defined in Section 5.2.

“Cash Election” is defined in Section 2.8(a).

“Cash Seller” means any Seller who either (i) has made a Cash Election or (ii) has not made an effective Earnout Election or an effective Cash Election.

“Class A Preferred Units” means the Membership Interests classified in the Organizational Documents of the Company as Class A Preferred Units.

“Class B Preferred Units” means the Membership Interests classified in the Organizational Documents of the Company as Non-Voting Class B Preferred Units.

“Closing” is defined in Section 2.4(a).

“Closing Balance Sheet” is defined in Section 2.6(c).

“Closing Common Units” means all the issued and outstanding Common Units as of the Closing Date, including, for the avoidance of doubt, all Common Units issued in connection with the Conversion; provided that, the number of Common Units issued in connection with the Conversion shall be determined by using the Initial Payment Per Unit calculated as of the Closing Date. The number of Common Units held by any Seller as of the Closing Date shall be the number of Closing Common Units owned and held by such Seller.

“Closing Date” means the date and time as of which the Closing actually takes place.

“Closing Date Funded Indebtedness” is defined in Section 2.6(c).

“Closing Date Net Working Capital” is defined in Section 2.6(c).

“CMS” is defined in Section 4.8(b).

“COBRA” means the requirements of Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code and any similar state Law.

“Common Units” means the Membership Interests classified in the Organizational Documents of the Company as common units.

“Company” is defined in the Preamble to this Agreement.

“Competing Business” is defined in Section 4.17.

“Confidential Information” means any information which is proprietary in nature and non-public or confidential, in whole or in part; provided, however, that Confidential Information does

 

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not include any information in the possession of the receiving party (a) that is independently developed by such party, (b) is learned from a third party not under any duty of confidence to the disclosing party, or (c) becomes part of the public domain through no fault of the receiving party.

“Confidentiality Agreement” is defined in Section 13.4.

“Consent” means any approval, consent, license, permit, ratification, waiver or other authorization (including any Governmental Authorization).

“Contemplated Transactions” means all of the transactions contemplated by this Agreement, the Sellers’ Closing Documents and the Buyer’s Closing Documents, including:

(a) the sale of the Membership Interests by Sellers to Buyer;

(b) the execution, delivery, and performance of the Escrow Agreement; and

(c) the performance by Buyer and Sellers of their respective covenants and obligations under this Agreement, the Sellers’ Closing Documents and the Buyer’s Closing Documents.

“Contract” means any agreement, contract, obligation, commitment, lease, promise or undertaking (whether written or oral and whether express or implied) that is legally binding.

“Conversion” means the conversion of the Preferred Units into Common Units in accordance with the Organizational Documents of the Company.

“Copyrights” is defined in Section 4.16(a).

“Damages” means any debt, obligation, loss, liability, claim, damage, deficiency, cost, interest, penalty, fine or other expense (including all amounts paid in investigation, settlement and defense of any of the forgoing or in asserting, preserving or enforcing any of the rights hereunder and reasonable attorneys’ fees) or diminution of value, whether or not involving a third-party claim; provided, however, that the term “Damages” shall not include punitive damages (other than those punitive damages actually paid by the Indemnified Persons to a Person other than another Indemnified Person).

“Deficiency Amount” is defined in Section 2.6(b).

“Disclosure Schedule” collectively means the disclosure schedules delivered concurrently with the execution and delivery of this Agreement, as amended and supplemented in accordance with the provisions of this Agreement.

“Earnout Election” is defined in Section 2.8(a).

“Earnout Payments” is defined in Section 2.9(a).

 

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“Earnout Period” means each of Year 1, Year 2 and Year 3, collectively or individually, as applicable.

“Earnout Seller” means each Seller who has made an effective Earnout Election.

“Encumbrance” means any claim, charge, condition, equitable interest, lien, option, warrant, call, mortgage, Tax, encumbrance, pledge, security interest, right of first refusal, or restriction of any kind or nature whatsoever, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

“Enforceability Exceptions” is defined in Section 3.2(a).

“Environment” means soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource.

“Environmental, Health, and Safety Liabilities” means any Damages arising from or under Environmental Law or Occupational Safety and Health Law and consisting of or relating to:

(a) any environmental, health, or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products);

(b) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law;

(c) financial responsibility under Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or other remediation or response actions required by applicable Environmental Law or Occupational Safety and Health Law and for any natural resource damages; or

(d) any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law.

The terms “removal,” “remedial,” and “response action,” include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended and in effect on the date of this Agreement (“CERCLA”).

“Environmental Law” means any Legal Requirement that requires or relates to:

(a) advising appropriate authorities, employees, and the public of intended or actual releases of pollutants or hazardous substances or materials, violations of discharge limits, or other prohibitions and of the commencements of activities, such as resource extraction or construction, that has significant impact on the Environment;

 

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(b) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the Environment;

(c) reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated;

(d) protecting resources, species, or ecological amenities;

(e) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil, or other potentially harmful substances;

(f) cleaning up pollutants that have been released, preventing the threat of release, or paying the costs of such clean up or prevention;

(g) making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets; or

(h) otherwise concerning public health or relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, exposure of Persons to or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation.

“ERISA” means the Employee Retirement Income Security Act of 1974 or any successor law, and regulations and rules issued pursuant to that Act or any successor law.

“ERISA Affiliate” means each entity that is treated as a single employer with the Company or any Subsidiary for purposes of Section 414 of the Code.

“Escrow Agent” is defined in Section 2.3.

“Escrow Agreement” is defined in Section 2.3.

“Escrow Amount” is defined in Section 2.3.

“Estimated Closing Balance Sheet” is defined in Section 2.6(a).

“Estimated Funded Indebtedness” is defined in Section 2.6(a).

“Estimated Net Working Capital” is defined in Section 2.6(a).

 

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“Estimated Purchase Price” is defined in Section 2.6(b).

“Facilities” means any and all real property currently leased and operated by the Company and any buildings, plants, structures, or equipment currently owned or operated by the Company.

“FAR” is defined in Section 4.8(b).

“Financial Advisor” is defined in Section 13.1.

“Financial Statements” is defined in Section 4.4.

“Financing Charge Amount” is defined in Section 8.2.

“FIRPTA Affidavits” is defined in Section 2.5(a)(iv).

“Fundamental Representations” is defined in Section 12.7.

“Funded Indebtedness” of the Company means all obligations of the Company as of the Closing Date (i) for borrowed money, (ii) evidenced by bonds, debentures, notes or other similar instruments or debt securities, (iii) in respect of letters of credit and bankers’ acceptances issued for the account of such person, (iv) arising from cash/book overdrafts, (v) arising from deferred compensation arrangements, (vi) for capital lease obligations, (vii) for the deferred purchase price of property or services with respect to which the Company is liable, contingently or otherwise, as obligor or otherwise (other than trade payables incurred in the Ordinary Course of Business), (viii) in the nature of guaranties of the obligations described in clauses (i) through (vii) above of any Person or (ix) for fees, accrued and unpaid interest, premiums or penalties related to any of the foregoing; provided, however, that Funded Indebtedness shall not include any intracompany indebtedness or obligations from Concept or SeniorScript to HospiScript.

