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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): January 29, 1998
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 January 29, 1998, the registrant, HORIZON Pharmacies, Inc.
("Registrant"), acquired substantially all of the assets of Conoly-Herry Drugs,
Inc., a Texas corporation (the "Pharmacy"), comprising primarily pharmacy
files, equipment, inventory and supplies. The Registrant acquired the assets
through arm's-length negotiations with Daniel B. Conoly and Michael L. Herry,
the Pharmacy's sole shareholders.
Prior to this transaction, no material relationships existed between the
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) $101,000.00 cash
payable at closing; and (ii) two promissory notes in the amount of
$149,472.70 and $99,648.48 payable to Mr. Conoly and Mr. Herry, respectively,
over 60 months in equal monthly installments bearing interest at 8% per annum.
The Registrant intends to continue the retail pharmacy operations of the
Pharmacy under the HORIZON Pharmacies, Inc. name. In connection therewith, the
Registrant has secured a real estate lease covering the current retail location
of the Pharmacy and has secured a valid Texas 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 January 29,
1998 by and between Conoly-Herry Drugs,
Inc., a Texas corporation, and HORIZON
Pharmacies, Inc. Omitted from this
Agreement, as filed, are the exhibits
thereto. The Registrant will furnish
supplementally a copy of any such
omitted exhibits to the Commission upon
request.
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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: February 10, 1998 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 January 29, 1998 by and 5
between Conoly-Herry Drugs, Inc., a Texas
corporation, and HORIZON Pharmacies, Inc.
Omitted from this Agreement, as filed, are
the exhibits thereto. The Registrant will
furnish supplementally a copy of any such
omitted exhibits to the Commission upon request.
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PURCHASE AGREEMENT
AGREEMENT made the 12 day of JANUARY, 1998 between CONOLY-HERRY DRUGS,
INC. a Texas Corporation ("Seller"), and HORIZON Pharmacies, Inc., a Texas
Corporation ("Buyer").
WITNESSETH
WHEREAS, Seller operates a retail pharmacy doing business as CONOLY-HERRY
DRUGS (the "Drug Store") located at 1327 THIRD STREET, FLORESVILLE, TEXAS
78114 (the "Retail Location").
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase
certain assets utilized in connection with and as part of Seller's operation
of the Drug Store upon the terms and conditions stated herein:
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby the acknowledged, the parties agree as follows:
1. SALE OF ASSETS.
1.1 ASSETS TO BE PURCHASED Seller hereby agrees to convey, transfer,
assign, and deliver to Buyer on a going concern basis, and Buyer
hereby agrees to purchase from Seller all of Seller's assets
located at or used in connection with Seller's operation of the
Drug Store including but not limited to:
A. MARKETABLE INVENTORY. All marketable pharmaceutical and retail
inventory of Seller held for retail sale by the Drug Store; and
B. PRESCRIPTION FILES AND PATIENT PROFILES. All prescription
files, patient profiles and customer list, telephone numbers.
C. FURNITURE, FIXTURES AND EQUIPMENT. Supplies and all
furniture, fixtures, equipment described in Exhibit "A"
attached hereto and made a part hereof, including but not
limited to computers, peripherals, cash registers,
refrigerators, typewriters, microfiche, fax machines,
copiers, postage meters, sound system, alarm system,
telephone equipment, shelving, counters, bottles, vials,
ointment jars and other usable supplies.
1.2 ASSETS NOT PURCHASED BY BUYER Unless otherwise agreed by the parties
in writing, Buyer shall not purchase the following: (i) consigned
merchandise; (ii) merchandise held in layaway; (iii) merchandise
which is damaged, shopworn, faded (including faded labels) or
subject to visible deterioration; (iv) merchandise which, in Buyer's
reasonable opinion, is unsalable because it is obsolete, its
expiration date has expired or it has been discontinued by the
manufacturer; (v) out of date unsalable; (vii) all third party
insurance receivables for services rendered on or before Closing Date.
