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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: JUNE 1, 1998
------------
(Date of earliest event reported)
NCS HEALTHCARE, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 0-027602 34-1816187
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(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
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3201 ENTERPRISE PARKWAY, SUITE 220, BEACHWOOD, OHIO 44122
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 514-3350
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Item 2. Acquisition or Disposition of Assets.
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On June 1, 1998, NCS HealthCare, Inc., a Delaware corporation (the
"Company"), through a wholly-owned subsidiary NCS Acquisition Sub, Inc., a
Delaware corporation ("Buyer"), acquired certain assets of the extended care
division of Walgreens Advance Care, Inc., an Illinois corporation ("Walgreen"),
pursuant to an Asset Purchase Agreement, dated as of April 10, 1998 (the
"Agreement"), among the Company, Buyer, Walgreen and Walgreen Co., an Illinois
corporation. The assets sold consisted of all properties, assets and rights
owned by Walgreen and used in connection with the business of providing
pharmaceuticals, drugs, biologicals, medical devices and other health or medical
supplies and related services to nursing homes, other institutional care
facilities and individuals residing in such facilities (the "Business"). The
Buyer intends to continue to use the assets purchased for the purpose of
continuing the current conduct of the Business.
As consideration for the assets of Walgreen, the Buyer (i) assumed
certain liabilities of Walgreen under certain contracts relating to the Business
and (ii) paid cash in the amount of $57,779,111. The consideration is subject to
certain post-closing adjustments as provided for in the Agreement.
The Buyer utilized cash made available pursuant to (i) a Credit
Agreement, dated June 1, 1998, among the Company, certain lending institutions
named therein and KeyBank National Association ("KeyBank"), as Swing Line
Lender, Letter of Credit Issuer and as Administrative Agent and (ii) a
non-revolving capital markets bridge credit facility established by KeyBank in
favor of the Company on June 1, 1998, to make the cash payments in connection
with this transaction.
There are no material relationships between Walgreen or Walgreen Co.
and the Buyer or the Company.
Item 5. Other Events.
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The Company issued a news release on June 9, 1998, a copy of which
is filed as Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements of Business Required.
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Pursuant to Rule 3-05(b)(2)(i) of Regulation S-X, financial
statements of the business acquired are not required to be filed with this
report.
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(b) Pro Forma Financial Information.
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Pro forma financial information is not required to be filed with
this report pursuant to Article 11 of Regulation S-X.
(c) Exhibits.
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<CAPTION>
Exhibit No. Description
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2.1 Asset Purchase Agreement, dated April 10, 1998, among
NCS HealthCare, Inc., NCS Acquisition Sub, Inc.,
Walgreens Advance Care, Inc. and Walgreen Co.*
99.1 News release, dated June 9, 1998, from the Company.
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<FN>
* The Registrant agrees by this filing to supplementally furnish a copy of
all omitted exhibits and schedules to this agreement to the Commission upon
request.
</FN>
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NCS HEALTHCARE, INC.
By: /s/ Gerald D. Stethem
---------------------------
Gerald D. Stethem,
Chief Financial Officer
Date: June 15, 1998
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EXHIBIT INDEX
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<CAPTION>
Exhibit No. Description
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2.1 Asset Purchase Agreement, dated April 10, 1998, among
NCS HealthCare, Inc., NCS Acquisition Sub, Inc.,
Walgreens Advance Care, Inc. and Walgreen Co.
99.1 News release, dated June 9, 1998, from the Company.
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EXHIBIT 2.1
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EXECUTION COPY
ACQUISITION OF CERTAIN ASSETS
OF THE
EXTENDED CARE DIVISION
OF
WALGREENS ADVANCE CARE, INC.
AN ILLINOIS CORPORATION
BY
NCS ACQUISITION SUB, INC.,
A DELAWARE CORPORATION
ASSET PURCHASE AGREEMENT
APRIL 10, 1998
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TABLE OF CONTENTS
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PAGE
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ARTICLE 1 PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES.............................1
1.1 Definition Reference.........................................................1
1.2 Purchased Assets.............................................................1
1.3 Retained Assets..............................................................2
1.4 Assumed Liabilities..........................................................2
1.5 Retained Liabilities.........................................................3
1.6 Satisfaction of Liabilities by Seller........................................3
ARTICLE 2 CONSIDERATION.............................................................3
2.1 Purchase Price...............................................................3
2.2 Purchase Price Adjustments...................................................3
2.3 Determination of Net Asset Value.............................................4
2.4 Allocation...................................................................5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER..............................6
3.1 Organization.................................................................6
3.2 Agreements...................................................................6
3.3 Financial....................................................................7
3.4 Legal........................................................................8
3.5 Business.....................................................................9
3.6 Assets......................................................................10
3.7 Real Property...............................................................11
3.8 Miscellaneous...............................................................12
ARTICLE 3A REPRESENTATIONS AND WARRANTIES OF WALGREENS.............................12
3A.1 Enforceability.............................................................12
3A.2 Consents...................................................................13
3A.3 No Conflicts...............................................................13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER AND NCS..........................13
4.1 Organization and Power......................................................13
4.2 Agreements..................................................................13
4.3 No Investigation............................................................14
ARTICLE 5 CLOSING; CONDITIONS......................................................14
5.1 Closing.....................................................................14
5.2 Conditions to Buyer's and NCS's Obligations.................................15
5.3 Conditions to Seller' Obligations...........................................16
5.3A Conditions to Buyer's, Walgreens', NCS's and Seller's Obligations..........17
5.4 Pre-Closing Covenants.......................................................17
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ARTICLE 6 COVENANTS................................................................20
6.1 Miscellaneous Covenants.....................................................20
6.2 Restrictive Covenants.......................................................22
6.3 Employee Covenants..........................................................24
ARTICLE 7 INDEMNIFICATION..........................................................25
7.1 Survival of Representations and Warranties..................................25
7.2 Indemnification by Seller...................................................26
7.2A Indemnification by Walgreens...............................................27
7.3 Indemnification by Buyer and NCS............................................27
7.4 Third Party Claims..........................................................28
7.5 Limitations on Indemnification of Buyer.....................................29
7.6 Limitations on Indemnification of Seller....................................30
7.7 General Limitations on Indemnification......................................30
ARTICLE 8 CONSTRUCTION.............................................................31
8.1 Definitions.................................................................31
8.2 Notices.....................................................................33
8.3 Binding Effect..............................................................34
8.4 Headings....................................................................34
8.5 Exhibits and Schedules......................................................35
8.6 Counterparts................................................................35
8.7 Governing Law...............................................................35
8.8 Waivers.....................................................................35
8.9 Pronouns....................................................................35
8.10 Time Periods...............................................................35
8.11 No Strict Construction.....................................................35
8.12 Modification...............................................................35
8.13 Entire Agreement...........................................................35
8.14 Severability...............................................................36
8.15 Further Assurances.........................................................36
8.16 Risk of Loss...............................................................36
8.17 Retention and Access to Records............................................36
8.18 Assistance and Cooperation.................................................36
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT ("Agreement") is entered into this
10th day of April, 1998, by and among NCS ACQUISITION SUB, INC., a Delaware
corporation and wholly-owned subsidiary of NCS ("Buyer"), solely for purposes of
Article 4 and Sections 5.4.2, 5.4.5, 6.1.5, 6.1.7 and 7.3, NCS HEALTHCARE, INC.,
a Delaware corporation ("NCS"), WALGREENS ADVANCE CARE, INC., an Illinois
Corporation ("Seller"), and, solely for purposes of Article 3A and Sections
5.4.5, 6.1.8, 6.2 and 7.2A, WALGREEN CO., an Illinois corporation ("Walgreens").
RECITALS:
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A. The Seller's Extended Care division is engaged, among other
things, in the business of providing pharmaceuticals, drugs, biologicals,
medical devices and other health or medical supplies and related services to
nursing homes, other institutional care facilities and individuals residing in
such facilities (the "Business").
B. The parties desire that the Seller sell to Buyer and that Buyer
purchase from the Seller substantially all of the assets that are used or useful
primarily in the Business upon the terms and conditions hereinafter set forth.
C. Walgreens owns one hundred percent (100%) of the outstanding
shares of capital stock of the Seller and will benefit from the sale of the
assets of the Business by the Seller hereunder.
D. NCS owns one hundred percent (100%) of the outstanding shares of
the capital stock of Buyer and will benefit from the sale of the assets by the
Seller hereunder.
In consideration of and in reliance upon the representations,
warranties and obligations in this Agreement, the parties agree as follows:
ARTICLE 1
PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES
---------------------------------------------
1.1 DEFINITION REFERENCE. Certain capitalized terms are defined in
Section 8.1.
1.2 PURCHASED ASSETS. On the Closing Date, the Seller agrees to
sell, deliver, transfer, assign and convey to Buyer free of all Liens other than
Permitted Liens, and Buyer agrees to purchase, all right, title and interest in
and to all of the Seller's properties, assets, and rights owned, used, acquired
for use, or arising or existing primarily in connection with the Business,
whether known or unknown, tangible or intangible, real, personal or mixed and
wherever located, including, without limitation, all cash, property, plant,
equipment, accounts
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receivable (except as provided in Section 1.3(a) below), inventories, books and
records, permits and other governmental authorizations pertaining to the
Business (to the extent such permits and authorizations may legally be
assigned), all proprietary information and rights owned or used by or useful to
the Seller primarily in the operation of the Business, including, without
limitation, all patents, patent applications, copyrights, trademarks, trade
names (other than the trade names "Advance Care," "Walgreen" and "Walgreens
Advance Care"), licenses or other rights to technology or information, trade
secrets, customer and supplier lists, estimating and bidding methodologies,
computer software and programming, and all other intangible property and
goodwill associated with the Business; PROVIDED, HOWEVER, that (a) the Seller
shall not sell and Buyer shall not purchase the Retained Assets described in
Section 1.3 hereof, and (b) as to contracts, subject to the terms of Section
6.1.5 hereof, the Seller shall assign and Buyer shall assume only those
contracts of the Seller that are described and expressly set forth in Section
1.4(a) hereof. The assets to be purchased and sold pursuant to this Agreement
are sometimes collectively referred to as the "Purchased Assets."
1.3 RETAINED ASSETS. The Seller shall not sell, transfer or assign,
and Buyer shall not purchase (a) the third party centrally processed accounts
receivable as listed on SCHEDULE 1.3 (which Schedule will be updated immediately
prior to the Closing and, if necessary, adjusted post-Closing based on a final
calculation as of the Closing Date), (b) rights of the Seller arising under this
Agreement, (c) the Seller's corporate minute books, stock records, and tax
returns or other similar corporate books and records, and those records
originals of which the Seller is required to maintain under applicable laws
(PROVIDED, copies of the same that relate to the Business will be made available
to Buyer), (d) rights of the Seller in any pending litigation, (e) all contracts
of the Seller that are NOT described in Section 1.4 or otherwise as provided in
Section 6.1.5 hereof, (f) the trade names "Advance Care," "Walgreen" and
"Walgreens Advance Care" and all variants thereof, (g) any other assets of the
Seller that are specifically set forth on SCHEDULE 1.3, and (h) any other assets
of the Seller not owned, used or useful primarily in the Business (collectively,
the "Retained Assets").
1.4 ASSUMED LIABILITIES. On the Closing Date, Buyer agrees to assume
only the following liabilities of the Seller (a) the contracts set forth on
SCHEDULE 1.4(a) to the extent such contract liabilities accrue and relate solely
to the period after the Closing (subject to the terms of Section 6.1.5 hereof),
(b) the accrued employee benefits, including vacation pay of employees of the
Seller who work primarily in the Business and who are hired by Buyer
simultaneously with the Closing, which amount shall be determined by the mutual
agreement of the Seller and Buyer immediately prior to the Closing Date and
shall be set forth at the Closing on SCHEDULE 1.4(b) (which Schedule will be
updated immediately prior to the Closing and, if necessary, adjusted
post-Closing based on a final calculation as of the Closing Date), and (c) open
purchase orders for inventory, supplies and the like which are ordered in the
ordinary course of business consistent with past practice by the Seller for the
Business prior to the Closing Date and such inventory, supplies and the like are
delivered to Buyer after the Closing Date (collectively, the "Assumed
Liabilities"). Nothing in this Section 1.4 shall be construed or implied to
impose upon Buyer any Liabilities of the Seller, except as set forth in this
Section 1.4.