“GAAP” means United States generally accepted accounting principles, applied on a basis consistent with the basis on which the Financial Statements were prepared.

“Governmental Authorization” means any Consent issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

“Governmental Body” means any:

(a) nation, state, county, city, town, village, district or other jurisdiction of any nature;

(b) federal, state, local, municipal, foreign, or other government;

(c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); or

 

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(d) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature.

“HIPAA” is defined in Section 4.8(b).

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and in effect on the date of this Agreement, or any successor law, and the regulations and rules issued pursuant to that Act or any successor law.

“Indemnified Persons” means, when not referring to the Buyer Indemnified Persons or the Seller Indemnified Persons specifically, both the Buyer Indemnified Persons and the Seller Indemnified Persons.

“Indemnity Cap” is defined in Section 12.7.

“Initial Payment” means an amount in cash equal to the sum of (A) the Estimated Purchase Price plus (B) the amount of reimbursement set forth in Section 2.2(b), minus (C) the Escrow Amount.

“Initial Payment Per Unit” means the quotient of (A) the Initial Payment, divided by (B) the Closing Common Units.

“Intellectual Property” is defined in Section 4.16(a).

“Intellectual Property Assets” is defined in Section 4.16(b).

“Interim Balance Sheet” is defined in Section 4.4.

“IRC” means the Internal Revenue Code of 1986, as amended and in effect on the date of this Agreement, or any successor law, and the regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law.

“IRS” means the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.

“Joinder Agreement” means the agreement attached hereto as Exhibit A.

“Knowledge” means, with respect to an individual, the actual awareness of a particular fact or other matter as of the date of this Agreement after reasonable inquiry of the subject matter. A Person (other than an individual) will be deemed to have “Knowledge” of a particular fact or other matter if any individual who is serving as a director, manager, officer, partner, executor, or trustee of such Person (or in any similar capacity) has Knowledge of such fact or other matter after reasonable inquiry of the subject matter; provided, however, that with respect to the Company, “Knowledge” shall mean only the Knowledge of Shannon Speir, Robert Gamble and John M. Sayler.

 

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“Leased Real Property” is defined in Section 4.5.

“Leases” is defined in Section 4.5.

“Legal Requirement” means any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty, whenever enacted or in effect.

“Licenses and Permits” is defined in Section 4.8(a).

“Manager” means a member of the Board of Managers.

“Marks” is defined in Section 4.16(a).

“Material Adverse Change” means, when used in connection with any Person, any change, event, violation, inaccuracy, circumstance or effect that is or is reasonably likely to be materially adverse to the business, assets, liabilities, customer, supplier or employee relations, financial condition or results of operations of such Person taken as a whole, other than as a result of (i) events, changes, conditions, or effects generally adversely affecting the United States economy as a whole or such Person’s industry (including any changes to GAAP or regulatory accounting principles generally applicable to such industry) in each case which do not disproportionately impact such Person; (ii) compliance by such Person with or performance by such Person of its obligations under this Agreement; (iii) the announcement, public disclosure or pendency of this Agreement or the Contemplated Transactions or the consummation of the Contemplated Transactions, but only to the extent that the change, event, violation, inaccuracy, circumstance or effect directly results from or is caused by such disclosure or consummation; or (iv) national or international political or social events, changes, conditions or effects, including, without limitation, those attributable to acts of war, terrorism, or the outbreak of hostilities, in each case which do not disproportionately impact such Person.

“Material Contracts” is defined in Section 4.11(a).

“Member” means a member of the Company.

“Membership Interests” is defined in the Recitals of this Agreement.

“Net Working Capital” means the excess of the current assets of the Company as of the Closing Date minus the current liabilities of the Company (excluding current maturities of Funded Indebtedness) as of the Closing Date determined in accordance with the Company’s past practices in conformity with GAAP; provided, however, that current assets shall not include intracompany receivables due from PremierScript or any loans from HospiScript to Concept, SeniorScript and PremierScript.

“Objection Notice” is defined in Section 2.6(c).

 

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“Occupational Safety and Health Law” means any Legal Requirement designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (including those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions.

“Operating Income” means the net income of the Company before Taxes and interest, but excluding (i) allocated general or administrative costs or expenses of the Buyer and (ii) any amounts payable under any agreement, arrangement or understanding between the Company and the Buyer (including, without limitation, administrative fees and rebates payable), as determined in accordance with GAAP using the same accounting methods, policies, principles, practices and procedures, with consistent classifications, judgments and estimation methodology as were used in the preparation of the internal financial statements of the Company for each of Year 1, Year 2 and Year 3, as applicable, as determined in good faith by the Buyer in its sole discretion. Additionally, if at any time during any of Year 1, Year 2 and Year 3, the Company enters into a transaction, including by way of a merger, consolidation or other business combination, purchase or sale or other acquisition or divestiture, or the Company incurs any extraordinary gain or loss, the Board of Directors of the Buyer shall equitably adjust in good faith the calculation of Operating Income to reflect such change.

“Order” means any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made or rendered by any court, administrative agency or other Governmental Body or by any arbitrator.

“Ordinary Course of Business” means any action taken by a Person that is consistent with the past practices of such Person (including with respect to quantity and frequency) and is taken in the ordinary course of the normal day-to-day operations of such Person.

“Organizational Documents” means (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the articles or certificate of organization or formation and the operating agreement or limited liability company agreement of a limited liability company; (c) the partnership agreement and any statement of partnership of a general partnership; (d) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (e) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (f) any amendment to any of the foregoing.

“Patents” is defined in Section 4.16(a).

“Percentage Interest” means, with respect to an Earnout Seller, a fraction (a) the numerator of which is the total number of Common Units owned and held by such Earnout Seller as of the Closing Date, and (b) the denominator of which is the aggregate number of all Common Units owned and held by all the Earnout Sellers as of the Closing Date (in each case, giving effect to the pro ration provisions of Section 2.8(c)).

“Permitted Encumbrance” means any (a) Encumbrances or statutory liens for Taxes not yet due and payable as of the Closing Date and for which there are adequate reserves on the books of

 

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the Company; (b) pledges or deposits to secure obligations under workers or unemployment compensation laws arising in the Ordinary Course of Business; (c) mechanic’s, materialman’s, supplier’s, vendor’s or similar liens arising in the Ordinary Course of Business securing amounts that are not delinquent; (d) zoning, building and other similar restrictions that do not, individually or in the aggregate, materially interfere with the value or current use of any real property or interests therein; (e) easement, covenant, right-of-way or other similar restriction on real property recorded and of record in the appropriate office; (f) Encumbrances specifically referred to or itemized on the Balance Sheet or the Interim Balance Sheet as securing specified liabilities or obligations, with respect to which no default (or event that, with notice or lapse of time or both, would constitute a default) exists; and (g) Encumbrances incurred in connection with the purchase of property or assets after the date of the Interim Balance Sheet (such Encumbrances being limited to the property or assets so acquired), with respect to which no default (or event that, with notice or lapse of time or both, would constitute a default) exists and that (i) do not render title to the property encumbered thereby unmarketable and (ii) do not individually or in the aggregate materially adversely affect the value, use or occupancy of such property for its current and anticipated purposes.

