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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): October 11, 1997
HORIZON PHARMACIES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 333-25257 75-2441557
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
275 W. PRINCETON DRIVE
PRINCETON, TEXAS 75407
(Address of Principal Executive Offices) (Zip Code)
(972) 736-2424
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 11, 1997, the registrant, HORIZON Pharmacies, Inc.
("Registrant"), acquired substantially all of the assets of Kenn's Pharmacy,
Inc. ("Kenn's Pharmacy") comprising primarily pharmacy files, equipment,
inventory and supplies. The Registrant acquired the assets through arm's-length
negotiations with Kenn's Pharmacy and its President, Kenn Volpato.
Prior to this transaction, no material relationships existed between Kenn's
Pharmacy and the Registrant or any of its affiliates, any director or officer of
the Registrant, or any associate of such director or officer.
The consideration for the acquisition consisted of (i) $150,000 cash; (ii)
9,035 shares of the Registrant's common stock, par value $.01 per share; and
(iii) a promissory note in the amount of $247,167.66 payable over 72 months in
equal monthly installments bearing interest at 8.5% per annum. The cash portion
of the purchase price was derived from proceeds of the Registrant's initial
public offering which closed July 11, 1997.
The Registrant intends to continue the retail pharmacy operations of
Kenn's Pharmacy under the HORIZON Pharmacies, Inc. name. In connection
therewith, the Registrant has secured a real estate lease covering the current
retail location of Kenn's Pharmacy and has secured a valid New Mexico license to
do business at that location under the HORIZON Pharmacies, Inc. name.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
It is impracticable at this time to provide the required financial
statements of the acquired business described in Item 2. This information will
be provided within 60 days by an amendment to this report.
(b) PRO FORMA FINANCIAL INFORMATION.
See (a) above.
(c) EXHIBITS.
The following exhibits are filed with this report:
Exhibit No. Name of Exhibit
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2 Purchase Agreement dated October 17, 1997 by and between
Kenn's Pharmacy, Inc. and HORIZON Pharmacies, Inc.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
REGISTRANT:
HORIZON PHARMACIES, INC.
Date: October 24, 1997 By: /s/ Ricky D. McCord
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Ricky D. McCord, President
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INDEX TO EXHIBITS
Appears at
Exhibit Sequentially
Number Description Numbered Page
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2 Purchase Agreement dated October 11, 1997 by and 5
between Kenn's Pharmacy, Inc.and HORIZON
Pharmacies, Inc.
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EXHIBIT 2
PURCHASE AGREEMENT
AGREEMENT made the 11 day of OCTOBER, 1997 between KENN'S PHARMACY, INC.
having an office at 955 SECOND STREET, RATON, NEW MEXICO 87740 (hereinafter
referred to as the "seller"), and HORIZON PHARMACIES, INC., a Texas
Corporation, having offices located at 275 W. Princeton Drive, Princeton
Texas, 75407 (hereinafter referred to as the "Buyer").
W I T N E S S E T H
WHEREAS, the Seller and the Buyer have reached an agreement, in
accordance with the terms and conditions herein below set forth, with respect
to the sale by the Seller and the purchase by the Buyer of certain of the
assets of the Seller utilized in connection with and as part of the retail
drug store operations of the Seller known as KENN'S PHARMACY (hereinafter
referred to as the "DRUG STORE") and desire to reduce said agreement in
writing;
NOW, THEREFORE, THE PARTIES AGREE:
1. SALE OF ASSETS.
1.1 For the purpose of this Agreement, Seller agrees to sell to Buyer as
is certain assets of the Drug Store (hereinafter referred to as
the "Drug Store Assets"), which the Buyer hereby agrees to purchase.
Such assets include and are hereby limited to:
A. INVENTORY. All of the marketable inventory held for retail sale
by the Seller and located at the Drug Store; and
B. PRESCRIPTION FILES INCLUDING ALL CUSTOMER AND PATIENT LISTS AND
PATIENT PROFILES. All prescription files and patient profiles
of Seller located at and pertaining to prescription customers
of the Drug Store.
