EXHIBIT 10.1
PHARMACY PURCHASE
AGREEMENT
THIS AGREEMENT is made effective the 24th day
of March, 2008, among APOTHECARYRX, LLC, an Oklahoma limited
liability company (the “Buyer”), NEWT’S DISCOUNT
PHARMACY, INC., an Oklahoma corporation (the “Company”)
and Jeremy Avance, an individual (“Avance” and together
with the Company, jointly and severally, the
“Seller”).
B
A C K G R O U N D :
A.
The Seller owns and
operates the pharmacy business located in or near Guthrie,
Oklahoma, described at Schedule “A” attached as a part
hereof (together, whether one or more, the
“Business”).
B.
The Buyer desires to
acquire and the Seller desires to sell the Business by the Buyer
acquiring all assets, rights and properties owned by the Seller
which are used in, useful in or related to the ownership, operation
or maintenance of the Business, except as specifically excluded
herein.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1.
Sale
Agreement . Subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase and the Seller agrees
to sell the Business, including, without limitation, all assets,
rights and property used in, useful in or related to the ownership,
operation or maintenance of the Business as of the date of this
Agreement and the Closing Date (as hereafter defined) except for
the Excluded Assets (collectively, the “Assets”).
Absolute ownership of the Assets will be transferred to the Buyer
on the Closing Date free and clear of all liens, claims and
encumbrances other than liens securing the Approved Liabilities (as
hereafter defined). The Assets include, without
limitation:
1.1.
Fixtures and
Equipment . All tangible personal property used in,
useful in or related to the ownership, operation or maintenance of
the Business, including, without limitation, all equipment,
furniture, supplies and trade fixtures.
1.2.
Merchandise
Inventory . All of the following inventory located
on the premises of the Business (the “Merchandise
Inventory”): (a) all saleable prescription
pharmaceutical inventory except: (i) inventory that is
damaged, has expired or will expire within ninety (90) days
following the Time of Transfer; (ii) non-wholesaler re-packed
or misbranded pharmaceutical merchandise; (iii) compounding
chemicals; and (iv) any other inventory not transferable due
to any applicable local, state or federal law; and (b) all
over-the-counter inventory reasonably acceptable to the
Buyer.
1.3.
Contracts and
Leases .
All of the Seller’s interest in all contracts, leases and
agreements used in, useful in or related to the ownership,
operation or maintenance of the Business or the Assets (the
“Contracts”) that are reasonably acceptable to the
Buyer.
1.4.
Will Call
Receivables . All of the Will Call Receivables (as
defined in the Transition Agreement (as hereinafter defined in
paragraph 8.10)).
1.5.
Intangible
Property . All intangible personal property used
in, useful in or related to the ownership, operation, or
maintenance of the Business, including, without limitation:
(a) the right to all names (including the names
“Newt’s Pharmacy” and “Newt’s
Discount Pharmacy”), telephone numbers, pager numbers,
cellular and digital phone numbers, internet web sites and
electronic mail addresses, if any; (b) all permits, licenses,
certificates and operating authorities necessary to operate the
Business, to the extent assignable; (c) all customer and
prospective customer lists including the exclusive use of such
lists; (d) all books, records and files, whether physical or
electronic; and (e) all computer software, to the extent
assignable.
1.6.
Going Concern
Assets .
The covenant not to compete and other going concern assets as set
forth in the Goodwill Protection Agreement to be executed in
connection herewith (the “Goodwill Protection
Agreement”).
2.
Excluded
Assets .
The Assets to be acquired by the Buyer under this Agreement
specifically exclude the following (the “Excluded
Assets”): (a) all cash, checks and coupons located
at the Business prior to the Time of Transfer (as hereinafter
defined in paragraph 11.3), except for a cash change fund in the
amount of $500.00 (the “Change Fund”); (b) all
accounts receivable, relating to operation of the Business prior to
the Time of Transfer other than the Will Call Receivables;
(c) any Contracts not approved by the Buyer in writing after
the date hereof; and (d) those items described at Schedule
“2” attached as a part hereof that the Seller
represents are not necessary for the ownership or operation of the
Business; and (e) all Merchandise Inventory not purchased by
Buyer under paragraph 1.2, above.
3.
Liabilities
. The Seller will be
solely responsible for and will pay or otherwise satisfy on or
before the Closing Date all: (a) liabilities,
obligations and debts of the Seller with respect to the Business in
existence as of the Closing Date; and (b) taxes (including
sales and income taxes) accruing from operation of the Business or
actions taken by the Seller prior to and through the Closing
Date.
4.
Purchase
Price .
