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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): September 18, 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 WEST 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 September 18, 1997, the registrant, HORIZON Pharmacies, Inc.
("Registrant"), acquired substantially all of the assets of Marty's
Pharmacy, Inc. ("Marty's Pharmacy") comprising primarily pharmacy files,
equipment, inventory and supplies. The Registrant acquired the assets
through arm's-length negotiations with Marty's Pharmacy and its sole
shareholder, Marty Vallejos.
Prior to this transaction, no material relationships existed between
Marty'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) $81,250 cash; (ii)
10,156 shares of the Registrant's Common Stock; and (iii) a promissory note
in the amount of $163,544.32 payable over 84 months in equal monthly
installments bearing interest at 8% 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
Marty'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 Marty's Pharmacy and has secured a valid Colorado
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 September 18, 1997 by and
between Marty'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: September 25, 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 5
September 18, 1997 by and
between Marty's Pharmacy, Inc.
and HORIZON Pharmacies, Inc.
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PURCHASE AGREEMENT
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AGREEMENT made the 18 day of September, 1997 between Marty's Pharmacy,
Inc. having an office at 100 W. Main, Trinidad, Colorado 81082 (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 Marty'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 $70,000.00
hardware/software, and Non-compete Covenant
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%
GREATER THAN 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 $81,250.00 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 $81,248.00 based
upon the average bid and asked 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 (8)
percent. The note is due and payable in Eighty four (84) equal
consecutive monthly installments, the first installment will
be 1st 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 a third
party inventory service 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 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 or contingent, 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,
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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 September 18, 1997
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 18, 1997 at
Buyer's discretion, but in no event later than September 30, 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) 10,156 Shares
of Buyer's common stock, par value $.01 per share (the
"Horizon Common Stock"), equivalent to $81,248.00 based
upon closing price for the Horizon common stock as reported
on the American Stock Exchange for the day immediately preceding
the closing date of this Agreement. c) Buyer's promissory
note described in Paragraph 4.1 hereof, and the Security
instruments required by section 4.1 (c).
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 BUYER.
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 closing 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,
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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.
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 of included in purchase price is the covenant not to
compete Marty Vallejos 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 Trinidad,
CO or have any equity investment in such operation. This non-compete
entitles Marty Vallejos to perform work as employee of HORIZON
Pharmacies, Inc. Furthermore, This non-compete clause does not
prohibit Marty Vallejos from performing duties such as relief
pharmacist at other pharmacies for up to one (1) day per week.
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 Colorado.
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 Colorado 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 Colorado License.
(b) can not secure a lease for:
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$1,500.00 per month and 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.
18. EARNEST MONEY.
19.1 To bind this Agreement, Buyer herewith deposits with Marty'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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands the day and
year first above written.
BUYER:
HORIZON PHARMACIES, INC.
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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.
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SEAL
Notary Public, State of
My commission Expires:
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SELLER:
Marty's Pharmacy, Inc.
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Marty Vallejos, President
THE STATE OF )
COUNTY OF )
THIS INSTRUMENT was acknowledged before me on this the _________day of
__________, 19___ by __________________, who holds the office of President of
Marty's Pharmacy, Inc.
-----------------------------------
SEAL
Notary Public, State of
My commission Expires:
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