C. ALL FIXTURES AND EQUIPMENT. All Rx, OTC, and DME fixtures and
equipment owned by Seller (computer/peripherals, registers,
refrigerator, typewriter, Microfiche, etc.) located at the Drug
Store,; and all telephone equipment, and all miscellaneous
shelving, counters and supplies belonging to Seller as listed on
Exhibit A attached hereto and made a part hereof.
D. STORE TELEPHONE NUMBER(S). All telephone numbers of the Drug
Store location shall be transferred to Buyer.
E. SUPPLIES. All bottles, vials, ointment jars, and other usable
supplies of Seller located at the Drug Store location and at
Seller cost.
F. ASSETS NOT PURCHASED. Buyer shall not purchase any consigned
merchandise or layaway items.
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2. PURCHASE PRICE.
2.1 The total purchase price to be paid by the Buyer for the Drug Stores
Assets shall be computed, but not allocated, as follows:
Furniture, Fixtures, Prescription Files,
Patient Profiles, Customer List, Telephone
System/Numbers, Computer $ 150,000.00
hardware/software,
Non-compete Covenant $ 50,000.00
2.2 An amount equal to the aggregate value of the marketable inventory as
determined in the physical inventory described in paragraph 5 below.
2.3 Buyer will purchase accounts receivable based on the following
evaluation:
Individual Charge Accounts
0-30 days balances at 100%
31-60 days balances at 80%
61-90 days balances at 60%
>90 days balances at 0%
3. ALLOCATION OF PURCHASE PRICE.
The purchase price shall be allocated on the attached closing statement,
signed by both Buyer and Seller.
4. PAYMENT OF PURCHASE PRICE.
4.1 Subject to the following provisions, the purchase price hereafter
shall be paid as follows:
4.1 (a) Cash at the closing equal to $150,000.00 less $1,000
escrow deposit.
4.1 (b) Shares of Buyer's common stock, par value $ .01 per share
(the "Horizon Common Stock"), equivalent to approximately
$100,000.00. based upon the closing price for the
Horizon common stock as reported on the American Stock
Exchange for the ten (10) days immediately preceding the
closing date of this Agreement.
4.1 (c) A note at the closing equal to the purchase price less cash
in Sections 4.1(a) bearing interest at the rate of eight
and half (8 1/2) percent. The note is due and payable
in seventy two (72) equal consecutive monthly installments,
the first installment will be1st of the following month.
The Note will be executed by Buyer and payable to the order
of Seller. It will be secured by the inventory of the said
DRUG STORE.
5. INVENTORY.
5.1 A physical inventory shall be taken at the Drug Store by RGIS
INVENTORY SPECIALISTS on the closing date. Each party shall pay
one-half (1/2) of the inventory expense. Seller's portion will be
deducted from closing statement.
5.2 For purposes of this Agreement, marketable inventory is all of the
Seller's inventory, except the following:
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(a) DAMAGED MERCHANDISE. Damaged merchandise, including but not
limited to, items which are shopworn, faded (including faded
labels) or subject to visible deterioration; and
(b) UNSALABLE MERCHANDISE. Unsalable merchandise, that is items
which are obsolete, or which have an expired expiration date or
which have been discontinued by the manufacturer; and
(c) PRESCRIPTION MERCHANDISE AND OVER-THE COUNTER DRUGS. The
following exclusions, in addition to the exclusions set forth
above, shall be applicable to prescription merchandise and
over-the-counter drugs:
(i) Any partial container with expired dating within ninety
(90) days;
(ii) Any full, sealed containers (aa) with expired dating,
(iii) Filled prescriptions over one month old;
(d) The buyer has the right of refusal to exclude seasonal
merchandise from the evaluation of inventory.
5.3 The marketable inventory shall be valued, for purposes of this
agreement, as follows
(a) The marketable prescription inventory will be taken at
acquisition cost OR AWP less 16%. Special deal prescription
items and/or generic items will be at acquisition cost.
(b) Non-prescription merchandise will be taken at acquisition cost.