1.3 TELEPHONE NUMBERS. Seller agrees to use all reasonable efforts and
take all action necessary to assure that all telephone numbers used
at the Drug Store shall be transferred without interruption to Buyer.
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2. PURCHASE PRICE.
2.1 COMPUTATION. The purchase price to be paid by the Buyer for the
Drug Stores Assets shall be computed as follows: (i) $130,000 for
prescription files, patient profiles, furniture, fixtures,
equipment, goodwill, and non-compete agreement; PLUS (ii) the
discounted fair market value of all inventory constituting a part
of the Drug Store Assets determined in accordance with Section 2.6
below;
2.2 ALLOCATION. The total purchase price described in Section 2.1,
above, shall be allocated as set forth in Exhibit "B" attached
hereto and made a part hereof.
2.3 PAYMENT OF THE PURCHASE PRICE. Buyer shall cause the purchase
price to be paid to Seller as follows:
(a) $100,000.00 on the Closing Date by certified or cashier's
check (less of the Earnest Money Deposit as such term is
defined in Section 2.4, below);
(b) The balance in a negotiable promissory note in the form
attached in Exhibit "C" attached hereto secured by the
inventory of the Drug Store;
(c) Buyer shall deduct from the purchase price payable at
Closing an amount equal to the sum of (i) Seller's pro rata
share of personal property taxes as described in Section 2.5.2,
below, and (ii) one half of the fee charged by the third party
inventory service.
2.4 EARNEST MONEY DEPOSIT. Buyer herewith deposits with (the "Escrow
Agent"), the sum of $1,000 (the "Earnest Money Deposit")), which
sum shall be applied to the cash portion of the purchase price at
Closing. In the event Seller fails to perform each and every
covenant and condition required hereunder. Buyer may terminate
this Agreement by giving Seller written notice and Seller shall
return the Earnest Money to Buyer within three (3) days of
Seller's receipt of such notice. In the event Buyer fails to
perform each and every obligation hereunder, Seller may terminate
this Agreement and retain the Earnest Money as liquidated damages.
The remedies provided in this Section shall be the exclusive
remedies for a breach of this Section.
2.5 TAXES
2.5.1 SALES, USE, AND TRANSFER TAXES. Buyer shall pay any and all
sales, use, and transfer taxes arising out of the sale of the
Drug Store Assets pursuant to this Agreement.
2.5.2 PERSONAL PROPERTY TAXES. Seller shall pay all personal
property taxes attributable to the Drug Store Assets for
the period up to and including the Closing Date, and Buyer
shall pay all personal property taxes attributable to the
Drug Store Assets for the period following the Closing
Date. The parties shall, using last year's tax returns,
estimate as of the Closing Date the personal property taxes
anticipated to be owed on the Drug Store Assets for the
current calendar year, and Seller's pro rata portion of
such estimated taxes shall be withheld by Buyer from the
purchase price described in Section 2.3. above.
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2.6 INVENTORY EVALUATION. A physical inventory of the Drug Store
Assets shall be performed on the Closing Date by an independent third party
inventory service. Each party shall pay one-half of the fee charged by the
service company, with Seller's pro rata share of such costs to be deducted
from the purchase price payable by Buyer at Closing (to be deducted from each
note in equal amount). For purposes of calculating that portion of the
purchase price attributed to inventory under Section 2, above, the marketable
inventory shall be valued as follows, except as otherwise provided herein:
<TABLE>
Marketable Inventory Method of Valuation
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<S> <C>
Prescription inventory Acquisition cost of AWP less 14%
except for special deal prescription
items or generic items which shall be
valued at acquisition cost
Non-Prescription inventory Acquisition cost
</TABLE>
In the event Seller is unable to establish the acquisition cost of any
non-prescription inventory, the following formula shall be applied in valuing
such inventory.