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1.5 RETAINED LIABILITIES. Notwithstanding anything in this Agreement
to the contrary, except for the Assumed Liabilities expressly provided in
Section 1.4, Buyer shall not assume and shall not be liable for any Liabilities
of the Seller or any Affiliate of the Seller of any nature whatsoever, whether
related to the Business or otherwise, relating, in any manner, to the Seller's
operation of the Business on or before the Closing Date or any event or
occurrence on or before the Closing Date (the "Retained Liabilities"),
including, without limitation, any Liabilities for or relating to Taxes, trade
or other accounts payable of the Seller, litigation, employee benefits, employee
compensation, workers' compensation, COBRA benefits (including any that may
result from this transaction) or other employment or labor-related claims or
obligations of the Seller, environmental liabilities, product warranty or
product liability claims, any pension or other employee benefit plan
liabilities, any claims under any contract or arrangement or any other
contingent liabilities, whether known or unknown.
1.6 SATISFACTION OF LIABILITIES BY SELLER. To preserve for Buyer the
opportunity to maintain good relations with the creditors, suppliers and vendors
of the Business and preclude the assertion of claims for nonpayment against
Buyer, the Seller agrees to pay or otherwise satisfy and discharge promptly
after the Closing, or otherwise in accordance with their terms, all Retained
Liabilities of the Seller to its creditors, suppliers and vendors.
ARTICLE 2
CONSIDERATION
-------------
2.1 PURCHASE PRICE. In consideration for the Purchased Assets and
the noncompetition obligation of the Seller and Walgreens set forth in Section
6.2.2, Buyer will (a) assume the Assumed Liabilities, and (b) pay to the Seller
an aggregate amount equal to Fifty-seven Million Dollars ($57,000,000) LESS the
amount of the accrued employee benefits, including vacation pay, assumed by
Buyer pursuant to Section 1.4(b) above (the "Purchase Price"). The Purchase
Price will be subject to adjustment as provided in Section 2.2 below. The
Purchase Price will be payable at the Closing by (i) crediting the Four Million
Dollar ($4,000,000) deposit paid to Seller by NCS upon the execution of that
certain Addendum to Proposal to Purchase Assets, dated March 20, 1998, between
NCS and Seller (the "Addendum"), and (ii) by wire transfer of the balance of the
Purchase Price in immediately available United States federal funds to an
account designated by the Seller at least two (2) business days prior to the
Closing Date.
2.2 PURCHASE PRICE ADJUSTMENTS. If the Valued Assets being acquired
by Buyer have a net book value at the Closing (the "Net Asset Value") of less
than Ten Million Eight Hundred Ninety-nine Thousand Seven Hundred Twenty-two
Dollars ($10,899,722) (the "Target Value"), the Purchase Price payable at the
Closing will be further reduced by the excess of the Target Value over the Net
Asset Value. If the Valued Assets being acquired by Buyer have a Net Asset Value
of more than the Target Value, the Purchase Price payable at the Closing will be
increased by the excess of the Net Asset Value over the Target Value. The Net
Asset Value will be determined pursuant to Section 2.3 hereof.
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2.3 DETERMINATION OF NET ASSET VALUE. Within three (3) days
preceding the Closing Date, the Chief Financial Officer of the Seller shall
deliver a certificate to Buyer setting forth such officer's good faith estimate
of the Net Asset Value of the Valued Assets as of the Closing Date (the "CFO's
Certificate") for the purpose of determining any adjustment to the Purchase
Price to be paid by Buyer at the Closing. The Net Asset Value of the Valued
Assets shall be the book value of the Valued Assets determined as follows:
(a) INVENTORY. The Net Asset Value of the "marketable" inventory
shall be determined based on a physical inventory of the inventory which shall
be taken by an independent and nationally recognized inventory service
immediately prior to the Closing Date, which physical inventory may be observed
by representatives of the Seller and Buyer. For purposes of this Section 2.3(a),
the inventory shall be valued as described on SCHEDULE 2.3(a) hereto and shall
be considered "marketable" only if it satisfies the criteria set forth on
SCHEDULE 2.3(a) hereto. The cost of the inventory service shall be shared
equally by the Seller and Buyer. Within three (3) days after the taking of the
inventory, the inventory service shall provide to the Seller and Buyer its
estimate of the amount of the inventory based on the preceding methodology. The
Seller and Buyer shall then have five (5) days to submit any comments or
objections with respect to the inventory to the inventory service. Within three
(3) days thereafter, the inventory service shall notify the Seller and Buyer of
its final calculation of the amount of the inventory, which calculation shall be
final and binding on Buyer and the Seller for the purpose of determining the
value of the "marketable" inventory on such date.
(b) ACCOUNTS RECEIVABLE. The Seller acknowledges and agrees that
the estimate of the Net Asset Value of the accounts receivable shall fix an
allowance for doubtful accounts at seven percent (7%) of the Seller's gross
accounts receivable relating to the Business and included in the Purchased
Assets. In calculating the Net Asset Value of the Seller's accounts receivable
relating to the Business and included in the Purchased Assets as described in
Section 2.3(d) below, Buyer shall calculate the gross amount of such accounts
receivable as of the Closing Date and apply the same percentage of allowance for
doubtful accounts as referred to above. In calculating the gross amount of such
accounts receivable, Buyer shall not be entitled to any adjustments for
additional write-offs made by Buyer of accounts receivable as of the Closing.
(c) FIXED ASSETS. The Net Asset Value of the Fixed Assets shall
be determined based upon the cost of such assets less the amount of depreciation
through the Closing Date. In calculating the Net Asset Value of the Fixed
Assets, Buyer shall use the same depreciation methodology as used by the Seller
in its preparation of the CFO's Certificate.
(d) BUYER'S DETERMINATION. Within forty-five (45) days after the
Closing, Buyer shall prepare and deliver to the Seller, a certificate as to its
calculation using the methodology described in Section 2.3(a)-(c) above of the
Net Asset Value as of the Closing Date (the "Buyer's Certificate") and the
resulting additional adjustment to the Purchase Price, if any, which will be the
difference between the Net Asset Value on the CFO's Certificate and the Net
Asset Value on the Buyer's Certificate (the "Purchase Price Adjustment"). Buyer
shall provide the Seller with appropriate backup for its calculation of the Net
Asset Value. If the Seller does not
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dispute the Net Asset Value set forth on the Buyer's Certificate within fifteen
(15) business days after receipt of same, the Net Asset Value set forth on the
Buyer's Certificate shall become the final Net Asset Value and the Seller shall
reimburse to Buyer, or Buyer shall pay to the Seller, as the case may be, the
Purchase Price Adjustment by wire transfer in immediately available United
States federal funds within five (5) days of the Net Asset Value becoming
finalized. If the Seller disputes the Net Asset Value set forth on the Buyer's
Certificate, it shall deliver written notice to Buyer specifying, in reasonable
detail, the nature and basis of such dispute (the "Seller's Dispute Notice").
Buyer and the Seller shall attempt in good faith to reach an agreement with
regard to the Net Asset Value within twenty (20) days after the Seller's Dispute
Notice is received by Buyer, in which event the Net Asset Value, as agreed to,
shall be the conclusive and binding Net Asset Value, and the Seller shall
reimburse to Buyer, or Buyer shall pay to the Seller, as the case may be, the
Purchase Price Adjustment, by wire transfer in immediately available United
States federal funds within five (5) days of the Net Asset Value becoming
finalized.
(e) FINAL DETERMINATION. If Buyer and the Seller are unable to
resolve the Net Asset Value within the aforesaid 20-day period, the parties
shall, promptly after the expiration of such time period, submit their
unresolved dispute to a nationally (or, if none is available, regionally)
recognized accounting firm not affiliated in any way with the Seller or Buyer as
selected by Buyer and approved by the Seller, which approval shall not be
unreasonably withheld (the "Net Asset Value Arbiter"). Promptly, but no later
than thirty (30) days after acceptance of its appointment, the Net Asset Value
Arbiter shall render a written report as to the resolution of the dispute and
the resulting calculation of the Net Asset Value. The decision of the Net Asset
Value Arbiter will be delivered in writing to Buyer and the Seller, will be
final and binding upon such parties, and payment by either the Seller or Buyer,
as the case may be, to the other of the Purchase Price Adjustment, shall be made
by wire transfer in immediately available United States federal funds within
five (5) days of the Net Asset Value becoming finalized by the Net Asset Value
Arbiter. The Net Asset Value Arbiter shall have exclusive jurisdiction over, and
resort to the Net Asset Value Arbiter as provided in this paragraph shall be the
sole recourse and remedy of the parties against one another or any other person
with respect to determining the Net Asset Value. The fees and expenses of the
Net Asset Value Arbiter shall be borne equally by Buyer and the Seller.
2.4 ALLOCATION. The Purchase Price shall be allocated among the
Purchased Assets in the manner required by Section 1060 of the Internal Revenue
Code of 1986, as amended.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
--------------------------------------------
The Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION.
3.1.1 ORGANIZATION AND POWER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois. Seller has full
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corporate power to own, lease and operate the Purchased Assets owned, leased or
operated by it and carry on the Business as and where such assets are now owned
or leased and as such Business is presently being conducted.
3.1.2 QUALIFICATION. SCHEDULE 3.1.2 lists all of the states and
countries in which Seller (i) owns or leases real property used primarily in the
Business, (ii) maintains sales offices or sales agents used primarily in the
Business, or (iii) maintains inventory used primarily in the Business. The
Seller is not, and is not required to be, qualified to do business as a foreign
corporation in connection with the Business in any states or countries other
than those listed in SCHEDULE 3.1.2, and the Seller is duly qualified as a
foreign corporation to do business in each of those states or countries, except
for where the failure to so qualify would not have a material adverse effect on
the Business or the Purchased Assets.
3.2 AGREEMENTS.
3.2.1 ENFORCEABILITY. All requisite corporate action to approve,
execute, deliver and perform this Agreement and each other agreement and
document delivered by Seller in connection herewith has been taken by Seller.
This Agreement and each other agreement and document delivered by Seller in
connection herewith has been duly executed and delivered by Seller and
constitutes the binding obligation of Seller enforceable in accordance with its
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
rights of creditors generally or by principles of equity.
3.2.2 CONSENTS. Except as required by the HSR Act and as set
forth on SCHEDULE 3.2.2, no approval or consent of, or filing with, any Person
or Governmental Authority is required in connection with the transactions
contemplated hereby or the execution, delivery or performance by Seller of this
Agreement or any other agreement or document delivered by or on behalf of Seller
in connection herewith.
3.2.3 NO CONFLICTS. Except as set forth on SCHEDULE 3.2.3, no
action taken or required to be taken by or on behalf of Seller in connection
herewith, including, but not limited to, the execution, delivery and performance
of this Agreement, and each other agreement and document delivered by the Seller
in connection herewith:
(a) to the Knowledge of Seller, gives rise to a right of
termination or acceleration under any Contract by which it is bound;
(b) to the Knowledge of Seller, disrupts or impairs any
business relationship which Seller has with any vendor,
manufacturer, dealer, distributor, sales representative, supplier or
customer;
(c) conflicts with or violates, in any material respect:
(i) any Law;
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(ii) the Seller's Articles of Incorporation or
Bylaws;
(iii) any Contract by which Seller is bound;
(iv) any order, arbitration award, judgment,
decree or other similar restriction to which Seller is
subject; or
(d) constitutes an event which, after notice or lapse of
time or both, could result in any of the foregoing, in each case,
with respect to the foregoing clauses (a) through (d), which could
reasonably be expected to have a material adverse effect on the
Purchased Assets, the Business, or Seller's ability to consummate
the transactions contemplated by this Agreement.