If no acquisition cost exists, then the following formula will
apply to the merchandise.
CATEGORY COST (% OF RETAIL)
HBA Retail price less 25%
OTC Retail price less 25%
Gifts Retail price less 50%
Cards Retail price less 50%
Cosmetics Retail price less 40%
Watches/Cameras Retail price less 50%
Fragrances Retail price less 25%
Candy (box) Retail price less 40%
Candy (loose) Retail price less 30%
Jewelry Retail price less 50%
Miscellaneous Retail price less 50%
Seasonal Merchandise Retail price less 50%
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6. REPRESENTATIONS AND WARRANTIES BY SELLER.
6.1 The Seller does hereby represent and warrant as follows:
A. AUTHORITY. The execution, delivery and performance of this
agreement by Seller has been duly authorized by all necessary
entity action and constitutes a legal, valid, and binding
obligation on Seller enforceable in accordance with its terms.
B. TITLE TO PROPERTIES. The Seller has good and marketable
title to all of the Drug Store assets to be transferred
hereunder, free and clear of all mortgages, liens, encumbrances,
pledges, or security interests of any nature whatsoever, except
for secured debts, if any, listed on Exhibit C attached hereto
which shall be satisfied and released at or prior to closing. The
Seller has received no notice of violation of any applicable law,
regulation or requirement relating to the retail Drug Store
business operation or Drug Store assets to be transferred
hereunder; and as far as known to the Seller, no such violation
exists.
C. CONTRACTS. Seller is not party to any contract ,
understanding or commitment whether in the ordinary course of
business or not, relating to the conduct of business by Seller
from the Drug Store which contract, understanding or commitment
shall extend beyond the closing date for the Pharmacy Location
except the real estate lease, Pitney Bowes mail machine, In-store
music system. Seller is not party to any contractual agreement
or commitment to individual employees which may not be terminated
at the will of Seller.
D. LITIGATION. To the best of Seller's current actual
knowledge there is no suit, action, proceeding, investigation,
claim, complaint or accusation pending or, threatened against or
affecting Seller or the Assets or to which Seller is a party, in
any court or before any arbitration panel of any kind or before
or by any federal, state, local, foreign, or other governmental
agency, department, commission, board, bureau, instrumentality or
body which would have a materially adverse affect on the
financial condition of Seller, and to the best knowledge and
belief of Seller, there is no basis for any such suit, action,
litigation, proceeding, investigation, claim, complaint or
accusation. There is no outstanding order, writ, injunction,
decree, judgment or award by any court, arbitration panel or
governmental body against or affecting Seller with which Seller
is not currently in compliance.
E. EMPLOYEES.
(a) To the best of Seller's actual knowledge, the Seller is in
full compliance with all wage and hour laws, and is not engaged
in any unfair labor practice or discriminatory employment
practice and no complaint of any such practice against Seller is
filed or threatened to be filed with or by the National Labor
Relations Board, the Equal Employment Opportunity Commission or
any other administrative agency, federal or state, that regulates
labor or employment practices, nor is any grievance filed or
threatened to be filed against Seller by any employee pursuant to
any collective bargaining or other employment agreement to which
Seller is a party. To the Seller's best knowledge and belief is
in compliance with all applicable federal and state laws and
regulations regarding occupational safety and health standards
and has received no material complaints from any federal or state
agency or regulatory body alleging violations of any such laws
and regulations.
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(b) The employment of all persons and officers employed by
Seller is terminable at will without any penalty or severance
obligation of any kind on the part of the employer. All sums due
for employee compensation and benefits and all vacation time
owing to any employees of Seller have been duly and adequately
accrued the accounting records of Seller. All benefits such as
vacation accrued and earned by employees up to the closing date
is responsibility of the Seller. All benefits accrued and earned
after the closing date will become the financial responsibilities
of the Buyer. To the Seller's best knowledge, all employees of
Seller are either United States citizens or resident aliens
specifically authorized to engage in employment in the United
States in accordance with all applicable laws.