<TABLE>
Category of Merchandise Method of Valuation
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<S> <C>
HBA Retail price less 25%
OTC Retail price less 25%
Gifts Retail price less 40%
Cards Retail price less 50%
Cosmetics Retail price less 33 1/3%
Watches/Cameras Retail price less 25%
Fragrances Retail price less 25%
Candy (box) Retail price less 40%
Candy (loose) Retail price less 30%
Jewelry Retail price less 40%
Miscellaneous Retail price less 40%
Seasonal Merchandise Retail price less 40%
</TABLE>
3. REPRESENTATIONS AND WARRANTIES
3.1 The Seller does hereby represent and warrant to Buyer as follows:
3.1.1 ORGANIZATION. Seller is sole proprietorship duly organized
and existing in good standing under the laws of its state of
incorporation and is entitled to own and lease its properties and to
carry on its business as and in the places where such properties are
now owned, leased or operated and such business in conducted.
3.1.2 AUTHORITY. The execution, delivery and performance of this
agreement by Seller has been duly authorized by all necessary
corporate action and constitutes a legal, valid, and binding
obligation on Seller enforceable in accordance with its terms.
3.1.3 TITLE TO PROPERTIES. The Seller has good and marketable
title to all of the Drug Store assets, 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 "D" attached hereto which shall be satisfied and released
prior to closing.
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3.1.4 BOOKS AND RECORDS. Seller's books and records which have
been provided to Buyer for inspection are true, correct and complete,
and contain no material omission with respect to Seller's business,
operation or status.
3.1.5 STATEMENTS NOT MISLEADING. No representation, warranty or
other information disclosed to Buyer in connection with this
Agreement omits or will omit to state the material facts necessary
to make such representation, warranty or information not misleading.
3.1.6 COMPLIANCE WITH APPLICABLE LAWS. Seller has received no
notice of violation of any applicable law, regulation or requirement
relating to the operation of the Drug Store, the Drug Store Assets
or the Retail Location, and Seller has no knowledge of or reason to
believe any such violation exists. Seller is in full compliance with
all wages and hour laws, and to the best of its knowledge 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
Relation Board, the Equal Employment Opportunity Commission or any
other administrative agency, Federal or state, that regulates labor
or employment practices, nor is any grievances filed or threatened to
be filed against Seller by any employee pursuant to any collect
bargaining or other employment agreement to which Seller is a party.
To the Seller's best knowledge, it 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.
3.1.7 CONTRACTS. Seller is not party to any contract,
understanding or commitment whether in the ordinary course of
business or not, relating to Seller's operation of the Drug Store
which extends beyond the Closing Date.
3.1.8 EMPLOYMENT CONTRACTS. Seller is not a party to any oral or
written contract of employment between Seller and any officer or
other employee, and the employment of each of Seller's officers and
all the Drug Store's employees is terminable at will without any
penalty of severance obligation of any kind.
3.1.9 LITIGATION. Seller is not a party to and has no knowledge
of any suit, action, proceeding, investigation, claim, complaint or
accusation pending or threatened against or affecting Seller or the
Drug Store Assets, in any court or before any arbitration panel of
any kind or before or by any Federal, state, local, foreign or other
government agency, department, commission, board, bureau,
instrumentality or body, 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 government body against or affecting
Seller, Drug Store, the Drug Store Assets or the Retail Location.
3.1.10 EMPLOYEE BENEFITS. All sums due for employee compensation
and benefits and all vacation time owing to any employees of Seller
have been duly and adequately accrued and reflected in the accounting
records of the Seller. Seller shall be responsible for all employee
benefits, including but not limited to payment for accrued vacation,
to the Closing Date. 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.
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3.1.11 TAXES.
(a) Seller has 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,
employee's 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) Seller has made all deposits required to be made in
connection with any tax including but not limited to,
estimated income, franchise, sales, use and employee
withholding taxes.