3.3 FINANCIAL.
3.3.1 FINANCIAL RECORDS. SCHEDULE 3.3.1 consists of (a) a
schedule of the Valued Assets as of February 28, 1998 (the "Acquisition Balance
Sheet"), and (b) an unaudited statement of income for the Business, including a
statement of the direct revenues and expenses of the Business, for the eighteen
(18) month period through February 28, 1998, each of (a) and (b) as prepared by
the Seller. Except as set forth on SCHEDULE 3.3.1, all such financial records
were compiled from the Seller's books of account, are accurate and complete in
all material respects, and present fairly the Valued Assets and the results of
operations of the Business at the date and for the period indicated.
3.3.2 NO CHANGES. Since January 31, 1998, Seller has, in all
material respects, operated the Business only in the ordinary course, consistent
with past practice. Since that date, there has not been any material adverse
change, or event or circumstance which might reasonably be expected to result in
a material adverse change, in the Purchased Assets or the Business that is
specific to Seller and not to the Seller's industry as a whole. Without limiting
the generality of the foregoing, since January 31, 1998, except as listed on
SCHEDULE 3.3.2, there has not been , with respect to the Business, any:
(a) waiver, release, cancellation or compromise of any
debts owed to it or claims or rights against others exceeding
$50,000 in the aggregate;
(b) purchase or lease (or commitment to purchase or
lease) any assets (other than inventory) in excess of Fifty Thousand
Dollars ($50,000) individually or Two Hundred Fifty Thousand Dollars
($250,000) in the aggregate;
(c) (i) creation, incurrence or assumption of any debt
for borrowed money, (ii) assumption, guarantee, endorsement or other
act of becoming liable or responsible for the obligation of any
other Person, or (iii) making of any loans, advances or capital
contributions to, or investments in, any other Person;
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(d) new Contract entered into, except in the ordinary
course of business consistent with past practice, or then existing
Contract modified or terminated under circumstances which might
adversely affect the condition (financial or otherwise) or prospects
of the Business taken as a whole; or
(e) sale or disposition of any assets other than (i)
inventory in the ordinary course of business or (ii) assets
individually worth more than $3,000 or in the aggregate worth more
than $20,000.
3.3.3 TAXES. All Tax returns, reports and declarations
(hereinafter collectively, "Tax Returns") required by any Governmental Authority
to be filed in connection with the properties, business, sales, income,
expenses, net worth and franchises of the Seller, the failure of which to file
would have a material adverse effect on the Purchased Assets, have been timely
filed, and such returns are correct and complete in all material respects. All
Tax due in connection with the properties, business, sales, income, expenses,
net worth and franchises of the Seller has been paid, other than any Tax which
is not yet due or which, if due, is not yet delinquent or is being contested in
good faith. There are no Tax claims, audits or proceedings pending in connection
with the properties, business, income, expenses, net worth and franchises of the
Business, and, to the Knowledge of the Seller, there are no such threatened
claims, audits or proceedings. There are not currently in force any extensions
of time with respect to the dates on which any Tax Return was or is due to be
filed by the Seller, or any waivers or agreements for the extension of time for
the assessment or payment of any Tax.
3.4 LEGAL.
3.4.1 COMPLIANCE WITH LAWS. Seller is not in violation, in any
material respects, of any outstanding arbitration award, judgment, order or
decree relating in any manner to the Purchased Asset or the Business. SCHEDULE
3.4.1 lists all material permits, licenses, approvals or authorizations of any
Governmental Authority required by Seller to conduct the Business (the
"Permits"). All such Permits have been legally obtained and maintained by the
Seller and are in full force and effect in all material respects. No proceeding
is pending to revoke or limit any Permit. The Seller has timely made all filings
required to be made in connection with the sale of the products of the Business
in each state where they have sold products, the failure of which to file would
have a material adverse effect on the Purchased Assets, and, to the Knowledge of
Seller, no such filing has been the subject of any inquiry or investigation. In
the past year, there have been no material claims, notices, orders or directives
issued by any Governmental Authority with respect to the Business or the
Purchased Assets.
3.4.2 LITIGATION. Except as listed in SCHEDULE 3.4.2:
(a) no claim, litigation, investigation or proceeding is
pending or, to the Knowledge of the Seller, threatened against
Seller relating in any manner to the Business or the Purchased
Assets, which would have a material adverse effect on the Purchased
Assets or the Business; and
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(b) no arbitration award, judgment, order, decree or
similar restriction is outstanding against or relating in any manner
to the Business or the Purchased Assets, which would have a material
adverse effect on the Purchased Assets or the Business.
3.5 BUSINESS.
3.5.1 EMPLOYMENT. As it relates to the Business, as of February
28, 1998, the Business employed a total of three hundred ninety-three (393)
employees, all of which were full-time. SCHEDULE 3.5.1 lists the names, current
annual compensation rates and other compensation arrangements of each of the
Seller's employees at the Business. Seller has paid in full to all employees of
the Business, or made appropriate accruals for on its books of account, all
wages, commissions, bonuses and other direct compensation for all services
performed by them. Seller has withheld or collected from each payment made to
each of its employees of the Business the amount of all Taxes required to be
withheld or collected therefrom, and Seller has paid the same when due to the
proper Governmental Authorities, the failure of which to withhold would have a
material adverse effect on the Purchased Assets or the Business. There are no
pending controversies, grievances or claims by any of the employees, former
employees or beneficiaries of employees of the Business with respect to their
employment or benefits incident thereto, including, but not limited to, sexual
harassment and discrimination claims and claims arising under workers'
compensation laws ("Employee Claims"). There is no union representation of the
Business, there has been no attempt by a labor organization to organize the
Business into a collective bargaining unit, and there is no basis to believe
that there is any imminent threat of an attempt to organize a union at the
Business. Except as set forth on SCHEDULE 3.5.1, since February 28, 1998, other
than normal increases using standards consistent with past practice, there has
not been any general increase made or promised in the level or rate of salaries
or compensation (including, but not limited to, bonuses) of any of the Business'
employees, increases made or promised in the salary or compensation (including,
but not limited to, bonuses) paid to or accrued for the benefit of any employee,
director, representative or agent of the Business.
3.5.1.1 WORKER ADJUSTMENT AND RETRAINING NOTIFICATION ACT
("WARN"). Seller represents that SCHEDULE 3.5.1.1 indicates each of the Leased
Properties and, with respect to each, lists each and every employee employed
there as of January 1, 1998. In addition, if any of the employees listed within
SCHEDULE 3.5.1.1 (i) incurred an employment termination, other than a discharge
for cause, voluntary departure or retirement; (ii) was laid off for any reason;
or (iii) experienced a reduction in hours of work of more than fifty percent
(50%) from January 1, 1998, to the date of this Agreement, such shall be
indicated next to the employee's name, with the date of such occurrence(s)
provided.
3.5.2 CONTRACTS. SCHEDULE 3.5.2 contains a complete and accurate
list of the material Contracts of the Seller that relate to the Business. The
Seller has delivered or made available to Buyer copies of such written Contracts
which are accurate and complete in all material respects, in each case with all
material modifications and amendments thereto. There has been no material
modification or termination of any such Contract or Lease Agreement under
circumstances
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which would reasonably be expected to have a material adverse effect on the
Business and each such Contract and Lease Agreement is valid and in full force
and effect.
3.5.3 COMPLIANCE WITH CONTRACTS. Except as set forth on SCHEDULE
3.5.3, with respect to the Contracts and Lease Agreements that are being
assigned to Buyer hereunder, the Seller is not in material default under or in
material violation of any thereof, and no event has occurred which, with notice
or lapse of time or both, would constitute such a material default or material
violation. There have been no discussions or correspondence concerning a breach
by Seller or termination of any of the foregoing. To the Knowledge of the
Seller, there is no material default under or any material violation of any of
the foregoing by any other party thereto.
3.5.4 PREPAYMENTS AND DEPOSITS. Seller has not received any
prepayments or deposits from customers of the Business for products to be
shipped, or services to be performed, in the future.
3.5.5 SUPPLIERS AND CUSTOMERS. No supplier or customer which
accounted for more than five percent (5%) of Business' sales or purchases in the
past year has terminated, or, to the Knowledge of Seller, threatened to
terminate, its relationship with Seller.
3.6 ASSETS.
3.6.1 TITLE. The Purchased Assets are, or at the Closing will
be, free and clear of all Liens other than the Permitted Liens. Seller owns or
leases all of the Purchased Assets. Except for the Retained Assets, assets
leased under Contracts listed on SCHEDULE 3.5.2 and immaterial personal property
of employees, the Purchased Assets include all assets that are useful, or are
being used, primarily to operate the Business. All of the Contracts by which
Seller is bound with respect to which Buyer is acquiring the rights of Seller
pursuant to Section 1.4 hereof are valid, in full force and effect, and, in all
material respects, enforceable in accordance with their terms and, to the
Knowledge of Seller, will not be affected by the consummation of the transaction
contemplated hereby, except to the extent that any consent required in
connection with the assignment thereof is not obtained. There exists no
condition affecting the title to or use of any part of the Purchased Assets that
would prevent Buyer from occupying, using, or enforcing its rights in respect of
any part of the Purchased Assets to the same full extent that the Seller could
continue to do so if the transactions contemplated hereby did not take place.
3.6.2 ACCOUNTS RECEIVABLE. To the Knowledge of Seller, none of
the accounts receivable relating to the Business and included in the Purchased
Assets are subject to any set-off or counterclaim. SCHEDULE 3.6.2 sets forth the
aging summaries of the accounts receivable relating to the Business as of the
date of the Acquisition Balance Sheet.
3.6.3 INVENTORIES. All inventory has been valued on the
Acquisition Balance Sheet at the cost reflected on the most recent vendor
invoice.
3.6.4 CONDITION. All of the Fixed Assets included in the
Purchased Assets are in operating condition, normal wear and tear excepted.
Except as provided in the preceding
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sentence, the Fixed Assets are being transferred AS IS, WHERE IS, WITH ALL
FAULTS, and the Seller disclaims any express or implied warranties, including
the warranties of merchantability or fitness for a particular purpose.
3.6.5 INTELLECTUAL PROPERTY. SCHEDULE 3.6.5 lists all material
Intellectual Property Rights owned by Seller or in which (as noted on such
Schedule) Seller has any rights or licenses which is useful or used primarily in
the Business. To the Knowledge of the Seller, there has not been any
infringement or alleged infringement by others of any such Intellectual Property
Rights. Except as set forth in SCHEDULE 3.5.2, Seller is not a party to any
material contract, whether as licensor, licensee, franchisor, franchisee,
dealer, distributor, or otherwise, with respect to any Intellectual Property
Rights or Trade Secrets which is useful or used primarily in the Business. The
Seller has the right to use all Intellectual Property Rights as are necessary to
enable the Seller to conduct all phases of the Business in the manner presently
conducted, and the use of the trade name "Advance Care," and, to the Knowledge
of Seller, the use of any other Intellectual Property Rights, has not conflicted
with, infringed, or otherwise violated any rights of any Person. The
Intellectual Property Rights listed in SCHEDULE 3.6.5 are valid and in full
force and effect and are not subject to any material interference action or
other judicial, arbitration, or other adversary proceeding, the effect of which
would have a material adverse effect on the Purchased Assets or the Business.
3.7 REAL PROPERTY. Seller does not own any real property that is
used primarily in the Business, nor has Seller agreed to acquire any real
property or any fee interest in any real property. Except as set forth on
SCHEDULE 3.7, Seller has the exclusive right to possess, use and occupy their
respective Leased Properties pursuant to valid and binding lease agreements that
are enforceable in all material respects (the "Lease Agreements"). To the
Knowledge of Seller, none of the buildings, structures, improvements or
appurtenances of the Leased Properties, nor the operation or maintenance
thereof, violates in any material respect any restrictive covenant or any
provision of any Law, or encroaches on any property owned by others. To the
Knowledge of Seller, all accounts for work and services performed and materials
placed or furnished upon or in respect to the Leased Properties at the request
of Seller have been fully paid and satisfied and no person is entitled to claim
a Lien under any Law against the Leased Properties or any part thereof in
connection therewith. To the Knowledge of Seller, there is nothing owing in
respect of the Leased Properties by Seller to any municipal corporation or to
any other corporation or commission owning or operating a public utility for
water, gas, electrical power or energy, steam or hot water, or for the use
thereof, other than current accounts in respect of which the payment due date
has not yet passed. To the Knowledge of Seller, there are no material structural
repairs or replacements that are necessary with respect to the Leased
Properties. To the Knowledge of Seller, no underground storage tanks are or have
been located on the Leased Properties. The Seller has delivered to Buyer true
and complete copies of the Lease Agreements and all environmental audits,
evaluations, assessments, studies or tests relating to the Leased Properties and
their use which are within the possession or control of the Seller.