F. TAXES.
(a) Seller has duly filed all required federal, state, local,
foreign and other tax returns, notices, and reports (including,
but not limited to, income, property, sales, use, franchise,
capital, stock, excise, added value, employees' income
withholding, social security and unemployment tax returns)
heretofore due; and to Seller's best knowledge all such returns,
notices, and reports are correct, accurate, and complete.
(b) All deposits required to be made by Seller with respect to
any tax (including but not limited to, estimated income,
franchise, sales, use, and employee withholding taxes) have been
duly made.
(c) All taxes, assessments, fees, penalties, interest and other
governmental charges which have become due and payable have been
paid in full by Seller or adequately reserved against on its
books of account and the amounts reflected on such books are to
the best belief and knowledge of Seller sufficient for the
payment of all unpaid federal, state, local, foreign, and other
taxes, fees, and assessments, and all interest and penalties
thereon with respect to the periods then ended and or all periods
prior thereto. Seller hereby agrees to indemnify and hold
harmless Buyer from and against any and all liability, claims, or
causes of action for any unpaid taxes, or other assessments due
and owing to any federal, state, or local governmental entity
arising out of the business of Seller prior to the closing date.
(d) Buyer shall pay any and all Sales, Use, and Transfer Taxes,
if any, arising out of the assets which are the subject of this
sale.
(e) Seller shall pay any and all personal property taxes for
prior years attributable to the property being transferred hereby
prior to closing.
(f) The parties shall pro rate at Closing anticipated personal
property taxes as of the date of Closing based upon last year's
tax renditions, and personal property tax bills and rent and will
be deducted from Seller at closing.
G. INDEMNIFICATION.
(a) Buyer agrees to indemnify and hold Seller harmless from any
and all liabilities concerning or otherwise connected with the
conduct or operation of the Buyer's business on the premises as
of closing date.
(b) Seller agrees to indemnify and hold Buyer harmless from any
and all liabilities concerning or otherwise connected with the
conduct or operation of the Seller's business on the premises on
or before the closing date.
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H. INVESTMENT PURPOSE.
Seller is acquiring the Horizon common Stock for investment,
and not with a view to the sale or distribution thereof. Seller
understands and acknowledges that the transfer of the Horizon
Common Stock issuable hereunder will be restricted and that
Seller may not sell or otherwise dispose of such shares unless
and until a registration statement under the Security Act of
1933, as amended (the "Securities Act"), is in effect with
respect thereto and Seller has fully complied with the Securities
Act and all applicable regulations thereunder, or Seller has
received an opinion from Buyer's counsel that the contemplated
sale or other disposition of the Horizon Common Stock will not
require registration under the Security Act.
6.2 The Buyer does hereby represent and warrant to Seller as follows:
A. DULY ORGANIZED. Buyer is a corporation duly organized
and existing in good standing under the laws of Texas, and is
entitled to own or lease properties and carry on its business
as and in the places where such properties are now owned,
leased or operated and such business is now conducted.
B. COMMON STOCK. Buyer has authorized 14,000,000 shares of
Horizon Common Stock of which approximately 2,462,424 shares are
currently issued and outstanding, and 1,000,000 shares of
preferred stock, par value $ .01 per share, none of which are
currently issued and outstanding.
7. CONDITIONS PRECEDENT.
7.1 All obligations of Seller under this Agreement are subject to
the fulfillment, prior to or at the closing, of each of the
following conditions (unless waived in writing by Buyer).
A. REPRESENTATIONS. The representations and warranties of
Seller contained in this Agreement shall not only have
been true and complete as of date of this Agreement, but
shall also be true and complete as though again made as of
the date of closing.
B. COMPLIANCE. The Seller shall have performed and complied
with all terms and conditions required by this Agreement
to be performed or complied with by it prior to or at the
closing.
C. CONSENTS. All necessary consents to the transfer of the
Drug Store assets have been obtained from vendors and
partners if any.
7.2 Buyer acknowledges that it has examined the properties, assets,
and financial records of the Seller covered by this Agreement,
and is purchasing the same in an "as is" condition.