“Person” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint-stock company, joint venture, estate, trust, association, organization, labor union or other entity or Governmental Body.

“Preference Amount” has the meaning set forth in the Organizational Documents of the Company.

“Preferred Units” means the Class A Preferred Units and the Class B Preferred Units.

“PremierScript” is defined in Section 6.7.

“Proceeding” means any action, investigation, arbitration, audit, hearing, litigation, claim, complaint or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“Proprietary Rights Agreement” is defined in Section 4.14(b).

“Purchase Price” is defined in Section 2.2(a).

“Purchase Price Bank Accounts” means the bank accounts of the Sellers in the United States designated by the Sellers pursuant to wire transfer instructions given to Buyer in writing prior to Closing.

“Related Person” with respect to a particular individual, means:

(a) each member of such individual’s Family;

 

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(b) any Person that is directly or indirectly controlled by such individual or one or more members of such individual’s Family;

(c) any Person in which such individual or members of such individual’s Family hold (individually or in the aggregate) a Material Interest; and

(d) any Person with respect to which such individual or one or more members of such individual’s Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity).

With respect to a specified Person other than an individual:

(a) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person;

(b) any Person that holds a Material Interest in such specified Person;

(c) each Person that serves as a director, officer, employee, partner, executor, or trustee of such specified Person (or in a similar capacity);

(d) any Person in which such specified Person holds a Material Interest;

(e) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and

(f) any Related Person of any individual described in clause (b) or (c).

For purposes of this definition, (a) the “Family” of an individual includes (i) the individual, (ii) the individual’s spouse, (iii) the individual’s issue, and (iv) any other natural person who resides with such individual, and (b) “Material Interest” means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on the date of this Agreement) of voting securities or other voting interests representing at least 50% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 50% of the outstanding equity securities or equity interests in a Person.

“Representative” means, with respect to a particular Person, any director, manager, officer, employee, member, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.

“Securities Act” means the Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to that Act or any successor law.

“Sellers” is defined in the Preamble to this Agreement.

“Sellers’ Closing Documents” is defined in Section 3.2(a).

 

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“Seller Indemnified Persons” means each Seller and his or its respective Representatives, stockholders, members, controlling Persons, and Affiliates.

“Sellers Indemnity Threshold” is defined in Section 12.6.

“Selling Parties’ Representative” is defined in Section 13.11(a).

“Senior Credit Facilities” is defined in Section 8.2.

“SeniorScript” is defined in Section 6.6.

“Software” is defined in Section 4.16(a).

“Subsidiary” means with respect to any Person (the “Owner”), any other Person of which securities or other interests having the power to elect a majority of that other Person’s board of directors or similar governing body, or otherwise having the power to direct the business and policies of that other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner or one or more of its Subsidiaries. For all purposes under this Agreement, SeniorScript shall be treated as if it were a Subsidiary of HospiScript as of the date of this Agreement.

“Tax” means any tax (including any income tax, excise tax, franchise tax, capital gains tax, gross receipts tax, value-added tax, sales tax, use tax, property tax, business tax, payroll tax, withholding tax, gift tax, or estate tax), levy, assessment, tariff, duty (including any customs duty), deficiency, or other fee, and any related charge or amount (including any fine, penalty, interest, or addition to tax), imposed, assessed, or collected by or under the authority of any Governmental Body or payable pursuant to any tax-sharing agreement or any other Contract relating to the sharing or payment of any such tax, levy, assessment, tariff, duty, deficiency or fee.

“Tax Return” means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax.

“Termination Date” is defined in Section 11.1(e).

“Threatened” means, with respect to a claim, Proceeding, dispute, action, or other matter, any demand or statement that has been made (orally or in writing) or any notice that has been given (orally or in writing), or any other communication that has been made, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.

“Trade Secrets” is defined in Section 4.16(a).

 

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“Transaction Expenses” means all expenses of the Sellers and the Company incurred in connection with the preparation, execution and consummation of this Agreement, the Sellers’ Closing Documents, the Contemplated Transactions and the Closing, including all brokerage commissions, fees, expenses and disbursements of the Financial Advisor or otherwise, all transaction-related bonuses, stay bonuses or accelerated benefits or bonuses payable to any officer, Manager, employee, member or Affiliate of the Company and all fees and disbursements of attorneys, accountants, and other advisors and service providers payable by the Sellers and the Company.

“WARN Act” is defined in Section 4.10(h).

“Year 1” is defined in Section 2.9(a)(i).

“Year 2” is defined in Section 2.9(a)(ii).

“Year 3” is defined in Section 2.9(a)(iii).

ARTICLE II

SALE AND TRANSFER OF MEMBERSHIP INTERESTS; CLOSING

Section 2.1. Purchase and Sale of Membership Interests . Subject to the terms and conditions of this Agreement, at the Closing, each of the Sellers hereby agrees to sell, assign, transfer and deliver to Buyer all of the Membership Interests owned by such Seller as set forth on Schedule 3.1, free and clear of all Encumbrances, and Buyer hereby agrees to purchase, accept and receive the Membership Interests from Sellers.

Section 2.2. Purchase Price; Other Payments .

(a) The purchase price (the “Purchase Price”) for the Membership Interests will be an amount equal to $100,000,000 minus (i) any outstanding Funded Indebtedness plus or minus (ii) Net Working Capital to the extent positive or negative.

(b) In addition to the Purchase Price, the Buyer shall also reimburse the Sellers in accordance with each Seller’s Allocable Portion for actual Transaction Expenses paid on or prior to the Closing Date in an amount not to exceed $1,000,000.

Section 2.3. Escrow Amount . At the Closing, the Buyer will deposit with Wachovia Bank, National Association (the “Escrow Agent”) funds in the amount of $7,000,000 (the “Escrow Amount”) to be held by the Escrow Agent in escrow in an interest-bearing account or accounts approved by the Selling Parties’ Representative and the Buyer pursuant to an escrow agreement (the “Escrow Agreement”), by and among the Escrow Agent, the Selling Parties’ Representative and the Buyer, as mutually agreed upon by such parties. All interest earned on the Escrow Amount shall be for the account of the party entitled to receive the Escrow Amount pursuant to Article XII. The Escrow Agent shall hold and disburse the Escrow Amount in accordance with this Agreement and the terms and conditions of the Escrow Agreement.

 

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Section 2.4. Closing .

(a) The purchase and sale (the “Closing”) provided for in this Agreement will be consummated by facsimile and electronic transmission at the offices of Maynard, Cooper & Gale, P.C., 1901 Sixth Avenue North, 2400 AmSouth/Harbert Plaza, Birmingham, Alabama 35203, at 10:00 a.m. (local time) as soon as practicable, but in no event later than two (2) Business Days following the satisfaction or waiver of all of the conditions set forth herein (excluding conditions that, by their terms, cannot be satisfied until the Closing, but subject to the satisfaction or waiver of said conditions), or on such other date and at such other time and place as the parties may agree. Subject to the provisions of Article X, failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this Section will not result in the termination of this Agreement and will not relieve any party of any obligation under this Agreement.