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3.8 MISCELLANEOUS.
3.8.1 CONFLICTS OF INTEREST. Except as set forth on SCHEDULE
3.8.1, to the Knowledge of Seller, no shareholder, director or employee of
Seller, nor any relative of any director or employee of Seller nor any Affiliate
of any of the foregoing:
(a) owns, directly or indirectly, any interest in, or is
an employee or agent of, any entity which is a competitor, lessor,
lessee, customer or supplier of the Business;
(b) owns, directly or indirectly, any interest in, any
tangible or intangible property, asset, or right which the Seller
uses in the Business;
(c) has any cause of action or claim against, owes any
amount to, or is owed any amount by the Business;
(d) is a party to any Contract with the Business; or
(e) received a loan, gift or advance from the Seller
that in any manner relates to the Business during the three (3) year
period preceding the Closing Date.
3.8.2 FULL DISCLOSURE. No representation or warranty by Seller
in this Agreement and no statement contained in any Schedule to this Agreement
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements contained therein, in light of the
circumstances in which they are made, not misleading.
ARTICLE 3A
REPRESENTATIONS AND WARRANTIES OF WALGREENS
-------------------------------------------
Walgreens represents and warrants to Buyer as follows:
3A.1 ENFORCEABILITY. Walgreens is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois.
Walgreens has full corporate power and authority to execute, deliver and perform
this Agreement and each of the agreements and documents delivered by Walgreens
in connection herewith. This Agreement and each other agreement and document
delivered by Walgreens in connection herewith has been duly executed and
delivered by Walgreens and constitutes the binding obligations of Walgreens
enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights creditors generally
or by principles of equity.
3A.2 CONSENTS. Except as required by the HSR Act, no approval or
consent of, or filing with, any Person or Governmental Authority is required in
connection with the execution,
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delivery or performance by Walgreens of this Agreement or any other agreement or
document delivered by Walgreens in connection herewith.
3A.3 NO CONFLICTS. No action taken or required to be taken by or on
behalf of Walgreens in connection with the execution, delivery and performance
of this Agreement, and each other agreement and document delivered by Walgreens
in connection herewith conflicts with or violates: (a) any Law; (b) Walgreens'
Articles of Incorporation or Bylaws; (c) any order, arbitration award, judgment,
decree or other similar restriction to which Walgreens is subject.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER AND NCS
-----------------------------------------------
Buyer and NCS, jointly and severally, represent and warrant to the
Seller as follows:
4.1 ORGANIZATION AND POWER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and at the Closing will be qualified to do business in each state where such
qualification is necessary. Buyer has full corporate power and authority to
execute, deliver and perform this Agreement and all other agreements and
documents to be executed and delivered by it in connection herewith. NCS is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. NCS has full corporate power and authority to execute,
deliver and perform this Agreement and all other agreements and documents to be
executed and delivered by it in connection herewith.
4.2 AGREEMENTS.
4.2.1 ENFORCEABILITY. All requisite corporate action to approve,
execute, deliver and perform this Agreement and each other agreement and
document delivered by Buyer and NCS in connection herewith has been taken by
Buyer and NCS. This Agreement and each other agreement and document delivered by
Buyer and NCS in connection herewith have been duly executed and delivered by
Buyer and NCS and constitutes the binding obligations of Buyer and NCS
enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors
generally or by principles of equity.
4.2.2 CONSENTS. Except as required by the HSR Act, no approval
or consent of, or filing with, any Person or Governmental Authority is required
in connection with the transactions contemplated hereby or the execution,
delivery or performance by Buyer or NCS of this Agreement or any other agreement
or document delivered by Buyer or NCS in connection herewith.
4.2.3 NO CONFLICTS. No action taken by or on behalf of Buyer or
NCS in connection herewith, including, but not limited to, the execution,
delivery and performance of this Agreement, and each other agreement and
document delivered by them in connection herewith,
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conflicts with or violates, in any material respect (a) any Law, (b) Buyer's
Certificate of Incorporation or Bylaws, (c) NCS's Certificate of Incorporation
or Bylaws, (d) any contract by which Buyer or NCS is bound, or (e) any order,
arbitration award, judgment, decree or other similar restriction to which either
Buyer or NCS is subject, or constitutes an event which, after notice or lapse of
time or both, could result in any of the foregoing, in each case, with respect
to the foregoing clauses (a) through (e), which could reasonably be expected to
have a material adverse effect on Buyer's or NCS' business or their ability to
consummate the transactions contemplated by this Agreement.
4.2.4 FULL DISCLOSURE. No representation or warranty by Buyer or
NCS in this Agreement and no statement contained in any Schedule to this
Agreement contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not misleading.
4.3 NO INVESTIGATION. Except as set forth on SCHEDULE 4.3 attached
hereto, to the knowledge of NCS, neither NCS nor Buyer currently is under
investigation by any Governmental Authority.
ARTICLE 5
CLOSING; CONDITIONS
-------------------
5.1 CLOSING. The consummation of the transactions contemplated
hereby (the "Closing") shall take place at 10:00 a.m. (local time) on a mutually
agreed upon date that is within five (5) business days after the satisfaction or
written waiver of the conditions contained in Sections 5.2, 5.3 and 5.3A (the
"Closing Date") at the offices of Seller, or on such other date, place or time
as the parties may mutually agree. The transfers and deliveries herein
contemplated will be mutually interdependent and regarded as occurring
simultaneously; and no such transfer or delivery will become effective until all
of the transfers and deliveries provided for in Sections 5.2 and 5.3 have been
consummated. The transfers and deliveries herein contemplated will be deemed to
have occurred and the Closing will be effective as of the start of business on
the Closing Date.
5.2 CONDITIONS TO BUYER'S AND NCS'S OBLIGATIONS. The obligation of
Buyer and NCS to perform this Agreement is subject to satisfaction or written
waiver of the following conditions at or before the Closing:
5.2.1 AGREEMENTS PERFORMED. Seller shall have performed in all
material respects all of the obligations under this Agreement to be performed by
it at or before the Closing;
5.2.2 REPRESENTATIONS ACCURATE. The representations and
warranties of Seller and Walgreens contained herein will continue to be accurate
in all material respects as if made as of the Closing;
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5.2.3 CERTIFICATES. Buyer will have received a certificate from
each of Seller and Walgreens, with the referenced attachments, in the form of
EXHIBITS A AND B, respectively, attached hereto;
5.2.4 NO CHANGE. There will have been no material adverse change
in the Business or the Purchased Assets taken as a whole;
5.2.5 LEGAL ACTION. There will be no pending or threatened legal
action or inquiry that challenges the validity or legality of or seeks or could
reasonably be expected to prevent, delay or impose conditions on the
consummation of the transactions contemplated by this Agreement;
5.2.6 CONSENTS. Buyer will have received all consents and
approvals of all Governmental Authorities (other than under the HSR Act)
necessary for Buyer and the Seller to execute, deliver and perform this
Agreement, and the consents and approvals of all Persons listed on SCHEDULE
3.2.2;
5.2.7 LIEN TERMINATION STATEMENTS. Buyer will have received
termination statements of all security interests in, and releases of all Liens,
other than Permitted Liens, on, the Purchased Assets, including, but not limited
to, UCC Termination Statements;
5.2.8 TRANSFER INSTRUMENTS. Buyer will have received from Seller
a general bill of sale and assignment ("Bill of Sale") and such certificates of
title (including, but not limited to, those for motor vehicles), endorsements,
assignments in recordable form (including, but not limited to, those for the
Leased Properties and all of Seller's Intellectual Property Rights owned, useful
or used primarily in the Business), affidavits, and other instruments of
transfer, all of which shall be in form and substance reasonably satisfactory to
the Seller and Buyer, as shall be required to permit Buyer to acquire the
Purchased Assets, free of any Liens other than the Permitted Liens;
5.2.9 ASSIGNMENT OF CONTRACTS. Buyer will have received from
Seller an instrument, in form and substance reasonably satisfactory to Seller
and Buyer, pursuant to which Seller assigns the Contracts set forth on SCHEDULE
1.4(a) to Buyer;
5.2.10 LEGAL OPINION. Buyer will have received an opinion of
counsel of the Seller and Walgreens, in a form and substance reasonably
acceptable to Buyer and its counsel, dated as of the Closing Date; and
5.2.11 OTHER. Buyer will have received each other document
required to be delivered to Buyer hereunder.
5.3 CONDITIONS TO SELLER'S OBLIGATIONS. The obligation of the Seller
to perform this Agreement is subject to satisfaction or written waiver of the
following conditions at or before the Closing:
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5.3.1 AGREEMENTS PERFORMED. Buyer will have performed in all
material respects all of the obligations under this Agreement to be performed by
it at or before the Closing;
5.3.2 REPRESENTATIONS ACCURATE. The representations and
warranties of Buyer and NCS contained herein will continue to be accurate in all
material respects as if made as of the Closing;
5.3.3 CERTIFICATES. The Seller will have received a certificate
from each of Buyer and NCS, with the referenced attachments, in the form of
EXHIBITS C AND D, respectively, attached hereto;
5.3.4 LEGAL ACTION. There will be no pending or threatened legal
action or inquiry that challenges the validity or legality of or seeks or could
reasonably be expected to prevent, delay or impose conditions on the
consummation of the transactions contemplated by this Agreement;
5.3.5 PAYMENT OF THE PURCHASE PRICE. The Seller will have
received immediately available funds by wire transfer in the amount and to the
accounts designated pursuant to Section 2.1 hereof;
5.3.6 ASSUMPTION OF ASSUMED LIABILITIES. The Seller will have
received an instrument, in form and substance reasonably satisfactory to the
Seller and Buyer, pursuant to which Buyer assumes the Assumed Liabilities;
5.3.7 LEGAL OPINION. The Seller will have received an opinion of
counsel from Calfee, Halter & Griswold LLP, in a form and substance reasonably
acceptable to the Seller and its counsel, dated as of the Closing Date; and
5.3.8 OTHER. The Seller will have received each other document
required to be delivered to it hereunder.
5.3A CONDITIONS TO BUYER'S, WALGREENS', NCS'S AND SELLER'S
OBLIGATIONS. The obligations of Seller, Walgreens, NCS and of Buyer,
respectively, to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following additional conditions:
(a) HSR ACT. Any waiting period (and any extension thereof)
under the HSR Act applicable to the transaction contemplated hereby shall have
expired or shall have been terminated; and
(b) NO ORDER. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting
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consummation of such transactions; PROVIDED, HOWEVER, that the parties hereto
shall use their reasonable efforts to have any such order or injunction vacated.