8. LIABILITIES NOT ASSUMED BY BUYER.
8.1 It is expressly understood and agreed that Buyer shall not, by
virtue of this Agreement, the consummation of the transactions
contemplated herein or otherwise, assume any liabilities or
obligations of the Seller or any liabilities or obligations
constituting a charge, lien, encumbrance or security interest
upon the Drug Store assets to be transferred hereunder,
regardless of whether such liabilities or obligations are
absolute orcontingent, liquidated or unliquidated or otherwise.
8.2 It is expressly understood and agreed that Seller shall not by
virtue of this Agreement, a consummation of the transaction
contemplated herein or otherwise, assume any liabilities or
obligations of the Buyer or any liabilities, or obligations
constituting a charge, lien, encumbrance, or security interest
upon the Drug Store assets to be transferred hereunder,
regardless of whether such liabilities or obligations are
absolute or contingent, liquidated or unliquidated, or
otherwise, on or after OCTOBER 11, 1997
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8.3 Seller hereby indemnifies the Buyer, its officers, directors,
and controlling persons against any liability for any fee or
commission payable to any broker, agent or finder retained by
Seller with respect to any transaction contemplated by this
agreement.
9. CLOSING.
9.1 The closing shall take place on or before September 19,1997 at
Buyer's discretion, but in no event later October 11, 1997, at
the Drug Store location.
A. TO BE DELIVERED TO BUYER. The Seller shall deliver to
Buyer a Bill of Sale, which shall be effective to vest in
Buyer good and marketable title to the Drug Store Assets,
free and clear of all mortgages, security interest, liens,
encumbrances, pledges and hypothecation of every nature
and description, except the Security interest securing
Buyer's Note to the Seller.
B. TO BE DELIVERED TO SELLER. The Buyer shall deliver to
the Seller a) a Cashier's check for the cash portion of
the purchase price less $1,000 Escrow amount, b) Buyer
will authorize the issuance of 9,035 common shares of
Horizon Pharmacies, Inc., and c) Buyer's promissory note
described in Paragraph 4.1 hereof, and the Security
instruments required by section 4.1 (c).
10. INDEMNITY BY SELLER.
10.1 The Seller hereby agrees to indemnify and hold harmless Buyer
against and in respect of :
A. LIABILITY OF THE SELLER. All liabilities and obligations
of the Seller, of every kind and description, regardless
of whether such liabilities or obligations are absolute or
contingent, liquidated or unliquidated, accrued or
otherwise, and regardless of now and when the same may
have arisen, which are asserted against Buyer as a result
of this Agreement or the consummation of the transaction
contemplated herein.
B. CLAIMS UPON ASSETS. All claims against, or claims of any
interest in, or of a lien or encumbrance or the like upon
any or all of the Drug Store assets to be transferred
hereunder by the Seller to Buyer which are caused or
created by indemnifying party.
11. INDEMNITY BY SELLER.
A. The buyer will indemnify the Seller for all claims against
the Assets for any period after the closing date. The
Buyer further indemnifies the Seller for break or leases
and dissatisfied customer claims caused by HORIZON for any
period after the losing date.
12. SURVIVAL OF REPRESENTATIONS, WARRANTIES & INDEMNIFICATIONS.
12.1 All of the covenants, representations, warranties and
indemnification of the parties set forth in this Agreement
shall survive the closing date hereof.
12.2 All outstanding business transactions prior to the closing date
are credited to the Seller. All business acquired on or after
the closing date belong to the HORIZON Pharmacies, Inc.
including any insurance payments made to the existing NABP,
State Welfare number(s), and/or contract(s) as long as the
date of service is on or after the closing date.
12.3 Seller agrees to allow Buyer and Buyer's accountants access to
books and records so Buyer can conduct a financial audit of
year 1996 and 1997 up to point of closing at Buyer's expense.
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13. RISK OF LOSS.
13.1 The risk of loss of damage of Drug Store assets to be conveyed
hereunder shall be upon Seller until the closing hereof.