Subject to the adjustments and prorations hereafter described, the
total purchase price to be paid by the Buyer to the Seller for the
purchase of the Business is the amount equal to the sum of (the
“Purchase Price”): (a) One Million Dollars
($1,000,000.00) (the “Base Price”); plus (b) the
Merchandise Inventory Price (as hereafter defined) calculated in
accordance with paragraph 5 of this Agreement; plus (c) the
total amount of the Will Call Receivables (the “Receivables
Price”). The Purchase Price will be adjusted and paid
as follows:
4.1.
Cash at
Closing .
On the Closing Date, the Buyer will pay to the Company in
immediately available funds: (a) fifty percent (50%) of
the Base Price; (b) all of
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the Merchandise Inventory
Price; (c) all of the Receivables Price; and (d) the
amount of the Change Fund not to exceed $500.00. The Base
Price shall be adjusted as provided in paragraphs 4.3 and
4.4.
4.2.
Seller Financing;
Goodwill Protection . To satisfy the balance of the Purchase
Price, on the Closing Date, the Buyer will: (a) execute
and deliver a promissory note (the “Promissory Note”)
in the amount equal to forty percent (40%) of the Base Price in
favor of the Company; and (b) enter into the Goodwill
Protection Agreement providing for payment of ten percent (10%) of
the Base Price to Avance. The Promissory Note will be secured
by a security agreement (the “Security Agreement” and
collectively with the Promissory Note, the “Financing
Documents”), bear interest at six percent (6%) per annum, be
payable in blended quarterly installments of principal and interest
and have a term of three (3) years.
4.3.
Adjustments
. On the Closing
Date, the amount to be paid pursuant to paragraph 4.1 will be
decreased for any and all unpaid liabilities incurred by the
Company or the Business prior to the Time of Transfer and which are
assumed by the Buyer or collateralized by any of the Assets, or for
which the Buyer becomes liable and pays.
4.4.
Prorations
. On the Closing
Date, the amount to be paid pursuant to paragraph 4.1 will be
adjusted based on the proration of all rents (including ad valorem
taxes and casualty insurance), if any, and utilities for the month
in which the Time of Transfer occurs through the Time of Transfer
(the “Prorations”). All accounts payable and
other liabilities incurred prior to the Time of Transfer will be
the sole responsibility of the Seller. All accounts payable
and other liabilities incurred by the Buyer in connection with the
Business on and after the Time of Transfer will be the sole
responsibility of the Buyer. All accounts receivable and
other revenues will be apportioned as provided in the Transition
Agreement. Each party shall, promptly upon receipt, deliver
to the other party copies of each relevant bill or statement that
may be in such party’s records.
4.5.
Allocation
. The Purchase Price
will be allocated among the Assets by the Buyer and the Seller
according to sound accounting practices and such allocation will be
incorporated into a supplemental instrument to be executed and
delivered by the parties on the Closing Date.
5.
Inventory
. A physical
inventory (the “Inventory”) will be taken of all
Merchandise Inventory and supplies located at the Business prior to
the Closing Date on a date acceptable to the Buyer and the
Seller. The inventory is tentatively scheduled for
March 25, 2008, and will only be postponed to allow more time
for the satisfaction of conditions precedent in paragraphs 9or
10. The Inventory will be certified and taken by an inventory
service selected mutually by the Buyer and the Seller. The
cost of the Inventory will be divided equally between the Seller
and the Buyer. The Inventory will be recorded on duplicate
inventory sheets in the presence of the Seller and the Buyer or
their representatives, and a copy of such inventory sheets will be
furnished to the Seller and the Buyer. All damaged or
unsaleable merchandise, merchandise that is out of date or will
become out of date within ninety (90) days after the date the
Inventory is
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conducted or merchandise that the Buyer
reasonably determines cannot be sold for full retail price
(together, the “Excluded Inventory”) will be excluded
from the Inventory and set aside. The Seller will have the
right to remove all Excluded Inventory from the Business within
forty-eight (48) hours and to return the Excluded Inventory or send
it to a reclamation center for processing. Any Excluded
Inventory not timely removed from the Business by the Seller will
be deemed abandoned and the Buyer may dispose of the Excluded
Inventory as the Buyer deems appropriate and all proceeds from such
disposition will belong to the Buyer. The purchase price for
the Merchandise Inventory (the “Merchandise Inventory
Price”) will be the actual invoice cost paid by the Seller
for each item listed in the Inventory.
6.
Representations and
Warranties of Seller . As an inducement to the Buyer to enter
into this Agreement, the Seller represents and warrants to the
Buyer that as of the date of this Agreement and the Closing
Date:
6.1.