(b) All proceedings to be taken and all documents to be executed and delivered by all parties at the Closing shall be deemed to have been taken and executed simultaneously and no proceedings shall be deemed to have been taken nor documents executed or delivered until all have been taken, executed and delivered.

Section 2.5. Closing Obligations . At the Closing:

(a) The Sellers will deliver to the Buyer:

(i) instruments evidencing the transfer of the Membership Interests, together with any other document required for the sale, assignment, transfer and delivery of the Membership Interests;

(ii) a certificate executed by each Seller evidencing such Seller’s satisfaction of the conditions set forth in Sections 9.1(a) and 9.2(a);

(iii) a certificate executed by the Chief Executive Officer of the Company evidencing the Company’s satisfaction of the conditions set forth in Sections 9.1(b) and 9.2(a);

(iv) non-foreign affidavits dated as of the Closing Date, sworn under penalty of perjury and in form and substance required under Treasury Regulations issued pursuant to IRC §1445 stating that each Seller is not a “foreign person” as defined in IRC §1445 (the “FIRPTA Affidavits”); and

(v) instruments satisfactory to the Buyer evidencing the transfer of 100% of the issued and outstanding units of membership interests in SeniorScript to HospiScript pursuant to Section 6.6.

(b) The Buyer will deliver:

(i) to each of the Cash Sellers, by wire transfer of immediately available funds to the Purchase Price Bank Account(s), an amount in cash equal to the product of (A) the Initial

 

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Payment Per Unit, multiplied by (B) the number of Common Units owned and held by such Cash Seller as of the Closing Date (including any Common Units as to which a Seller will be deemed a Cash Seller due to the pro ration provisions of Section 2.8(c)); provided that the Buyer, at its option, may offset any amounts owed to the Company by any Seller as a result of the loans referenced in Section 6.3(c) from the payment to such Seller hereunder;

(ii) to each of the Earnout Sellers, by wire transfer of immediately available funds to the Purchase Price Bank Account(s), an amount in cash equal to the product of (A) the difference of the Initial Payment Per Unit minus $0.50, such difference multiplied by (B) the number of Common Units owned and held by such Earnout Seller as of the Closing Date (not including any Common Units as to which a Seller will be deemed a Cash Seller due to the pro ration provisions of Section 2.8(c));

(iii) to the Escrow Agent, by wire transfer of immediately available funds, the Escrow Amount;

(iv) to the Sellers a certificate executed by the Chief Executive Officer of the Buyer evidencing the Buyer’s satisfaction of the conditions set forth in Sections 10.1 and 10.2(a).

Section 2.6. Adjustment Procedure .

(a) At least three (3) Business Days prior to the Closing Date, the Company shall have prepared and delivered to the Buyer (i) an estimate of the balance sheet of the Company as of the Closing Date (the “Estimated Closing Balance Sheet”) with supporting detail and (ii) a certificate of the Company containing (A) the Company’s calculation of the estimated Net Working Capital as of the Closing Date (the “Estimated Net Working Capital”), prepared in accordance with GAAP applied on a basis consistent with the Financial Statements, (B) an estimate of all Funded Indebtedness (“Estimated Funded Indebtedness”) and (C) an estimate of Transaction Expenses paid by the Company on or prior to the Closing Date. The Buyer shall review the Estimated Closing Balance Sheet and all supporting documentation and the parties shall resolve in good faith any disagreements concerning the Estimated Net Working Capital prior to Closing.

(b) The “Estimated Purchase Price” shall be $100,000,000 minus (i) Estimated Funded Indebtedness plus or minus (ii) the amount by which Estimated Net Working Capital is positive or negative. Such adjustments shall be calculated based on the Estimated Closing Balance Sheet and the certificate delivered pursuant to subsection (a) above.

(c) Within 90 days after the Closing Date, the Buyer will prepare and deliver to the Selling Parties’ Representative (i) an unaudited balance sheet of the Company as of the Closing Date (the “Closing Balance Sheet”) and (ii) a certificate of the Buyer (the “Adjustment Certificate”) containing Buyer’s calculation of the Net Working Capital as of the Closing Date (the “Closing Date Net Working Capital”), the difference between the Closing Date Net Working Capital and the Estimated Net Working Capital, and all Funded Indebtedness (“Closing Date Funded Indebtedness”). The Purchase Price shall be adjusted as follows: (i) increased by the amount by which Closing Date Net Working Capital exceeds Estimated Net Working Capital; (ii) decreased by the amount by which Estimated Working Capital exceeds Closing Date Working Capital, (iii)

 

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increased by the amount by which Estimated Funded Indebtedness exceeds Closing Date Funded Indebtedness, and (iv) decreased by the amount by which Closing Date Funded Indebtedness exceeds Estimated Funded Indebtedness (the sum of the foregoing adjustments, the “Adjustment Amount”). The Closing Balance Sheet and the Closing Date Net Working Capital shall be prepared in accordance with GAAP applied on a basis consistent with the Financial Statements. The Buyer and the Company will make available to the Selling Parties’ Representative all books, records, and personnel relating to the preparation of the Closing Balance Sheet during normal business hours that the Selling Parties’ Representative may reasonably require in order to analyze the Closing Balance Sheet. The Closing Balance Sheet, the Adjustment Certificate and the Adjustment Amount will be considered final and binding unless the Selling Parties’ Representative objects in writing thereto within 20 days after delivery of the Adjustment Certificate (an “Objection Notice”). The Objection Notice shall specify in reasonable detail the items in the Closing Balance Sheet to which the Selling Parties’ Representative objects and shall provide a summary of reasons for such objections.

(d) If the Selling Parties’ Representative makes a timely objection to the Adjustment Certificate, the Selling Parties’ Representative and the Buyer shall use good faith efforts to settle such dispute and reach a written agreement with respect to such dispute. If the Selling Parties’ Representative and the Buyer are unable to enter into a settlement within 30 days after the Selling Parties’ Representative delivers the written objection under this Section 2.6, then the Selling Parties’ Representative and the Buyer shall select an independent accounting firm of recognized national standing (or, if the Selling Parties’ Representative and the Buyer cannot agree upon a selection, they shall select such accounting firm by lot from among the four largest accounting firms in the United States; provided that such selected accounting firm shall not at the time of selection be performing, or at any time during the three years preceding such selection have performed, services for the Sellers, the Company or the Buyer) that shall be instructed jointly by the Selling Parties’ Representative and the Buyer to resolve such dispute as promptly as possible. The Buyer and the Selling Parties’ Representative shall cooperate fully with the accounting firm so as to enable it to make such determination as quickly and as accurately as practicable. The Buyer and the Selling Parties’ Representative shall instruct the accounting firm not to assign a value greater than the greatest value for any item assigned by the Buyer, on the one hand, or the Selling Parties’ Representative, on the other hand, or less than the smallest value for such item assigned by the Buyer, on the one hand, or the Selling Parties’ Representative, on the other hand. The accounting firm shall base its decision solely upon the presentations of the Buyer and the Selling Parties’ Representative delivered to the accounting firm and not upon an independent review. The independent accounting firm shall deliver a determination as to the Adjustment Amount, and such determination shall be conclusive and binding upon the parties for purposes of this Agreement. The Adjustment Amount and the determination thereof shall be (i) in writing, (ii) made in accordance with GAAP and (iii) nonappealable and incontestable by the Sellers and the Buyer and not subject to collateral attack for any reason. The fees and costs of the independent accounting firm incurred in the resolution of any items in dispute shall be reasonably determined by the independent accounting firm and set forth in the accountant’s adjustment determination, and shall be allocated between and paid by the Sellers, on the one hand, and the Buyer, on the other hand, in inverse proportion to the extent they prevailed on the items in dispute.