5.4 PRE-CLOSING COVENANTS.
5.4.1 CONDUCT OF THE BUSINESS. From the date hereof until the
Closing, except to the extent that Buyer otherwise consents in writing or except
as disclosed on SCHEDULE 5.4.1 hereto, the Seller will operate the Business
substantially as presently operated and only in the ordinary course. The Seller
will use commercially reasonable efforts to preserve intact the present business
organization and the relationships with persons having business dealings with
the Business. Without limiting the generality of the foregoing, in connection
with the Business, the Seller will not:
(a) purchase or lease (or commit to purchase or lease)
any assets (other than inventory) in excess of Twenty-five Thousand
Dollars ($25,000) individually or One Hundred Thousand Dollars
($100,000) in the aggregate;
(b) (i) create, incur or assume any debt (other than
trade payables in the ordinary course of business, consistent with
past practice), (ii) assume, guarantee, endorse or otherwise become
liable or responsible for the obligation of any other Person, or
(iii) make any loans, advances or capital contributions to, or
investments in, any other Person;
(c) (i) increase in any manner the rate of compensation
of any of its employees in the Business, other than normal increases
using standards consistent with past practice or as required by any
collective bargaining agreement, or (ii) pay or agree to pay any
bonus, pension, retirement allowance, severance or other employee
benefit not required or permitted by any existing Employee Benefit
Plan or by applicable Law;
(d) permit any of the Purchased Assets to be subjected
to any Lien other than Permitted Liens;
(e) enter into any Contract, except in the ordinary
course of business consistent with past practice, or modify or
terminate any Contract under circumstances which might adversely
affect the condition (financial or otherwise) or prospects of the
Business;
(f) sell or dispose of any assets other than (i)
inventory in the ordinary course of business, or (ii) assets
individually worth less than Three Thousand Dollars ($3,000) or in
the aggregate worth less than Twenty Thousand Dollars ($20,000); or
(g) take any action the taking of which, or omit to take
any action the omission of which, would cause any of the
representations and warranties herein
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to fail to be true and correct in all material respects as of the
date of such action or omission as though made at and as of the date
of such action or omission, except as otherwise specifically
contemplated by this Agreement.
5.4.2 ACCESS. From the date hereof until Closing, upon
reasonable notice, the Seller will provide NCS and Buyer and their
representatives reasonable access to the personnel, facilities and all Books and
Records and such other information and Persons relating to the Business as NCS
and Buyer may reasonably request, provided that such access does not materially
interfere with the operation of the Business. In addition, subject to applicable
Law and the terms of the Lease Agreements, the Seller will permit NCS and Buyer
to perform engineering, environmental and workplace condition surveys and such
other physical inspections of the Leased Properties as NCS or Buyer may
reasonably deem necessary, at Buyer's sole cost and expense, in such a manner
that will not materially interfere with the Business. The parties hereto agree
that the terms and conditions of the letter agreement, dated December 15, 1997,
with regard to confidentiality shall remain in full force and effect and, to the
extent any Proprietary Information (as defined in the December 15 letter
agreement) does not relate to the Business, such letter agreement shall survive
the Closing of this Agreement.
5.4.3 SUPPLEMENTAL DISCLOSURE. Until the Closing, Seller will
promptly notify Buyer of any event or circumstance that arises hereafter and
that, had it existed on or prior to the date hereof, would have resulted in a
material inaccuracy in a representation or warranty in Article 3.
5.4.4 SATISFACTION OF CONDITIONS; HSR ACT FILING. Seller and
Walgreens agree to use all reasonable efforts to cause each of the conditions
set forth in Section 5.2 to Buyer and NCS proceeding with the Closing and in
Section 5.3.A to be satisfied at or before the Closing. Buyer and NCS agree to
use all reasonable efforts to cause each of the conditions set forth in Section
5.3 to Seller and Walgreens proceeding with the Closing and in Section 5.3.A to
be satisfied at or before the Closing. Each party hereto will use its reasonable
efforts to obtain all authorizations, consents, orders and approvals of all
federal, state and local regulatory bodies and officials that may be or become
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement, and will cooperate fully with the other
party in promptly seeking to obtain all such authorizations, consents, orders
and approvals. Each party hereto agrees to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby promptly after the execution of this Agreement
and to supply promptly any additional information and documentary material that
may be requested pursuant to the HSR Act. The parties hereto will not take any
action that will have the effect of delaying, impairing or impeding the receipt
of any required authorizations, consents, orders or approvals, PROVIDED,
HOWEVER, that nothing in this Agreement shall be construed to prevent or impair
NCS or Buyer from taking any action it deems reasonable in response to any
action or proposed or threatened action by any Governmental Authority with
jurisdiction over the enforcement of any applicable antitrust laws
("Governmental Antitrust Authority"). Each of the parties agrees to respond to a
request for additional information or documentary material, if any, made
pursuant to Section 803.20 of the Premerger Notification Rules by a Governmental
Antitrust Authority in order to consummate the transaction
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contemplated by this Agreement. In no event shall any party be required to
consummate a transaction different than the transaction contemplated by this
Agreement, unless otherwise agreed to in writing by the parties hereto.
5.4.5 TERMINATION. This Agreement may be terminated:
(a) by mutual written consent of Buyer and the Seller;
(b) by either Seller or Buyer, if the Closing shall not
have occurred by the 105th calendar day after the date of this
Agreement if the conditions set forth in Section 5.3.A(a) or Section
5.3.A(b) shall not have been satisfied; or
(c) by either Seller or Buyer, if the Closing shall not
have occurred prior to the date that is four (4) months after the
date of this Agreement; PROVIDED, HOWEVER, that the right to
terminate this Agreement under Section 5.4.5 (b) or (c) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement shall have been the cause of, or shall have resulted
in, the failure of the Closing to occur prior to such date.
If this Agreement is terminated pursuant to paragraph (a) of this Section 5.4.5
all provisions of this Agreement except Section 6.1.2 and the last sentence of
Section 5.4.2 will become void without any liability on the part of any party.
If this Agreement is terminated pursuant to paragraph (b) or (c) of this Section
5.4.5, all rights and remedies of each party hereunder and all other provisions
hereof related thereto will survive termination to the extent required so that
any party responsible for any breach or nonperformance of its obligations
hereunder prior to termination will remain liable for the damages resulting
therefrom.
ARTICLE 6
COVENANTS
---------
6.1 MISCELLANEOUS COVENANTS.
6.1.1 PUBLICITY. All public announcements relating to this
Agreement or the transactions contemplated hereby will be made only as may be
agreed upon by the parties or as required by Law (it being agreed that the
parties hereto or their Affiliates are entitled to disclose all requisite
information concerning the transaction in any filings required with the United
States Securities and Exchange Commission and pursuant to the HSR Act).
6.1.2 EXPENSES. Except to the extent otherwise specifically
provided herein or in the Addendum, Buyer will pay all of the expenses incident
to the transactions contemplated by this Agreement that are incurred by Buyer,
NCS or their representatives, and Seller will pay all of the expenses incident
to the transactions contemplated by this Agreement which are incurred by Seller,
Walgreens or their representatives or Affiliates. Notwithstanding the foregoing,
Seller and Buyer agree that: (i) all sales taxes arising in connection with the
transfer of the Purchased Assets
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shall be paid by Buyer, and (ii) Buyer shall pay all recording costs payable in
connection with the transactions contemplated by this Agreement and transfer
charges, if any, with respect to the transfer of motor vehicles. Additionally,
the parties agree that all proratable items such as rent under the Lease
Agreements, common area charges, utility charges, other obligations under the
Lease Agreements, payments owed with respect to the Assumed Liabilities and all
personal property taxes on the Purchased Assets or the Business shall be
prorated as of the Closing Date. The Seller shall provide its good faith
estimate of such prorations, using estimates if necessary, to Buyer at the time
Seller provides the CFO's Certificate and Buyer or Seller, as the case may be,
shall make the appropriate payment to the other on the Closing Date. As soon as
reasonably possible after the Closing Date, the parties shall calculate the
final correct amount of such prorations, and the Seller or Buyer, as the case
may be, shall make the appropriate payment, if any, to the other within ten (10)
days thereafter.
6.1.3 NO ASSIGNMENT. Except as provided in the following
sentence, no assignment of any part of this Agreement or any right or obligation
hereunder may be made by NCS or Buyer without the prior written consent of
Seller or by Walgreens or Seller without the prior written consent of Buyer, and
any assignment attempted without that consent will be void. Without the consent
of the Seller, Buyer may assign all or any part of this Agreement and all or any
part of its rights and obligations hereunder to an Affiliate of NCS or Buyer, in
which event, Seller will execute and deliver any documents reasonably requested
by the assignee(s) in connection with such assignments, provided that, with
respect to any such assignment, no such assignment will relieve Buyer or NCS of
its obligations hereunder.
6.1.4 ACCOUNTS RECEIVABLE AND PAYMENTS. Seller covenants and
agrees to forward to Buyer, promptly after the Seller's receipt of the same, any
and all payments that Seller or any Affiliate of Seller may receive in respect
of the accounts receivable acquired by Buyer hereunder or any payments that
relate or pertain to sales by Buyer after the Closing, which payments are
delivered to Seller or are otherwise received by either Seller or any of its
Affiliates. In the event that Buyer at any time receives checks payable to
Seller for amounts owed to Buyer, Buyer shall deliver such checks to Seller and
Seller shall endorse such checks to Buyer or remit to Buyer the amounts
represented by such checks promptly after Seller's receipt of same. Similarly,
Buyer shall promptly reimburse Seller for any Assumed Liabilities that are paid
by the Seller after the Closing Date, so long as Seller provides Buyer at least
five (5) days notice of their receipt of any Assumed Liabilities and Buyer does
not object to payment of same within three (3) days after Buyer's receipt of
Seller's notice. If Seller in good faith fails to provide Buyer such notice,
Buyer will reimburse Seller for any Assumed Liabilities that are paid by Seller
after the Closing Date, so long as the payment by Buyer of any such Assumed
Liability is not disputed by Buyer.
6.1.5 ASSIGNMENT OF CONTRACTS, RIGHTS, ETC. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any Contract or any claim or right or any benefit arising
thereunder or resulting therefrom if such assignment, without the consent of a
third party thereto, would constitute a material breach or other material
contravention of such Contract and the failure to obtain such consent materially
adversely affects the rights of Buyer or the Seller thereunder. Seller will use
commercially reasonable efforts (but without any payment of money by the Seller)
to obtain the consent of the
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other parties to any such Contracts or any claim or right or any benefit arising
thereunder for the assignment thereof to Buyer as Buyer may request. If
requested by any other party to such Contract, NCS will provide a guarantee of
the obligations to be assumed by Buyer thereunder, in form and substance
reasonably satisfactory to NCS. If, with respect to a particular Contract, any
such consent is not obtained, and if any attempted assignment thereof would be
ineffective or would materially adversely affect the rights of the Seller
thereunder so that Buyer would not in fact receive all such rights in all
material respects under such Contract, the Seller and Buyer will cooperate in a
mutually agreeable alternate arrangement under which Buyer would obtain the
benefits and assume the obligations thereunder in accordance with this
Agreement, including sub-contracting, sub-licensing, or sub-leasing to Buyer, or
under which Seller would enforce for the benefit of Buyer, with Buyer assuming
Seller's obligations under such Contract any and all rights of Seller against a
third party thereto. If: (i) any consent is required to any such sub-licensing,
sub-contracting, sub-leasing or other alternate arrangement and such consent is
not obtained, (ii) the substantial benefits under the Contract have not been
provided to Buyer by any alternative arrangements, and (iii) the other party to
such Contract takes an action or fails to take an action which results in Buyer
not being able to substantially enjoy and realize the benefits of the Contract
in question, Buyer shall have the right to reject such Contract and Seller,
immediately upon the request of Buyer, shall reassume its position as the party
to such Contract and such Contract shall no longer constitute an Assumed
Liability. Buyer acknowledges that Seller has endeavored to include on Schedule
1.4(a) the Contracts of Seller that relate primarily to the Business. The
parties agree that Seller intends to assign and Buyer intends to assume all
Contracts of Seller that relate primarily to the Business. Accordingly the
parties agree that any Contracts with customers of the Business or immaterial
Contracts of Seller that relate primarily to the Business inadvertently omitted
from Schedule 1.4(a) hereto shall be deemed to be one of the Assumed Liabilities
and subject to all the terms and provisions of this Agreement, including, but
not limited to, this Section 6.1.5.