Financial
Statements . The Seller has delivered to the Buyer
the unaudited financial statements for the Business for the periods
ending December 31, 2005, December 31, 2006, and
December 31, 2007. There has not been a material change
(nor an event which would result in any material change) in the
Business, or in the results of operation or financial condition of
the Company since the effective date of the most recent financial
statements. The financial statements, copies of which are
attached at Schedule “6.1” as a part hereof, consist of
a balance sheet, an income statement and all appropriate notes and
disclosures. The financial statements, income statements and
notes and disclosures are true and correct in all material respects
and present fairly the financial condition and results of
operations of the Business at the dates thereof and for the
respective periods then ended and have been prepared in accordance
with accounting principles consistently applied.
6.2.
Absence of
Liabilities . The Seller currently has no debt,
liability, obligation or commitment, absolute or contingent, known
or unknown, relating to or connected with the Business or the
Assets other than: (a) those set forth (and not
exceeding the amounts so set forth) in the most recent financial
statements attached at Schedule “6.1” (the
“Current Financial Statements”) and not otherwise paid
or discharged after the date thereof; (b) and those incurred
in the ordinary course of business from the effective date of the
Current Financial Statements, through the date of this Agreement
consistent with past practices. Except for the items shown on
the Current Financial Statements of the Seller which will be paid
from the sale proceeds hereunder, on the Closing Date, the Business
will have no claims, debts, liabilities, obligations, guaranties or
commitments and the Seller will not be a party to, be bound or
subject to any real or personal property leases relating to the
Business other than the Contracts. The Assets and the
Business will not be subject to or liable for any claim, debt,
liability, obligation, guaranty or commitment as of the Closing
Date. Any such claims, debts, liabilities, obligations or
commitments will be the sole responsibility of the Seller, and the
Seller hereby agrees to indemnify and hold harmless the Buyer from
all such amounts.
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6.3.
Title to
Assets .
The Seller owns, possesses and has good and marketable title to the
Assets free and clear of all mortgages, liens, leases, pledges,
charges, encumbrances, equities, easements, rights of way,
covenants, conditions, restrictions or claims of every nature and
kind whatsoever, other than those described at Schedule
“6.3.” The Assets constitute all the assets used
in, useful in or related to the Business. Each Asset
is: (a) either (i) in good saleable condition or
(ii) in good operating condition and repair, and in sound
structural condition; and (b) free and clear of any material
defects or any restrictions on or conditions to transfer or
assignment.
6.4.
Contracts
. Schedule
“6.4” is a true, correct and complete list (or
description, in the case of oral agreements) of all of the
Contracts. Except as disclosed to the Buyer in writing:
(a) such contracts, leases and agreements are in full force
and effect; (b) the Seller is in full compliance with all of
the Seller’s obligations under the Contracts; (c) the
counterparty under each of the Contracts is in full compliance with
all of such party’s obligations under the Contracts;
(d) no default exists under any of the Contracts; (e) no
event of default or event which would become an event of default
with the giving of notice or passage of time has occurred; and
(f) no condition presently exists which would give any party
to any contract the right to terminate such contract. There
are no other material contracts, leases, commitments or agreements
in effect related to the Assets or the Business other than those
identified at Schedule “6.4.”
6.5.
Legal
Requirements . The Seller: (a) has all
requisite power to own, lease and operate the Seller’s
properties, including, without limitation, the Assets and to carry
on the Seller’s business as now being conducted, including,
without limitation, the Business; (b) is duly qualified to
carry on the Business in the State where the business is located;
and (c) holds all required licenses and permits for carrying
on all aspects of the Business. The Seller and the Business
have complied and will continue to comply with all applicable
federal, state or local statutes, laws and regulations including,
without limitation, any applicable building, zoning or other law,
ordinance or regulation affecting the operation of the
Business.
6.6.
Zoning
. To the best
knowledge of the Seller, the zoning of the real property where the
Business is located permits the presently existing improvements and
the continuation of the Business as presently being
conducted. To the best knowledge of the Seller, the Seller
has received no notice of any and there are no:
(a) pending changes in statutes, regulations or local laws
(including zoning) that will render any part of the Business
illegal; (b) outstanding orders or notices pending from any
local authority, governmental body or governmental agency with
respect to the Assets or the Business; or (c) plans, studies
or efforts by any governmental authority or agency or of any
non-governmental person or entity which in any way would materially
affect all or any portion of the Business or the Assets.
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6.7.
Insurance
. The Seller has and
will maintain in full force and effect through the Closing Date
insurance against all risks, damages, losses and liabilities usual
and customary for Business similar to the Business, including
without limitation, general liability, casualty, workers’
compensation and property insurance. The Seller is not self
insured for any risks. The Seller’s current insurance
coverage on the Business is described at Schedule “6.7”
attached as a part hereof.
6.8.
Environmental
Issues .