 

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(e) On the fifth Business Day following the final determination of the Adjustment Amount in accordance with Section 2.6(d), (i) if the Adjustment Amount is positive, the Buyer will pay the Adjustment Amount to the Sellers; and (ii) if the Adjustment Amount is negative, the Selling Parties’ Representative will instruct the Escrow Agent to pay from the Escrow Amount the Adjustment Amount to the Buyer. All payments made pursuant to this Section 2.6(e) will be made together with interest, at the same rate of interest then being earned on the Escrow Amount, calculated from the Closing Date to the date of the payment. Payments will be made in immediately available funds. Payments to the Sellers pursuant to this Section 2.6(d) shall be made by wire transfer to the Purchase Price Bank Account(s) in accordance with each Seller’s Allocable Portion. Payments to the Buyer will be made by wire transfer to such bank account as the Buyer will specify.

Section 2.7. Withholding Taxes . The Buyer shall be entitled to deduct and withhold from the consideration otherwise payable to a Seller such amounts as are required to be deducted and withheld from such payment under the IRC, or any applicable provision of state, local or foreign Tax law. To the extent that amounts are so withheld and paid over to the appropriate taxing authority by the Buyer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to such Seller in respect of which such deduction and withholding was made.

Section 2.8. Earnout Election .

(a) Not later than ten (10) Business Days after the date of this Agreement, each Seller may elect (i) by delivering written notice in the form attached hereto as Exhibit B to the Buyer, to be an Earnout Seller (each such election, an “Earnout Election”) or (ii) by delivering written notice in the form attached hereto as Exhibit C to the Buyer, to be a Cash Seller (each such election, a “Cash Election”). Any Seller that fails to deliver to the Buyer an effective Earnout Election or an effective Cash Election within ten (10) Business Days after the date of this Agreement shall be conclusively deemed a Cash Seller for the purposes herein (as determined by the Buyer in its sole discretion) and shall not have right to or any interest in any of the Earnout Payments whatsoever. For the avoidance of doubt, any Earnout Election or Cash Election shall apply to all of the Common Units owned by the Seller making such Earnout Election or Cash Election and no Seller may make an Earnout Election or Cash Election with respect to only a portion of the Common Units owned by such Seller (except as provided in Section 2.8(c)).

(b) If the aggregate number of Common Units owned by such Sellers that have made an Earnout Election is less than 10% of the aggregate number of Closing Common Units, then all of the Earnout Elections shall be void and shall not be effective and each such Seller shall automatically be deemed a Cash Seller for the purposes herein.

(c) If the aggregate number of Common Units owned by such Sellers that have made an Earnout Election is greater than 50% of the aggregate number of Closing Common Units, then the Sellers who have made an Earnout Election will be deemed to have made an Earnout Election with respect to the number of Common Units owned and held by such Seller as of the Closing Date multiplied by a fraction equal to: (i) 50% of the aggregate number of Closing Common Units divided by (ii) the aggregate number of Common Units owned by the Sellers making an Earnout Election, with the product of the foregoing rounded down to the nearest whole number, and such Seller shall be deemed to be a Cash Seller with respect to the balance of the Common Units owned and held by such Seller as of the Closing Date.

 

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Section 2.9. Earnout Payments .

(a) In addition to receipt of the proceeds set forth in Section 2.5, following the Closing Date, the Earnout Sellers (and only the Earnout Sellers) may be eligible to receive their respective Percentage Interest of the following payments (collectively, the “Earnout Payments”):

(i) For the period beginning on May 1, 2008, and ending on October 31, 2008 (“Year 1”), each of the Earnout Sellers shall be entitled to receive from the Company or the Buyer their Percentage Interest of an amount (such amount, the “2008 Payment”) determined in accordance with the criteria set forth below:

(A) if an amount equal to two (2) times the Company’s Operating Income is less than $9,600,000, the 2008 Payment shall be equal to $0.00; and

(B) if an amount equal to two (2) times the Company’s Operating Income is greater than or equal to $9,600,000, the 2008 Payment shall be equal to $850,000.

(ii) For the year beginning on January 1, 2009, and ending on December 31, 2009 (“Year 2”), each of the Earnout Sellers shall be entitled to receive from the Company or the Buyer their Percentage Interest of an amount (such amount, the “2009 Payment”) determined in accordance with the criteria set forth below:

(A) if the Company’s Operating Income is less than $14,000,000, the 2009 Payment shall be equal to $0.00;

(B) if the Company’s Operating Income is greater than or equal to $14,000,000 but less than $14,500,000, the 2009 Payment shall be equal to $1,950,000; and

(C) if the Company’s Operating Income is greater than or equal to $14,500,000, the 2009 Payment shall be equal to $2,600,000.

(iii) For the year beginning on January 1, 2010, and ending on December 31, 2010 (“Year 3”), each of the Earnout Sellers shall be entitled to receive from the Company or the Buyer their Percentage Interest of an amount (such amount, the “2010 Payment”) determined in accordance with the criteria set forth below:

(A) if the Company’s Operating Income is less than $16,800,000, the 2010 Payment shall be equal to $0.00;

(B) if the Company’s Operating Income is greater than or equal to $16,800,000 but less than $18,200,000, the 2010 Payment shall be equal to $1,950,000; and

 

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(C) if the Company’s Operating Income is greater than or equal to $18,200,000, the 2010 Payment shall be equal to $2,600,000.

(b) The Buyer shall cause the Company to provide to the Earnout Sellers, as soon as available, a copy of the Company’s internal financial statements as of and for each of the periods ended October 31, 2008, December 31, 2009 and December 31, 2010, as applicable.

(c) The Company or the Buyer shall pay to each of the Earnout Sellers an amount in cash equal to such Earnout Seller’s Percentage Interest of the applicable Earnout Payment (if any) for each of Year 1, Year 2 and Year 3 by wire transfer of immediately available funds pursuant to the Purchase Price Bank Account(s). With respect to Year 1, such payment (if any) shall be made within 30 days following the Buyer’s receipt of internal financial statements for the Company, but in no event later than December 31, 2008. With respect to Year 2 and Year 3, such payments (if any) shall be made within 30 days following the completion of the audited financial statements of the Buyer for Year 2 and Year 3, as applicable.