6.1.6 POST-CLOSING AGREEMENT. The parties hereto acknowledge and
agree that Buyer may not have all required licenses, permits, provider numbers
and other governmental authorizations to take title to all of the Purchased
Assets and to hereafter operate all aspects of the Business. Buyer shall
promptly apply for such licenses, permits, provider numbers and other
governmental authorizations. Buyer knows of no reason why such permits, provider
numbers or licenses will not be granted. Seller agrees that, for a period not to
exceed six (6) months after the Closing Date, Buyer may operate the Business
under the authority of Seller's licenses, permits, provider numbers or other
governmental authorizations of the type that Buyer has not yet obtained,
PROVIDED, that such operation does not violate applicable laws or regulations,
and that Buyer indemnifies and holds Seller harmless against any and all costs,
liability, loss, damage or deficiency resulting from Seller's performance of
these obligations or use thereof. To the extent Buyer operates the Business
under the authority of any of Seller's licenses, permits, provider numbers or
governmental authorizations, Buyer agrees to distribute pharmaceutical supplies
and provide health and pharmacy services as would be required of Seller under
such licenses, permits, provider numbers and governmental authorizations and
will indemnify Seller against all liability for its failure to do so and for all
other liabilities arising in connection with such actions.
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6.1.7 NCS GUARANTY. NCS hereby unconditionally guaranties the
performance of any and all of Buyer's liabilities and obligations hereunder and
those under any other agreements or documents delivered in connection with this
Agreement.
6.1.8 WALGREENS GUARANTY. Walgreens hereby unconditionally
guaranties the performance of any and all of the Seller's liabilities and
obligations hereunder and those under any other agreements or documents
delivered in connection with this Agreement.
6.2 RESTRICTIVE COVENANTS.
6.2.1 CONFIDENTIALITY. Each of Walgreens and Seller agrees with
Buyer that it will not and will cause its Affiliates not to disclose or use,
directly or indirectly, any Confidential Information, at any time after the
Closing. If the disclosure of Confidential Information is required by Law, each
of Walgreens and Seller agrees to use its best efforts to provide Buyer an
opportunity to object to the disclosure and as much prior written notice as is
possible under the circumstances. For purposes of this Subsection 6.2.1,
"Confidential Information" means (i) all information belonging to, used by, or
that is in the possession of Walgreens or Seller relating to the Business to the
extent such information is not intended to be disseminated to the public or is
otherwise not generally known to competitors of the Business, including, but not
limited to, information relating to Seller's Business products, services,
strategies, pricing, customers, representatives, suppliers, distributors,
technology, finances, employee compensation, computer software and hardware,
inventions, developments, or Trade Secrets, and (ii) all information relating to
the acquisition hereunder, including, without limitation, all strategies,
negotiations, discussions, terms, conditions and other information relating to
this Agreement and each other document and agreement delivered in connection
herewith. Each of Walgreens and Seller acknowledges that following the Closing
the Confidential Information referred to in (i) above will be the exclusive
proprietary property of Buyer, whether or not prepared in whole or in part by
Seller and whether or not disclosed to or entrusted to the custody of Seller.
6.2.2 NONCOMPETITION. Until the fourth (4th) anniversary of the
Closing Date, each of Walgreens and Seller agrees with Buyer that it will not
and will cause its Affiliates not to:
(a) develop, manufacture, sell, or distribute products
or perform services in competition with the Business;
(b) perform any advisory or consulting services for,
invest in or otherwise become associated with in any capacity, any
Person which develops, manufactures, sells, or distributes products
or performs services in competition with the Business; or
(c) solicit any current customers or any prospective
customers of or for the Business;
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within the states listed on SCHEDULE 6.2.2 attached hereto. Notwithstanding the
foregoing, the covenants of Walgreens and Seller set forth in this Section 6.2.2
shall not restrict their ability to continue to conduct (i) their retail
pharmacy business in such states listed on SCHEDULE 6.2.2, except that, with
respect to providing nursing homes, correctional institutions, or any other
institutional care facilities with pharmaceuticals, drugs, biologicals, medical
devises, durable medical equipment, or other home health or medical supplies,
their retail pharmacies in such states will be permitted only to continue to
service their then current customers not acquired by Buyer hereunder, (ii) the
home infusion, respiratory and other therapies business currently conducted by
Seller or in which Seller may be engaged in the future, (iii) the durable
medical equipment business currently conducted by Seller or in which Seller may
be engaged in the future, and (iv) its mail order prescription business to
current customers in assisted living institutions. Nothing in this Section 6.2.2
shall prevent Walgreens, Seller or their Affiliates from acquiring an equity
interest of less than three percent (3%) in a corporation whose shares are
listed on a national securities exchange or regularly quoted in a United States
over-the-counter market.
6.2.3 NONINTERFERENCE. Until the fourth (4th) anniversary of the
Closing Date, each of Walgreens and Seller agrees with Buyer that it will not
and will cause its Affiliates not to induce, attempt to induce, or assist others
in inducing or attempting to induce any employee or agent of Buyer or any other
Person affiliated or doing business with Buyer to terminate their relationship
with Buyer, or in any reckless or intentional manner, interfere with the
relationship between Buyer and any such Person or the relationship between Buyer
and any of its suppliers or customers. The foregoing shall not preclude general
employment advertisements or general solicitations of employment not directed
specifically to employees of Buyer.
6.2.4 EQUITABLE RELIEF. Each of Walgreens and Seller agrees that
money damages alone will not be a sufficient remedy for any breach of the
provisions of this Section 6.2 and that, in addition to all other remedies,
Buyer will be entitled to specific performance and injunctive or other equitable
relief as a remedy for any such breach, and each of Walgreens and Seller waives
the securing or posting of any bond in connection with such remedy, and each of
Walgreens and Seller agrees not to assert as a defense in any proceeding where
Buyer seeks such relief that Buyer has an adequate remedy at law.
6.2.5 REFORMATION OF AGREEMENT. If any of the covenants
contained in Section 6.2, or any portion thereof, is found by a court of
competent jurisdiction to be invalid or unenforceable as against public policy
or for any other reason, such court shall exercise its discretion to reform such
covenant to the end that each of Walgreens and Seller shall be subject to
nondisclosure, noninterference, noncompetition or other covenants that are
reasonable under the circumstances and are enforceable by Buyer. In any event,
if any provision of Section 6.2 is found unenforceable for any reason, such
provision shall remain in force and effect to the maximum extent allowable and
all nonaffected provisions shall remain fully valid and enforceable.
6.2.6 EXTENSION OF COVENANTS. If a court of competent
jurisdiction finds that either or both of Walgreens and Seller has violated any
of the restrictions or covenants contained in Section 6.2, then the parties
agree that the period of all restrictions and covenants set
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forth therein shall automatically be extended by the number of days that the
court determines Walgreens or Seller to have been in violation of such
restriction or covenant.
6.2.7 REASONABLENESS OF TERMS. The parties hereto stipulate and
agree that the covenants and other terms contained in this Section 6.2 are
reasonable in all respects, including time period, geographical area and scope
of restricted activities (it being acknowledged that the Business is being
carried on within a consolidating industry), that the Buyer would not have
purchased the Purchased Assets and the Business had Walgreens and Seller not
agreed to these covenants, and that the restrictions contained herein are
designed to protect the Business acquired by Buyer hereunder and ensure that
neither Walgreens nor Seller engages in unfair competition against Buyer.
6.3 EMPLOYEE COVENANTS.
6.3.1 EMPLOYMENT. The parties acknowledge and agree that certain
employees of the Seller have had access to valuable and proprietary information
related to the Business. In order to achieve the full benefits associated with
the acquisition contemplated hereunder, Seller agrees that following the
execution of this Agreement, except for the individuals listed on SCHEDULE
6.3.1, Buyer shall offer employment to the employees of Seller who perform
services primarily for the Business on such terms and with such benefits that
are, at a minimum, comparable to those terms and benefits under which such
employees currently are receiving from Seller; provided, however, that the final
decision as to employment with Buyer shall remain with such individual employee.
Seller covenants not to interfere with any such efforts by Buyer. Seller shall
be responsible for and shall pay the cost of any compensation, severance or
other benefits that may be payable to the individuals listed on SCHEDULE 6.3.1
as well as any of Seller's employees not accepting employment with Buyer.
Nothing in this Section 6.3.1 shall be deemed to require Buyer to retain any
employee for any period of time or, except as required above, at any particular
compensation rate or in any particular position. The employment by Buyer of any
employee of Seller who accepts the terms of employment offered by Buyer will
commence on the Closing Date. Buyer agrees to provide any employees of Seller
who are hired by Buyer on or after the Closing Date with first day medical
benefits coverage and agrees to waive any preexisting conditions with respect to
such employees' medical coverage. All employees of Seller who are hired by Buyer
shall be given years of service credit for the time period they were employed by
Seller for purposes of vesting, eligibility and paid time off under any benefit
program offered to employees of NCS or Buyer generally. With respect to any
employee of Seller who is hired by Buyer, Buyer shall allow such employees to
take the accrued vacation being assumed by Buyer in accordance with Seller's
vacation policy in effect on the Closing Date. Seller shall be free to retain
the services of any employees not hired by Buyer. From the date hereof through
the Closing, without the express written consent of Buyer, Seller agrees not to
(i) incur an employment termination, other than a discharge for cause, voluntary
departure or retirement; (ii) lay off for any reason; or (iii) reduce the hours
of work by more than fifty percent (50%) of any of Seller's employees who work
in the Business.
6.3.2 TAX DEPOSITS. With respect to any employee of Seller who
becomes an employee of Buyer, Seller shall make all required deposits for all
withholding, social
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security and unemployment insurance Taxes through the Closing and shall file
timely required quarterly and annual reports with respect to such Taxes in
accordance with applicable Law whether such reports are due prior to or after
the Closing.
6.3.3 COBRA COMPLIANCE. Seller will, pursuant to its current
practices and policies, timely provide all notices and any continuation of
health benefit coverage required to be provided to employees of the Business,
former employees of the Business, or the beneficiaries or dependents of such
employees or former employees, under Part 6 of Subtitle B of Title I of ERISA or
Section 4980B(f) of the Code (herein collectively referred to as "COBRA") who
are not hired by Buyer, to the extent such notices and continuation of health
benefit coverage are required to be provided by Seller by reason of events
occurring prior to or on the Closing Date or by reason of the transactions
contemplated by this Agreement. For the purposes of the foregoing, the Seller
will treat all of its employees of the Business (and such employees'
beneficiaries and dependents) who are not hired by Buyer as of the Closing Date
as having incurred a "qualifying event" (within the meaning of ERISA Section 603
and Code Section 4980B(f)(3)) on the Closing Date. Seller will continue the
health benefit coverage required by COBRA with respect to Seller's employees in
the Business who are not hired by Buyer and the provisions of this Agreement
irrespective of the elimination of any health benefit plan of Seller.
ARTICLE 7
INDEMNIFICATION
---------------
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Seller in Article 3, of Walgreens in Article 3A and of Buyer
and NCS in Article 4 will survive the Closing and continue to be binding
regardless of any investigation made at any time by any party. The right of the
Buyer Indemnified Parties to bring certain indemnification claims is subject to
the time and amount limits in Section 7.5, and the right of Seller Indemnified
Parties to bring certain indemnification claims is subject to the time and
amount limits in Section 7.6.