The Seller has not and to the best knowledge of the Seller no other
party has disposed, deposited, discharged, placed or otherwise
caused any release of any hazardous or toxic materials, substances,
pollutants, contaminants or wastes at, on or near the real property
and improvements where each Business is located in contravention of
any applicable federal, state or local laws, rules or
regulations.
6.9.
Consents and
Approvals . Other than in compliance with the
provisions of applicable statutes and regulations, no notice to,
filing with, or authorization, consent or approval of, any domestic
or foreign public body or authority is necessary for the
consummation of the transactions contemplated by this
Agreement. The execution, delivery, performance and
consummation of this Agreement does not and will not:
(a) violate, conflict with or constitute a default or an event
that, with notice or lapse of time or both, would be a default,
breach or violation under any term or provision of any instrument,
agreement, contract, commitment, license, promissory note,
conditional sales contract, indenture, mortgage, deed of trust,
lease or other agreement, instrument or arrangement to which the
Seller is a party or by which the Seller, the Business or the
Assets are bound; (b) violate, conflict or constitute a breach
of any statute, regulation or judicial or administrative order,
award, judgment or decree to which the Seller is a party or to
which the Seller, the Assets or the Business are bound or subject;
or (c) result in the creation or imposition of any adverse
claim or interest, or any lien, encumbrance, charge, equity or
restriction of any nature whatever, upon or affecting the Seller,
the Business or the Assets.
6.10.
Litigation
. Except as set
forth at Schedule “6.10,” there is no:
(a) action, suit or proceeding pending or threatened against
the Seller, the Assets or the Business; or (b) proceeding,
investigation, charges, audit or inquiry threatened or pending
before or by any federal, state, municipal or other governmental
court, department, commission, board, bureau, agency or
instrumentality which might result in an adverse effect on the
Seller, the Business or the Assets.
6.11.
Certain Employee
Plans .
Except as set forth at Schedule “6.11,” the
Seller: (a) has no “employee benefit plans,”
as defined in the Employee Retirement Security Act of 1974, as
amended, including by way of example and not limitation, 401(k),
Keogh, SEP and health insurance plans; and (b) is not a party
to any multi-employer plan. Other than at-will employment
agreements, there are no employment agreements with any officers,
directors, employees, retired employees or former employees of the
Seller.
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6.12.
Computer
Systems .
All computer software which is used in connection with the
operation of the Business is either proprietary or held pursuant to
a valid, legal and binding license agreement which is in full force
and effect, and no event has occurred which would constitute an
event of default under any applicable agreement or which, with the
lapse of time, the giving of notice or both, would constitute an
event of default under any applicable agreement. Other than written
industry standard license agreements, each such program or system
is complete and is not subject to any lien, claim, encumbrance,
security interest, right, restriction, option or purchase
obligation held by any person.
6.13.
Taxes
. All tax returns
and reports of the Seller required by law to be filed have been
filed or valid extensions have been obtained. The returns
which have been filed are true and correct and all taxes shown as
due thereon have been paid. All taxes and other governmental
charges which are due and payable have been paid and recorded in
the appropriate accounting records. There is no pending or
known threatened claim against the Seller for payment of additional
taxes in excess of the amounts reflected on such party’s
books and financial statements. The Seller has not executed
any waiver of any statute of limitations against assessments of
taxes.
6.14.
Authority
. The Seller has
taken all necessary action to authorize the execution, delivery and
performance of this Agreement and has adequate power, authority and
legal right to enter into, execute, deliver and perform this
Agreement and to consummate the transactions contemplated
hereby. This Agreement is legal, valid and binding with
respect to each Seller and is enforceable in accordance with its
terms. On execution, delivery and performance of this
Agreement in accordance with its terms, the Buyer will own one
hundred percent (100%) of the Business and the Assets free of all
claims, liens, encumbrances and liabilities.
6.15.
Labor
Relations . The Seller and the Business have not
and are not now a party to any collective bargaining or other labor
contract. To the best knowledge of the Seller, there has not
been, there is not presently or existing and there has not been any
threat of: (a) any strike, slow down, picketing, work
stoppage or employee grievance process; (b) any
proceeding against or affecting any of the Business relating to the
alleged violation of any federal, state, local, municipal, foreign,
international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute or treaty pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable governmental body,
organizational activity, or other labor employment dispute against
or affecting any of the Business, their premises or the Assets; or
(c) any application for certification of a collective
bargaining agent. To the best knowledge of the Seller, no
event has occurred or circumstances exist that could provide the
basis for any work stoppage or other labor dispute.
There is no lock out of any employees of the Seller, and no such
action is contemplated by the Seller. The Seller and the
Business have complied in all respects with all legal requirements
relating to the
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