(d) During the Earnout Period, the Buyer, the Company and the Earnout Sellers, as applicable, shall conduct the Company’s business and operations without any intent to prejudice or artificially enhance the Earnout Sellers’ right to receive any Earnout Payment and shall not enter into any agreement that would prohibit the Buyer or the Company from making the Earnout Payments if and when any Earnout Payment is due or otherwise interfere therewith. Without limiting the generality of the foregoing, the Company shall be maintained as a separate Subsidiary of the Buyer, and the Buyer will exercise good faith and fair dealing in its transactions with the Company. Notwithstanding anything in this Section 2.9 to the contrary, the Buyer and the Company shall have no liability for any action taken in good faith; it being agreed and understood that the Earnout Payments are not guaranteed, are set at levels that reflect strong future performance, and that the Buyer and the Company may make business decisions in good faith which they believe to be appropriate but in hindsight may directly or indirectly affect the likelihood that the Earnout Sellers receive the Earnout Payments.

Section 2.10 Conversion . At least three (3) Business Days prior to the Closing Date, the Company and the Sellers shall cause the Preference Amount to be paid to the holders of the Preferred Units and shall thereafter immediately effect the Conversion; provided, however, that if the Closing does not occur, nothing herein shall preclude the Company and the Sellers from effecting a cancellation and rescission of the Conversion.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS

Each Seller (and with respect to Section 3.5, each Earnout Seller) hereby separately and severally (and not jointly) represents and warrants to the Buyer as of the date hereof and the Closing Date, with respect to itself or himself solely and not with respect to the other Sellers to the extent such representations and warranties relate to another Seller, as follows:

Section 3.1. Ownership . Pursuant to the records of the Company, each Seller owns of record on the date of this Agreement the Membership Interests of HospiScript and Concept (as

 

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applicable) set forth opposite its or his name on Section 3.1 of the Disclosure Schedule, free and clear of all Encumbrances, except for those contained in the Organizational Documents of the Company. There is no Contract to which the Seller is a party relating to the issuance, voting, sale, transfer or any other rights with respect to the Membership Interests except for those contained in the Organizational Documents of HospiScript or Concept.

Section 3.2. Authority; No Conflict .

(a) If the Person executing this Agreement and all other documents required to be executed by Seller (the “Sellers’ Closing Documents”) on behalf of Seller is executing the same in a representative or fiduciary capacity, such Person has full power and authority to execute and deliver this Agreement and the Sellers’ Closing Documents in such capacity and on behalf of the Seller for whom such Person is executing such documents. This Agreement constitutes the legal, valid, and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights or by principles of equity (the “Enforceability Exceptions”). Upon the execution and delivery by the Seller of the Sellers’ Closing Documents, the same will constitute the legal, valid, and binding obligations of the Seller, enforceable against the Seller in accordance with their respective terms, except as such enforcement may be limited by the Enforceability Exceptions. Except as set forth in Section 3.2(a) of the Disclosure Schedule, the Seller has the power and authority to execute and deliver this Agreement and the Sellers’ Closing Documents and to perform its or his respective obligations under this Agreement and the Sellers’ Closing Documents.

(b) If the Seller is a natural person, the execution, delivery and performance by the Seller of this Agreement and the Sellers’ Closing Documents are within the Seller’s legal right, power and capacity. The Seller, if it is a Person other than a natural person, is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and the execution, delivery and performance by it of this Agreement and the Sellers’ Closing Documents are within its powers and have been duly authorized by all necessary corporate or other action on its behalf. No other action on the part of the Seller is necessary to authorize the execution and delivery of this Agreement or the performance of its or his obligations hereunder. At the Closing, the Seller shall sell to Buyer good and marketable title to all Membership Interests owned by such Seller, in each case, free and clear of all Encumbrances.

(c) Except as set forth in Section 3.2(c) of the Disclosure Schedule, neither the execution and delivery of this Agreement and the Sellers’ Closing Documents nor the consummation or performance of any of the Contemplated Transactions will (i) violate any Legal Requirement to which the Seller is subject or any provision of the Organizational Documents of the Seller (if applicable), (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any Person the right to accelerate, terminate, modify or cancel or require any notice under any Contract to which the Seller is a party or by which the Seller is bound or to which any of the Seller’s assets are subject or (iii) result in the imposition or creation of any Encumbrance upon or with respect to any of the Membership Interests.

 

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(d) Except as set forth in Section 3.2(d) of the Disclosure Schedule, the Seller is not and will not be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement and the Sellers’ Closing Documents or the consummation or performance of any of the Contemplated Transactions.

Section 3.3. Proceedings . There is no pending or, to the Knowledge of the Seller, Threatened Proceeding against or relating to the Seller to restrain or prevent the carrying out of the Contemplated Transactions or that would adversely affect or prevent the purchase and sale of the Membership Interests or otherwise have a material adverse effect on the ability of the Seller to perform its or his obligation under this Agreement or any of the Sellers’ Closing Documents.

Section 3.4. Brokers Or Finders . Except as set forth in Section 3.4 of the Disclosure Schedule, neither the Seller nor any Representative thereof has incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with any of the Contemplated Transactions.

Section 3.5. Earnout Sellers . Each Earnout Seller has conducted his or its own independent evaluation and made his or its own analysis as such Earnout Seller has deemed necessary, prudent or advisable in order for such Earnout Seller to make his or its own determination and decision to enter into this Agreement, deliver an Earnout Election and consummate the Contemplated Transactions. Such Earnout Seller understands and agrees that such Earnout Seller has not relied upon any statement of the Company, the other Earnout Sellers, the Buyer or any of their respective Affiliates or any of their respective officers, managers, directors, partners and employees regarding the value of the Earnout Payments and that no representation or warranty has been or is being made by the Company, the other Earnout Sellers, the Buyer or any of their respective Affiliates or any of their respective officers, managers, directors, partners and employees regarding the value of the Earnout Payments. Each Earnout Seller understands and agrees that delivering an Earnout Election involves a high degree of risk and that no guarantees have been made or can be made with respect to the future value of the Earnout Payments or the profitability or success of the Company. Such Earnout Seller understands that the value of the Earnout Payments may be more or less than such Earnout Seller would have received if such Earnout Seller participated as a Cash Seller, and that an Earnout Seller will suffer a decrease in the value of the Earnout Payments as a result of the Company’s lack of success or profitability.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Buyer as of the date hereof and the Closing Date (except, as to any representation or warranty which specifically is made by reference to an earlier date, as of such earlier date) as follows:

Section 4.1. Organization and Good Standing .

(a) HospiScript is a limited liability company validly existing and in good standing under the laws of the State of Delaware, and Concept is a limited liability company validly existing and in good standing under the laws of the State of Alabama, each with full power and authority to

 

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conduct its respective business as it is now being conducted and to own or use the properties and assets that it now owns or uses. Except as set forth in Section 4.1(a) of the Disclosure Schedule, the Company is qualified to do business as a foreign limited liability company and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, and the failure to be so qualified or in good standing would result in a Material Adverse Change.