7.2 INDEMNIFICATION BY SELLER. Seller will indemnify Buyer, NCS and
their respective Affiliates and the shareholders, directors, employees and
agents of Buyer and NCS (collectively, the "Buyer Indemnified Parties") against
and hold them harmless from:
(a) REPRESENTATIONS. All Liability, loss, damage or deficiency
suffered or incurred by them resulting from or arising out of any inaccuracy in
or breach of any representation or warranty by Seller herein or in any other
agreement or document delivered by Seller in connection herewith;
(b) COVENANTS. All Liability, loss, damage or deficiency
suffered or incurred by them resulting from or arising out of any breach or
nonperformance of any covenant or obligation made or incurred by the Seller
herein or in any other agreement or document delivered by Seller in connection
herewith;
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(c) LIABILITIES. All Liability, loss, damage or deficiency
suffered or incurred by them resulting from or arising out of the imposition or
attempted imposition (including, without limitation, by operation of bulk
transfer or other Laws) by any third party of any Liability of the Seller or the
Business, other than the Assumed Liabilities, and all Liability, loss, damage or
deficiency suffered or incurred by them resulting from or arising out of
Seller's operation of the Business on or before the Closing that is not an
Assumed Liability, in each case other than any Liability, loss, damage or
deficiency covered by the following subparagraph;
(d) INVENTORY; BILLING. Any claim asserted against Buyer or the
Purchased Assets resulting from or arising out of any violation of any Law,
including, without limitation, the Federal Food, Drug and Cosmetic Act, relating
to the packaging, labeling, dispensing or other treatment, handling or
dispensing of drugs, biologicals or pharmaceuticals, or any Law relating to
Medicare, Medicaid, or other reimbursement program, where such violation is
discovered prior to the Closing, or, with respect to any drugs, biologicals or
pharmaceuticals in the Seller's possession or control on the Closing Date, where
such violation is discovered by Seller or Buyer after the Closing Date and
relates to events or occurrences taking place on or before the Closing Date;
(e) ENVIRONMENTAL. All Liability, loss, damage or deficiency
suffered or incurred by them resulting from or arising out of Seller's
generation, production, treatment, transportation, use, or storage before the
Closing of any hazardous substances which could result in damage to the
environment, danger to the health and safety of the public, or Liability to
Buyer;
(f) BROKERS AND FINDERS. All Liability, loss, damage or
deficiency suffered or incurred by them resulting from or arising out of the
claims of any broker, finder, or other Person acting in a similar capacity on
behalf of Seller or its Affiliates in connection with the transactions
contemplated herein; and
(g) COSTS. Any and all reasonable costs and expenses (including,
but not limited to, legal and accounting fees) related to any of the foregoing.
7.2A INDEMNIFICATION BY WALGREENS. Walgreens will indemnify the
Buyer Indemnified Parties against and hold them harmless from:
(a) REPRESENTATIONS. All Liability, loss, damage or deficiency
suffered or incurred by them resulting from or arising out of any inaccuracy in
or breach of any representation or warranty by Walgreens herein or in any other
agreement or document delivered by Walgreens in connection herewith;
(b) COVENANTS. All Liability, loss, damage or deficiency
suffered or incurred by them resulting from or arising out of any breach or
nonperformance of any covenant or obligation made or incurred by Walgreens
herein or in any other agreement or document delivered by Walgreens in
connection herewith; and
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(c) COSTS. Any and all reasonable costs and expenses (including,
but not limited to, legal and accounting fees) related to any of the foregoing.
7.3 INDEMNIFICATION BY BUYER AND NCS. Buyer and NCS, jointly and
severally, will indemnify Seller and its Affiliates and the shareholders,
directors, employees and agents of Seller (the "Seller Indemnified Parties")
against and hold them harmless from:
(a) REPRESENTATIONS. All Liability, loss, damage or deficiency
suffered or incurred by them resulting from or arising out of any inaccuracy in
or breach of any representation or warranty by Buyer or NCS herein or in any
other agreement or document delivered by Buyer or NCS in connection herewith;
(b) COVENANTS. All Liability, loss, damage or deficiency
suffered or incurred by them resulting from or arising out of any breach or
nonperformance of any covenant or obligation made or incurred by Buyer or NCS
herein or in any other agreement or document delivered by Buyer or NCS in
connection herewith;
(c) LIABILITIES. All Liability, loss, damage or deficiency
suffered or incurred by them resulting from or arising out of Buyer's failure to
perform, from and after the Closing Date, its obligations with respect to the
Assumed Liabilities, and all Liability, loss, damage or deficiency suffered or
incurred by them resulting from or arising solely out of Buyer's operation of
the Business after the Closing;
(d) INVENTORIES; BILLING. Any claim asserted against Seller or
Walgreens resulting from or arising out of any violation of any Law, including,
without limitation, the Federal Food, Drug and Cosmetic Act, relating to the
packaging, labeling, dispensing or other treatment, handling or dispensing of
drugs, biologicals or pharmaceuticals or any Law relating to Medicare, Medicaid
or other reimbursement program, where such violation is discovered subsequent to
the Closing Date and relates solely to events or occurrences taking place after
the Closing Date;
(e) ENVIRONMENTAL. All Liability, loss, damage or deficiency
suffered or incurred by them resulting solely from or arising solely out of
Buyer's generation, production, treatment, transportation, use, or storage
subsequent to the Closing Date of any hazardous substances which could result in
damage to the environment, danger to the health and safety of the public, or
Liability to Seller; provided, however, that if any such Liability, loss, damage
or deficiency relates, in any manner, to Seller's generation, production,
treatment, transportation, use, or storage before the Closing Date of any
hazardous substances, such Liability, loss, damage or deficiency shall remain
solely the responsibility and obligation of the Seller pursuant to Section
7.2(e) above;
(f) BROKERS AND FINDERS. All Liability, loss, damage or
deficiency suffered or incurred by them resulting from or arising out the claims
of any broker, finder or other Person acting in a similar capacity on behalf of
Buyer or its Affiliates in connection with the transactions contemplated herein;
and
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(g) COSTS. Any and all reasonable costs and expenses (including,
but not limited to, legal and accounting fees) related to any of the foregoing.
7.4 THIRD PARTY CLAIMS. If any legal proceedings are instituted or
any claim is asserted by any third party with respect to which Seller
Indemnified Parties on the one hand, or the Buyer Indemnified Parties on the
other hand, may be entitled to indemnity hereunder, the party asserting such
right to indemnity will give the party from whom indemnity is sought written
notice thereof, including copies of any legal proceedings or documents
associated therewith. A delay in giving notice will only relieve the recipient
of liability to the extent the recipient suffers actual prejudice because of the
delay. The party from whom indemnity is sought will have the right, at its
option and expense, to participate in the defense of such a proceeding or claim,
but not to control the defense, negotiation or settlement thereof, which control
will (except as hereinafter provided) at all times rest with the party asserting
such right to indemnity, unless, and to the extent that the proceeding or claim
involves money damages and the party from whom indemnity is sought irrevocably
acknowledges in writing complete responsibility for and agrees to indemnify the
party asserting such right to indemnity, in which case the party from whom
indemnity is sought may assume the control of the monetary damage portion of
such defense through counsel of its choice and at its expense, but the party
asserting such right to indemnity will continue to have the right to be
represented in the monetary aspect of such defense, at its own expense, by
counsel of its choice, and in all events will retain control of the defense of a
proceeding or claim to the extent that it involves other than monetary damages.
If the party from whom indemnity is sought does not assume control of the
defense of such a proceeding or claim, the entire defense of the proceeding or
claim by the party asserting such right to indemnity, any settlement made by the
party asserting such right to indemnity, and any judgment entered in the
proceeding or claim will be deemed to have been consented to by, and will be
binding on, the party from whom indemnity is sought as fully as though it alone
had assumed the defense thereof and a judgment had been entered in the
proceeding or claim in the amount of such settlement or judgment, except that
the right of the party from whom indemnity is sought to contest the right of the
other to indemnification under this Agreement with respect to the proceeding or
claim will not be extinguished. If the party from whom indemnity is sought does
assume control of the defense of such a proceeding or claim, it will not,
without the prior written consent of the party asserting such right to
indemnity, settle the proceeding or claim or consent to entry of any judgment
relating thereto which does not include as an unconditional term thereof the
giving by the claimant to the party asserting such right to indemnity a release
from all Liability in respect of the proceeding or claim and such settlement is
solely for monetary damages. The parties hereto agree to cooperate fully with
each other in connection with the defense, negotiation or settlement of any such
proceeding or claim, including reasonable and necessary access to documents and
personnel.
7.5 LIMITATION ON INDEMNIFICATION OF BUYER INDEMNIFIED PARTIES
INDEMNIFIED PARTIES. The indemnification of the Buyer Indemnified Parties
provided for under Section 7.2 and 7.2A will be limited in certain respects as
follows:
(a) Any claim for indemnification under paragraph (a) of Section
7.2 or 7.2A by the Buyer Indemnified Parties must be made within eighteen (18)
months of the Closing Date except that there will be no limits on the time for
making a claim for indemnification relating
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to the representations and warranties contained in Section 3.2.1, 3.6.1 or 3A.1,
and except that a claim for indemnification relating to the representations and
warranties contained in Section 3.3.3 may be made until a period of sixty (60)
days after the expiration of the applicable statute of limitations (including
extensions) for the assessment or collection of Taxes for the periods referred
to therein. Any indemnification claim under Section 7.2(d) must be made within
three (3) years after the Closing Date.
(b) Seller shall not be liable to the Buyer Indemnified Parties
for indemnification claims under paragraph (a) of Section 7.2 until the
aggregate amount of indemnification claims under paragraph (a) of Section 7.2
exceeds $250,000, and upon reaching such amount Seller will be liable to the
Buyer Indemnified Parties for amounts in excess of that amount up to a maximum
of the Purchase Price for all indemnification claims under paragraph (a) of
Section 7.2, except that there shall be no such minimum or limit for any
indemnification claims made pursuant to paragraph (a) of Section 7.2 to the
extent that the claims relate to Section 3.2.1 or 3.6.1. For purposes of
determining the dollar amount of an indemnification claim by Buyer under
paragraph (a) of Section 7.2 the use of "materiality" to qualify the Seller's
representations and warranties in Article 3 shall not be considered.
(c) Seller shall not be liable to the Buyer Indemnified Parties
for indemnification claims under paragraph (d) of Section 7.2 until the
aggregate amount of indemnification claims under paragraph (d) of Section 7.2
exceeds $200,000, and upon reaching such amount Seller will be liable to the
Buyer Indemnified Parties from the first dollar up to a maximum of the Purchase
Price for all indemnification claims under Section 7.2(d).
(d) Walgreens shall not be liable to the Buyer Indemnified
Parties for indemnification claims under paragraph (a) of Section 7.2A until the
aggregate amount of indemnification claims under paragraph (a) of Section 7.2A
exceeds $250,000, and upon reaching such amount Walgreens will be liable to the
Buyer Indemnified Parties for amounts in excess of that amount up to a maximum
of the Purchase Price for all indemnification claims under paragraph (a) under
Section 7.2A, except that there shall be no minimum or limit for any
indemnification claims made pursuant to Sections 3A.1.
7.6 LIMITATION ON INDEMNIFICATION OF SELLER INDEMNIFIED PARTIES. The
indemnification of the Seller Indemnified Parties provided for under paragraph
(a) of Section 7.3 will be limited in certain respects as follows:
(a) Any claim for indemnification under paragraph (a) of Section
7.3 by the Seller Indemnified Parties must be made within eighteen (18) months
of the Closing Date except that there will be no limits on the time for making a
claim for indemnification relating to the representations and warranties
contained in Section 4.2.1.
(b) Buyer shall not be liable to the Seller Indemnified Parties
for indemnification claims under paragraph (a) of Section 7.3 until the
aggregate amount of indemnification claims under paragraph (a) of Section 7.3
exceeds $250,000 and, upon reaching such amount, Buyer will be liable to the
Seller Indemnified Parties for amounts in excess of that
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amount up to a maximum of the Purchase Price for all indemnification claims
under paragraph (a) of Section 7.3, except that there shall be no minimum or
limit for any indemnification claims made pursuant to Section 4.2.1.
7.7 GENERAL LIMITATIONS ON INDEMNIFICATION.
(a) The parties agree that their sole and exclusive remedy with
respect to any and all claims relating to the subject matter of this Agreement
shall be pursuant to the indemnification provisions set forth in this Article 7.
In no event will either party be liable to the other for consequential damages.
(b) Payments by the Seller, Walgreens or Buyer pursuant to this
Article 7 shall be limited to the amount of any liability or damage that remains
after deducting therefrom (i) any Tax benefit to the indemnified party (as
determined below), and (ii) any insurance proceeds and any indemnity,
contribution or other similar payment recovered by the indemnified party from
any third party with respect thereto. A Tax benefit will be considered
recognized by an indemnified party for purposes hereof in the tax period in
which the indemnity payment occurs and the amount of the Tax benefit will be
based on the value to the indemnified party at such time and shall be determined
by the indemnified party in its reasonable judgment which will include that such
indemnified party is in the maximum applicable statutory tax bracket after any
deductions or other allowances reportable with respect to a payment thereunder.