(c) Seller has paid or made adequate reserves on its books
of account for all taxes, assessments, fees, penalties,
interest and other governmental charges which have become
due and payable, and the amounts reflected on such books
are to Seller's best knowledge sufficient for the payment
of all unpaid Federal, state, local, foreign, and other
taxes, fees, and assessment and all interest and
penalties thereon with respect to the periods then added
and or all periods prior thereto.
3.1.12 INVESTMENT PURPOSES. Not applicable.
3.1.13 INSURANCE. All inventories, buildings and fixed assets
owned or leased by Seller are and will be adequately insured
against fire to the Closing Date, valid policies therefor are and
will be outstanding and in force, and the premiums will be paid
before the Closing Date.
3.1.14 NO CHANGES. Until the Closing Date, Seller will not,
except with Buyer's prior written consent: (i) conduct its
business except in the regular and ordinary course; (ii) increase
the amount of compensation currently being paid to employee or
agent, or make any bonus arrangement with any employee or agent;
(iii) enter into any transaction other than in the ordinary
course of business; or (iv) pay out assets being sold to Buyer any
debt, obligation or liability which Buyer has not agreed to assume
under the terms of this Agreement.
3.2 Buyer does hereby represent and warrant to Seller as follows:
3.2.1 ORGANIZATION. 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.
4. CONDITIONS TO CLOSING.
4.1 BUYER'S CONDITIONS TO CLOSING. All obligations of Buyer under this
Agreement are subject to the fulfillment, prior to or at Closing, of
each of the following conditions (unless waived in writing by Buyer).
4.1.1 REPRESENTATIONS AND WARRANTS. The representations and
warranties of Seller contained in this Agreement shall be
true and complete at the Closing Date as if they were made at
such time.
4.1.2 COMPLIANCE. 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 on the Closing Date.
5
ILLEGIBLE
Buyer inital ILLEGIBLE Seller Initials ILLEGIBLE
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4.1.3 CONSENTS. All necessary consents to the transfer of the
Drug Store Assets have been obtained from vendors and other
third party, if any.
4.1.4 NO CASUALTY. The Drug Store's business and property shall
not have been adversely affected in any material way as a
result of any strike, lock-out, accident or other casualty or
act of God of the public enemy, or any judicial, administrative
or governmental proceeding.
4.1.5 LEASE OF RETAIL LOCATION. Buyer shall have executed a lease
covering the Retail Location.
4.1.6 LICENSE TO OPERATE RETAIL PHARMACY. Buyer shall have
obtained a valid license to operate a retail pharmacy under the
HORIZON Pharmacies, Inc. name in the state of Texas.
4.2 SELLER'S CONDITIONS TO CLOSING. All obligations of Seller under this
Agreement are subject to the fulfillment, prior to or at Closing, of
each of the following conditions (unless waived in writing by Seller).
4.2.1 REPRESENTATIONS. The representations and warranties of
Buyer contained in this Agreement shall be true and complete at
the Closing Date as if they were made at such time.
4.2.2 COMPLIANCE. Buyer 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 on the Closing
Date.
5. LIABILITIES NOT ASSUMED BY BUYER. The parties expressly agree and
acknowledge that Buyer shall not, by virtue of this Agreement, the
consummation of the transactions contemplated herein or otherwise,
assume any liabilities or obligations of Seller or any liabilities or
obligations constituting a charge, lien, encumbrance or security interest
upon the Drug Store Assets, regardless of whether such liabilities or
obligations are absolute or contingent, liquidated or unliquidated or
otherwise.
6. INDEMNIFICATION.
6.1 SELLER'S INDEMNIFICATION OF BUYER. Seller and (Illegible)
shall indemnify and hold harmless Buyer against and in respect
of any and all liabilities concerning or otherwise connected to
the conduct or operation of the Drug Store as of or prior to the
Closing Date, and with the exception of liabilities expressly
assumed by Buyer, 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 how and
when the same may have arisen, which are asserted against Buyer
as a result of this Agreement or the consummation of the
transactions contemplated herein.