(b) The Company has delivered or made available to Buyer copies of the Organizational Documents of the Company, as currently in effect. The Company is not in default under or in violation of any provision of its Organizational Documents.

Section 4.2. Capitalization . Section 4.2 of the Disclosure Schedule sets forth the owners of record of the Membership Interests on the date of this Agreement. All of the outstanding Membership Interests of the Company have been duly authorized, validly issued and are fully paid, are not subject to, nor were they issued in violation of, any preemptive rights or rights of first refusal, and are owned of record and beneficially by the respective Seller as set forth in Section 3.1 of the Disclosure Schedule, and there are no other authorized, issued or outstanding Membership Interests or other equity interests of the Company or other securities convertible into or exchangeable or exercisable for Membership Interests or other equity interests of the Company. As of the Closing Date, there will be 9,712,626 Common Units outstanding and no Preferred Units. The Company has not violated any applicable federal or state securities Legal Requirements in connection with the offer, sale or issuance of any of the Membership Interests. Except as set forth in Section 4.2 of the Disclosure Schedule, or as contained in the Organizational Documents of the Company, there are no Contracts relating to the issuance, sale, or transfer of any equity securities or other securities of the Company. Except as set forth in Section 4.2 of the Disclosure Schedule, the Company does not own, and is not a party to any Contract to acquire, any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business.

Section 4.3. Authority; No Conflict .

(a) Each of HospiScript and Concept has full power and authority to execute and deliver and to perform its obligations under this Agreement, and the execution, delivery and performance by HospiScript and Concept of this Agreement, and the consummation of the Contemplated Transactions, have been duly and validly authorized by all necessary actions of HospiScript and Concept and their respective Members and Boards of Managers (none of which has been modified or rescinded and all of which actions are in full force and effect). No other action on the part of HospiScript or Concept is necessary to authorize the execution and delivery of this Agreement or the performance of its obligations hereunder. This Agreement constitutes a valid and binding agreement and obligation of HospiScript and Concept, enforceable against HospiScript and Concept in accordance with its terms, except as such enforceability may be limited by the Enforceability Exceptions.

(b) Neither the execution and delivery of this Agreement by HospiScript and Concept nor the consummation or performance of any of the Contemplated Transactions will (i) give any Person the right to prevent, delay or otherwise interfere with any of the Contemplated Transactions

 

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pursuant to any provision of the Company’s Organizational Documents, any Legal Requirement or Order to which the Company may be subject or any Contract to which the Company is a party or by which the Company may be bound, (ii) violate any Legal Requirement or Order to which the Company may be subject or (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, or create in any Person the right to accelerate, terminate, modify or cancel, any Contract to which the Company is a party or by which the Company may be bound.

(c) Except as set forth in Section 4.3(c) of the Disclosure Schedule, the Company is not and will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

Section 4.4. Financial Statements . The Company has delivered to Buyer: (a) balance sheets of the Company as of December 31 for each of the years 2005, 2006 and 2007 (such balance sheet for the year 2007, the “Balance Sheet”), and the related statements of income, changes in Members’ equity, and cash flow for each of the fiscal years then ended, together with the report thereon of Warren, Averett, Kimbrough & Marino, LLC, independent certified public accountants, and (b) an unaudited balance sheet of the Company as of February 29, 2008 (the “Interim Balance Sheet”) and the related unaudited statements of income and cash flow for the two months then ended (collectively, the “Financial Statements”). All of the Financial Statements (together with the notes thereto) are consistent with the Company’s applicable books and records (which books and records are accurate and complete in all material respects) and fairly present in all material respects the financial condition and the results of operations, changes in Members’ equity, and cash flow of the Company as of the respective dates of and for the periods referred to therein, and were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, subject, in the case of interim financial statements, to normal recurring year-end adjustments (the effect of which will not individually or in the aggregate be materially adverse) and the absence of notes. Except as set forth in Section 4.4 of the Disclosure Schedule, all of the notes and accounts receivable of the Company reflected on the Interim Balance Sheets are good and valid receivables (subject to no counterclaims or offset), free and clear of all Encumbrances. Except as set forth in Section 4.4 of the Disclosure Schedule, the Company does not have any liabilities or obligations (whether accrued, absolute, contingent, unliquidated, or otherwise, whether due or to become due, and regardless of when asserted) arising out of or relating to the operation of the business of the Company at or before the Closing, except (a) those current liabilities and obligations set forth on the face of the Interim Balance Sheet and not heretofore paid or discharged; and (b) those liabilities and obligations incurred in the Ordinary Course of Business since the date of the Interim Balance Sheet (none of which is a liability for breach of contract, breach of warranty, tort or infringement, Environmental Law matter, violation of Legal Requirements or a claim or lawsuit).

Section 4.5. Title to Properties; Encumbrances . The Company has good, valid and marketable title to, or holds a valid and enforceable leasehold interest in (or other valid and enforceable right to use), the properties and assets (whether real or personal, tangible or intangible) owned or used by it, located at its Facilities or shown on the Balance Sheet except for properties and assets disposed of in the Ordinary Course of Business since the date of the Balance Sheet or acquired after the date thereof, free and clear of all Encumbrances, except (a) as set forth in Section 4.5 of the Disclosure Schedule and (b) Permitted Encumbrances. All of such properties and assets

 

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necessary for the conduct of the Company’s business have been maintained in accordance with normal applicable industry practice, are in good operating condition and repair (except normal wear and tear), are suitable and sufficient for the purposes for which they are presently used and presently are proposed to be used, and constitute all of the assets and properties necessary to operate the Company’s business in all material respects as currently conducted. Except as disclosed in Section 4.5 of the Disclosure Schedule, the Company has exclusive possession and control of each such asset. Section 4.5 of the Disclosure Schedule is a complete and accurate list of each fixed asset owned or leased by the Company with a value in excess of $5,000. The Company owns no real property. Section 4.5 of the Disclosure Schedule sets forth a list of all leases of real property (the “Leased Real Property”) to which the Company is a party (the “Leases”). The Company has made true and complete copies of the Leases available to Buyer. With respect to each Lease, except as set forth in Section 4.5 of the Disclosure Schedule, (i) the Lease is a legal, valid, binding and enforceable obligation of the Company and in full force and effect, (ii) the Company holds a valid and existing leasehold interest under such Lease, (iii) no action has been taken or omitted by the Company and, to the Knowledge of the Company, by any other party thereto and no other event has occurred or condition exists that constitutes, or after notice or lapse of time or both would constitute, a breach or default under any Lease or permit termination, modification or acceleration under any Lease, (iv) there are no disputes, oral agreements or forbearance programs in effect as to any Lease and neither the Company nor, to the Knowledge of the Company, any other party to any Lease has repudiated any provision thereof, (v) the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold, (vi) all buildings, structures, improvements, fixtures, building systems, equipment and other property included in the Leased Real Property have, to the Knowledge of the Company, received all Governmental Authorizations required in connection with the operation thereof and have been operated and maintained in all material respects in accordance with all Legal Requirements and are in good condition and repair (ordinary wear and tear excepted), and (vii) as of the Closing, (A) the Company shall have obtained the Consent of each landlord to the transactions contemplated hereunder or (B) the Lease does not prohibit the transactions contemplated hereunder.