14. NON-COMPETE COVENANT OF SELLER.
14.1 In consideration of the purchase price herein above stated in
paragraph 2 included in purchase price is the covenant not to
compete Kenn Volpato hereby agrees that for a period of six (6)
years after the date of closing hereunder will not, directly or
indirectly, through a subsidiary, joint venture arrangement or
otherwise, conduct or assist another party other than the Buyer
in conducting or managing any operation which has as its
purpose what is generally known as a retail pharmacy, or
Nursing Home or IV operation or DME operation within the city
limits of Raton, New Mexico have any equity investment in such
operation. This non-compete entitles Kenn Volpato to perform
work as employee of HORIZON Pharmacies, Inc. Furthermore, This
non-compete clause does not prohibit Kenn Volpato from
performing duties such as relief pharmacist at other pharmacies
within the city limits of Raton. The parties hereby recognize
and acknowledge that the territorial and time limitations
contained in this paragraph are reasonable and properly
required for the adequate protection of the business to be
conducted by Buyer with the assets and properties to be
transferred hereunder and cannot be changed except by written
permission of Buyer.
14.2 The parties recognize that, in the event of a breach by Seller
of any of the provisions of this paragraph, the remedy of law
alone would be inadequate and, accordingly, Buyer, (in addition
to damages), shall be entitled to an injunction restraining
Seller from violating the covenants herein contained.
14.3 It is the intention of the Seller and the Buyer that the
execution of these covenants not to compete be considered as
materially significant and essential to the closing of this
Agreement, and that such covenants are a material portion of
the purchase price set forth herein above.
15. GOVERNING LAW.
15.1 This agreement shall be governed and construed in accordance
with the laws of the State of New Mexico
16. ENTIRE AGREEMENT.
16.1 It is stipulated that this agreement is null and void if
HORIZON Pharmacies, Inc.:
(a)Can not secure a valid New Mexico License under its own
merit for the said DRUG STORE location to conduct business as a
retail pharmacy operation. HORIZON Pharmacies, Inc. commits
that it will exercise due diligent effort to secure the New
Mexico License.
(b)can not secure a lease for:
$1,500.00 per month for three (3) years plus four(4) four (4)
years options with CPI increase at option years.
17. ENTIRE AGREEMENT.
This agreement contains the entire agreement between the parties,
and no representations, warranties or promises, unless contained
herein, shall be binding upon the parties hereto. This document is
null and void if the Purchase Agreement is not signed by both
parties within 10 days from date the Buyer has received the Purchase
Agreement document.
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18. EARNEST MONEY.
18.1 To bind this Agreement, Buyer herewith deposits with Kenn's
Pharmacy, Inc. as Escrow Agent, the sum of $1,000 (one thousand
dollars), which sum shall be applied to the cash portion of the
purchase price upon the closing of the transaction contemplated
herein. However, in the event Seller fails to perform each and
every covenant and condition required hereunder, Buyer may cancel
this Agreement and have the Earnest Money returned to it. If the
Buyer fails to perform each and every obligation hereunder, Seller
shall retain the Earnest Money as liquidated damages. each party's
remedy provided in this Section is that party's exclusive remedy.
IN WITNESS WHEREOF, the parties hereto have set their hands the day and
year first above written.
BUYER:
HORIZON PHARMACIES, INC.
/s/ Rick McCord - President
---------------------------------
Rick McCord, President
THE STATE OF )
COUNTY OF )
THIS INSTRUMENT was acknowledged before me on this the __________ day of
__________ , 19_____, by RICK MCCORD, who holds the office of President of
HORIZON PHARMACIES, INC., a Texas Corporation on behalf of such corporation.
-----------------------
SEAL
Notary Public, State of
My commission Expires:____________
SELLER:
/s/ Kenn Volpato - President
-------------------------------
Kenn Volpato , President
THE STATE OF )
COUNTY OF )
THIS INSTRUMENT was acknowledged before me on this the _________day of
__________, 19___ by Kenn Volpato, who holds the office of President
of ___________________
-----------------------
SEAL
Notary Public, State of
My commission Expires:____________
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