ARTICLE 8
CONSTRUCTION
------------
8.1 DEFINITIONS. Accounting terms used herein and not otherwise
defined herein will have the meanings attributed to them under generally
accepted accounting principles except as otherwise specified. When used in this
Agreement, the following terms in all of their tenses and cases will have the
meanings assigned to them below or elsewhere in this Agreement as indicated
below:
"Acquisition Balance Sheet" is defined in Section 3.3.1.
"Addendum" is defined in Section 2.1.
"Affiliate" of any Person means any person directly or indirectly
controlling, controlled by, or under common control with, any such Person and
any officer, director or controlling person of such Person.
"Assumed Liabilities" is defined in Section 1.4.
"Bill of Sale" is defined in Section 5.2.8.
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"Books and Records" means all books and records relating primarily
to the Business, including, but not limited to, (i) all books and records
relating to the purchase of materials and supplies, sales of products, dealings
with customers, invoices, suppliers' lists and personnel records, (ii) all
contracts, reports, opinions, maps and other documents affecting the title to or
the value of the properties of the Seller, and (iii) all financial and operating
data, files and other information with respect to the Business.
"Business" is defined in the recitals to this Agreement.
"Buyer" means NCS Acquisition Sub, Inc., a Delaware corporation.
"Buyer Indemnified Parties" is defined in Section 7.2.
"Closing" and "Closing Date" are defined in Article 5.
"Confidential Information" is defined in Section 6.2.1.
"Contract" means any commitment, understanding, instrument, lease,
pledge, mortgage, indenture, note, license, agreement, purchase or sale order,
contract, promise, or similar arrangement evidencing or creating any obligation,
whether written or oral, relating primarily to the Business.
"Disclosure Schedule" means the disclosure schedule, dated as of the
date hereof, delivered to Buyer by the Seller and forming a part of this
Agreement, which shall include a reference to each applicable schedule referred
to herein.
"Employee Claims" is defined in Section 3.5.1.
"Fixed Assets" means the tangible personal property, other than
inventory and accounts receivable, owned, used or useful primarily in the
operation of the Business.
"Governmental Authority" means any federal, provincial, municipal,
state, regional or local authority, agency, body, court or instrumentality,
regulatory or otherwise, domestic or foreign, which, in whole or in part, was
formed by or operates under the auspices of any federal, provincial, municipal,
state, regional or local government, domestic or foreign.
"HSR Act" means the Hart Scott Rodino AntiTrust Improvements Act of
1976, as amended.
"Intellectual Property Rights" means trade names, trademarks,
service marks, trade dress and mask works and all registrations and applications
for any of the foregoing, together with the goodwill symbolized or represented
by the foregoing, works of authorship and all copyrights related thereto and all
registrations and applications therefor, inventions, discoveries, designs,
industrial models and all United States and foreign patent rights covered by,
disclosed in or otherwise related thereto and all registrations (issued or
pending) and applications therefor and
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all reissues, divisions, continuations, continuations-in-part, re-examinations
and extensions thereof, together with the right to sue for past infringement and
improper, unlawful or unfair use of any of the foregoing.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Law" means any common law and any federal, provincial, municipal,
state, regional, local or foreign law, bylaw, rule, statute, ordinance, rule,
order or regulation.
"Leased Properties" means the properties listed on SCHEDULE 8.1(a).
"Liabilities" means responsibilities, obligations, duties,
commitments, claims, and liabilities of any and every kind, whether known or
unknown, accrued, absolute, contingent or otherwise.
"Lien" means any lien, encumbrance, charge, security interest,
option, or pledge of any kind.
"NCS" means NCS HealthCare, Inc., a Delaware corporation.
"Net Asset Value" is defined in Section 2.2.
"Permitted Lien" means landlord liens, tax liens and other statutory
or inchoate liens for amounts not yet due and payable, and notification liens
for leased assets included in the Purchased Assets.
"Person" means any individual, corporation, partnership, association
or any other entity or organization.
"Purchased Assets" is defined in Section 1.2.
"Purchase Price" is defined in Section 2.1.
"Retained Assets" is defined in Section 1.3.
"Retained Liabilities" is defined in Section 1.5.
"Seller" means Walgreens Advance Care, Inc., an Illinois
corporation.
"Seller Indemnified Parties" is defined in Section 7.3.
"Tax" means any charge or assessment by or Liability to any
governmental tax authority, including, but not limited to, any deficiency,
interest or penalty.
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"to the Knowledge of Seller" means the actual knowledge of the
executive officers and management of Seller involved in the Business.
"Trade Secrets" means, with respect to any Person, any information
that is not known to any competitor or other third party and, if it were to be
known by a competitor or other third party, could be harmful to the owner of the
information.
"Valued Assets" means Seller's cash, accounts receivable, inventory
and Fixed Assets that are owned, used, useful or generated primarily in
connection with the Business and are included in the Purchased Assets.
"Walgreens" means Walgreen Co., an Illinois corporation.
"WARN" is defined in Section 3.5.1.1.
8.2 NOTICES. All notices shall be in writing delivered as follows:
(a) If to Buyer or to NCS, to:
NCS Acquisition Sub, Inc.
c/o NCS HealthCare, Inc.
3201 Enterprise Parkway, Suite 220
Beachwood, Ohio 44122
Attn: Chief Financial Officer
With a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attn: Robert A. Ross, Esq.
(b) If to the Seller or Walgreens, to:
Walgreens Advance Care, Inc.
Department of Results-Acquisitions
200 Wilmot Road
Deerfield, Illinois 60015
Attn: Carl Buss, Director of Acquisitions
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With a copy to:
Allan M. Resnick, Esq.
Walgreen Co.
200 Wilmot Road
Deerfield, Illinois 60015
or to such other address as may have been designated in a prior notice pursuant
to this section. Notices sent by registered or certified mail, postage prepaid,
return receipt requested, shall be deemed to have been given two (2) business
days after being mailed, and otherwise notices shall be deemed to have been
given when received.
8.3 BINDING EFFECT. Except as may be otherwise provided herein, this
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as otherwise
specifically provided in this Agreement, nothing in this Agreement is intended
or will be construed to confer on any Person other than the parties hereto any
rights or benefits hereunder.
8.4 HEADINGS. The headings in this Agreement are intended solely for
convenience of reference and will be given no effect in the construction or
interpretation of this Agreement.
8.5 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to
in this Agreement will be deemed to be a part of this Agreement.
8.6 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same document.
8.7 GOVERNING LAW. This Agreement will be governed by and construed
under Illinois law, without regard to conflict of laws principles thereof.
8.8 WAIVERS. Compliance with the provisions of this Agreement may be
waived only be a written instrument specifically referring to this Agreement and
signed by the party waiving compliance. No course of dealing, nor any failure or
delay in exercising any right, will be construed as a waiver, and no single or
partial exercise of a right will preclude any other or further exercise of that
or any other right.
8.9 PRONOUNS. The use of a particular pronoun herein will not be
restrictive as to gender or number but will be interpreted in all cases as the
context may require.
8.10 TIME PERIODS. Any action required hereunder to be taken within
a certain number of days will be taken within that number of CALENDAR days;
provided, however, that if the last day for taking such action falls on a
weekend or a holiday, the period during which such action may be taken will be
automatically extended to the next business day.
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8.11 NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against either
party.
8.12 MODIFICATION. No supplement, modification or amendment of this
Agreement will be binding unless made in a written instrument that is signed by
all of the parties hereto and that specifically refers to this Agreement.
8.13 ENTIRE AGREEMENT. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement among the parties concerning the subject matter
hereof. All negotiations among the parties are merged into this Agreement, and
there are no representations, warranties, covenants, understandings, or
agreements, oral or otherwise, in relation thereto among the parties other than
those incorporated herein and to be delivered hereunder.
8.14 SEVERABILITY. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby. To the extent permitted by applicable law, each party
waives any provision of law which renders any provision of this Agreement
invalid, illegal or unenforceable in any respect.
8.15 FURTHER ASSURANCES. The parties hereto agree that each will
execute and deliver to the other any and all documents in addition to those
expressly provided for herein that may be necessary or appropriate to carry out
the provisions of this Agreement, whether before, at, or after the Closing.
Seller further agrees that, at any time and from time to time after the Closing,
it will execute and deliver to Buyer such further assignments, certificates or
other written assurances as Buyer may reasonably request to perfect and protect
Buyer's title to the Purchased Assets or as may otherwise be required to carry
out the provisions of this Agreement.
8.16 RISK OF LOSS. Risk of loss for the Purchased Assets shall be
and remain with Seller from and after the date hereof until Buyer shall have
acquired title to the Purchased Assets on the Closing Date, at which time risk
of loss for the Purchased Assets shall pass to Buyer. Seller shall insure the
Purchased Assets in a manner consistent with its current practices until risk of
loss for the Purchased Assets is transferred to Buyer in accordance herewith.
8.17 RETENTION AND ACCESS TO RECORDS. Buyer agrees that, from and
after the Closing Date, it will retain the books and records relating to the
Business as required by Law and will permit the Seller, upon reasonable notice
and during normal business hours, access to inspect and copy, at its expense,
the books and records relating to the Business prior to the Closing Date and
that, notwithstanding the sale of such books and records to Buyer subject to the
confidentiality covenants set forth in Section 6.2.1 above, the Seller shall be
permitted to retain such copies of all such books and records if and to the
extent required by Law.
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8.18 ASSISTANCE AND COOPERATION. From and after the Closing Date,
the Seller and Walgreens agree to assist and cooperate fully with Buyer (or any
Affiliate of Buyer) with respect to any financial or other regulatory reporting
requirements relating to the Business and otherwise to make available to Buyer
(or any Affiliate of Buyer) all relevant information, records and documents
relating to the Business prior to the Closing Date as may reasonably be
requested by Buyer (or an Affiliate of Buyer).
INTENDING TO BE LEGALLY BOUND, the parties have signed this
Agreement as of the date first written above.
<TABLE>
<S> <C>
NCS ACQUISITION SUB, INC.
By:
-------------------------------------------
Title:
-----------------------------------------
("Buyer")
NCS HEALTHCARE, INC.
By:
-------------------------------------------
Title:
-----------------------------------------
("NCS")
WALGREENS ADVANCE CARE, INC.
By:
-------------------------------------------
Title:
-----------------------------------------
("Seller")
WALGREEN CO.
By:
-------------------------------------------
Title:
-----------------------------------------
("Walgreens")
</TABLE>
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EXHIBIT 99.1
------------
FOR IMMEDIATE RELEASE
Contact: Gerald D. Stethem
Chief Financial Officer
(216) 514-3350
Internet: http://www.ncshealth.com
------------------------
NCS HEALTHCARE COMPLETES ACQUISITION OF
WALGREEN'S LONG-TERM CARE PHARMACY BUSINESS
Cleveland, Ohio (June 9, 1998)--NCS HealthCare, Inc. (Nasdaq:NCSS) today
announced that it has completed its acquisition of the long-term care pharmacy
assets of Walgreen Co. (NYSE:WAG).
The business, which was based in Deerfield, Illinois, provides institutional
pharmacy and ancillary services to over 20,000 long-term care residents in
Arizona, Iowa, Minnesota, New Mexico, Nebraska, Tennessee, Texas and Wisconsin.
Annualized revenues are approximately $40 million. Terms of the transaction were
not disclosed.
NCS HealthCare, Inc. is a leading independent provider of pharmacy and related
services to long-term care and acute care facilities, including skilled nursing
centers, assisted living facilities and hospitals. NCS currently serves over
245,000 residents of long-term care facilities in thirty-four states and manages
hospital pharmacies in nineteen states.
Except for the historical financial information contained in this press release,
certain statements in this release are forward looking statements. Factors that
may cause actual results to differ materially from those in the forward looking
statements include the availability and cost of attractive acquisition
candidates, continuation of various trends in the long-term care market,
competition among providers of long-term care pharmacy services and other risks
and uncertainties described in the Company's SEC reports.