Section 4.6. Taxes .

(a) Except as set forth in Section 4.6(a) of the Disclosure Schedule, the Company has filed or caused to be filed (on a timely basis since December 31, 2004) all Tax Returns required to be filed by it, pursuant to applicable Legal Requirements. The Company has delivered or made available to the Buyer copies of all such Tax Returns filed since December 31, 2004. The Company has paid, or made provision for the payment of, all Taxes that have become due pursuant to such Tax Returns or otherwise, or pursuant to any assessment received by the Company, except such Taxes, if any, as are listed in Section 4.6(a) of the Disclosure Schedule and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the Balance Sheet and the Interim Balance Sheet.

(b) The Company has not given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of the Company or for which the Company would reasonably expected to be liable.

 

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(c) All Taxes that the Company is or was required by Legal Requirements to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person.

(d) All Tax Returns filed by the Company are true, correct, and complete in all material respects. There is no Tax sharing agreement that will require any payment by the Company after the date of this Agreement. The Company has no liability for the Taxes of another Person as transferee or successor, by contract or otherwise.

(e) The Company has been classified as either a partnership (within the meaning of Treas. Reg. Section 301.7701-2(a)) or disregarded entity (within the meaning of Treas. Reg. Section 301.7701-3(b)(1)) for federal and all applicable state and local Tax purposes since the date of its formation.

Section 4.7. Employee Benefits .

(a) As used in this Section, the following terms have the meanings set forth below.

“Company Plan” means all Plans of which the Company is or was a Plan Sponsor, or to which the Company maintains or otherwise contributes or has contributed, or in which the Company otherwise participates or has participated or to which the Company has any liability or potential liability. All references to Plans are to Company Plans unless the context requires otherwise.

“Multi-Employer Plan” has the meaning given in ERISA § 3(37)(A).

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

“Plan” means any “employee benefit plan” (as such term is used in Section 3(3) of ERISA) and any other material employee benefit plan, program or arrangement of any kind.

“Plan Sponsor” has the meaning given in ERISA § 3(16)(B).

“Qualified Plan” means any Plan that meets or is intended to meet the requirements of IRC § 401(a).

(b) Section 4.7(b) of the Disclosure Schedule contains a complete and accurate list of all Company Plans adopted and in effect as of the date of this Agreement or to which the Company has any liability as of the date hereof.

(c) The Company has delivered or made available to Buyer:

(i) all documents that set forth the terms of each Company Plan and of any related trust, including (A) all plan descriptions and summary plan descriptions of Company Plans for which the Company is required to prepare, file, and distribute plan descriptions and summary

 

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plan descriptions, and (B) all summaries and descriptions furnished to participants and beneficiaries regarding Company Plans for which a plan description or summary plan description is not required;

(ii) all personnel, payroll, and employment manuals and policies;

(iii) all Contracts with third party administrators, actuaries, investment managers, consultants, and other independent contractors that relate to any Company Plan;

(iv) all reports submitted within the three years preceding the date of this Agreement by third party administrators, actuaries, investment managers, consultants, or other independent contractors with respect to any Company Plan;

(v) the Form 5500 filed in each of the three (3) years preceding the date of this Agreement with respect to each Company Plan, including all schedules thereto and the opinions of independent accountants;

(vi) all notices that were given by the IRS, the PBGC, or the United States Department of Labor to the Company or any Company Plan within the three (3) years preceding the date of this Agreement; and

(vii) with respect to Qualified Plans, the most recent determination letter for each Plan of the Company that is a Qualified Plan.

(d) Except as set forth in Section 4.7(d) of the Disclosure Schedule:

(i) The Company has performed all of its material obligations under all Company Plans;

(ii) The Company, with respect to all Company Plans is, and each Company Plan has been maintained, funded and administered in all material respects in accordance with its terms and with ERISA, the IRC, and other applicable Legal Requirements including the provisions of such Legal Requirements expressly mentioned in this Section, and with any applicable collective bargaining agreement;

(iii) Other than routine claims for benefits submitted by participants or beneficiaries, no claim against, or Proceeding involving, any Company Plan is pending or, to the Company’s Knowledge, is Threatened and the Company has no Knowledge of any facts that could reasonably be expected to give rise to any such action, suit or claim;

(iv) Each Qualified Plan of the Company is qualified in form and operation under IRC § 401(a), and each trust for each such Plan is exempt from federal income tax under IRC § 501(a). No event has occurred or circumstance exists that will give rise to disqualification or loss of tax-exempt status of any such Qualified Plan or trust;

(v) Neither the Company nor any ERISA Affiliate has established, maintained, or contributed to or has any liability or, to the Company’s Knowledge, potential liability with

 

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respect to any (i) Multi-Employer Plan (ii) any “defined benefit plan” as defined in Section 3(35) of ERISA or any other plan subject to the funding requirements of Section 412 of the IRC or Section 302 of Title IV of ERISA, or (iii) any employee benefit plan, program or arrangement that provides for post-employment medical, life insurance or other welfare-type benefits (other than health continuation coverage required by COBRA);

(vi) Neither the Company nor any Subsidiary has any liability with respect to any “employee benefit plan” (as defined in Section 3(3) of ERISA) solely by reason of being treated as a single employer under Section 414 of the IRC with any trade, business or entity other than the Company and the Subsidiaries;

(vii) With respect to each Company Plan, all contributions (including all employer contributions and employee salary reduction contributions) that are due have been made within the time periods prescribed by ERISA and the IRC, and all contributions for any period ending on or before the Closing Date that are not yet due have been made or properly accrued in accordance with GAAP and no Company Plan has any material unfunded liability not accurately reflected on the Closing Balance Sheet;

(viii) None of the Company Plans provides any separation, severance, termination or similar benefit or accelerate any vesting schedule or alter any benefit structure solely as a result of a change in control of ownership within the meaning of any Assumed Benefit Plans or Section 280G of the IRC.

Section 4.8. Compliance With Legal Requirements; Governmental Authorizations .

(a) Except as set forth in Section 4.8(a) of the Disclosure Schedule, since December 31, 2004, the Company has been operated in compliance in all material respects with all Legal Requirements. No written, or to the Knowledge of the Company, oral notice has been received by and, to the Knowledge of the Company, no claims have been filed against the Company from any Governmental Body alleging that the Company is not, or was not, in compliance in any material respect with any Legal Requirements, the reason for which has not been corrected. The Company possesses, and is in compliance in all material respects with, or with respect to individual professional licenses necessary to perform services for the Company’s business, its employees, contractors, or agents possess and are in compliance in all material respects with, each permit, license, waiver, franchise, order, approval, concession, registration or other Governmental Authorization (the “Licenses and Permits”).

(b) Section 4.8(b) of the Disclosure Schedule contains a complete and accurate list of all Licenses and Permits that are necessary for the Company to own, operate and use its assets and conduct it