6.2 BUYER'S INDEMNIFICATION OF SELLER. Buyer shall indemnify and
hold harmless Seller against and in respect of any and all
liabilities concerning or otherwise connected to the conduct or
operation of the Drug Store following the Closing Date.
7. CLOSING.
7.1 CLOSING DATE. The closing shall take place at the Retail
Location on or before JANUARY 29, 1998 (the "Closing Date") but
in no event later than JANUARY 31, 1998 unless otherwise agreed
by the parties in writing.
Buyer Initial Seller Initials
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7.2 SELLER'S OBLIGATIONS AT CLOSING. Seller shall deliver to
Buyer at closing of this Agreement a Bill of Sale 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 and all other instruments and documents that are
necessary or appropriate to the sale and delivery of the Drug
Store Assets.
7.3 BUYER'S OBLIGATIONS AT CLOSING. Buyer shall deliver to Seller
at closing: (i) a certified or cashier's check for the cash
portion of the purchase price provided for in Section 2.3; (ii)
the Note and security Agreement provided for in Section 2.3; and
(ii) evidence of the shares of Common Stock provided for in
Section 2.3.
8. MISCELLANEOUS.
8.1 SURVIVAL OF REPRESENTATION, WARRANTIES AND INDEMNIFICATIONS. All
of the representations, warranties and indemnifications of the
parties set forth in this Agreement shall survive the Closing
hereof.
8.2 RISK OF LOSS. The risk of loss of damages of Drug Store
Assets shall be upon Seller until the closing hereof.
8.3. COVENANT NOT TO COMPETE. Except as otherwise herein, Dan
Conoly and Mike Herry shall not, for a period of three (3)
years after the Closing Date, directly or indirectly own an
equity interest in, operate, manage or assist any person or
entity other than Buyer in operating or managing, any business
which includes a retail pharmacy, nursing home or home health
care company, or which offers for sale or lease durable medical
equipment within the city limits of Floresville, Texas. The
parties expressly agree that Dan Conoly and Mike Herry may
serve as a relief pharmacist at retail pharmacies not owned or
operated by Buyer. The parties acknowledge that the territorial
and time limitations contained in the 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 can not be changed
except by written permission of Buyer.
8.4 RIGHT TO ENJOIN BREACH. The parties agree that in the event
of a breach by Seller of any provision of this paragraph,
monetary damages alone would be inadequate and Buyer shall, in
addition to all other legal remedies, be entitled to obtain an
order enjoining Seller from violating the covenants set forth
herein.
8.5 ACCESS TO RECORDS. Seller shall give Buyer, its counsel,
accountants and representatives, reasonable access during normal
business to all of Seller's books, contracts, commitments and
records and furnish Buyer with all information which Buyer
reasonably may request to conduct a financial audit of the last
(2) fiscal years at Buyer's expense.
8.6 GOVERNING LAW. This agreement shall be governed and construed
in accordance with the laws of the state of Texas.
8.7 ENTIRE AGREEMENT MODIFICATION. 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, their successors and assigns.
This Agreement may not be amended or terminated except by an
instrument executed by both parties. Mutually agreed Employment
Agreement contract with Mr. Michael Herry.
Buyer Initial Seller Initial
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8.8 AGREEMENT. This agreement may not be assigned by Buyer
without written consent of Seller, which consent will not be
unreasonably withheld.
8.9 VEHICLE. Lease truck to be transferred to Horizon Pharmacy.
8.10 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
IN WITNESS WHEREOF, the parties hereto have set their hands the day and
year first above written.
BUYER: HORIZON Pharmacies, Inc.
Witness:
(Illegible) /s/ RICK McCORD, President
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Rick McCord, President
SELLER: Conoly-Herry Drugs, Inc.
Witness:
(Illegible) /s/ DAN CONOLY
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Michael Herry, President
Buyer Initial Seller Initial
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