UNITED STATES
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) JULY 1, 1996
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CHRONIMED INC.
(Exact name of registrant as specified in its charter)
MINNESOTA
(State or other jurisdiction of incorporation)
0-19952 41-1515691
(Commission File Number) (IRS Employer Identification Number)
13911 RIDGEDALE DRIVE, MINNETONKA, MINNESOTA 55305
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (612) 541-0239
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 1, 1996, Chronimed Inc. ("Chronimed"), through its wholly-owned
subsidiary, Chronimed Holdings Inc., ("Chronimed Holdings"), completed its
acquisition of substantially all of the assets of a group of nine companies
doing business as "StatScript Pharmacies." These nine companies include
StatScript Management Services, Inc., a Missouri corporation; Stat Script, Inc.,
a Missouri corporation; Oaklawn Pharmacy, Inc., a Texas corporation; Preston
Center Pharmacy, Inc., a Texas corporation; Mesa Pharmacy, Inc., an Arizona
corporation; Chicago Pharmacy, LLC, an Illinois limited liability company; North
Avenue Pharmacy, LLC, an Illinois limited liability company; Houston Pharmacy,
Inc., a Texas corporation; and Fort Lauderdale Pharmacy, Inc., a Florida
corporation (collectively referred to as "StatScript"). All or substantially all
of the issued and outstanding capital stock or limited liability company
interests, as the case may be, of each of the StatScript companies is owned by
Phillip D. Short.
The transaction was effected by a cash acquisition pursuant to an Acquisition
Agreement dated as of June 21, 1996 (the "Agreement") filed under Exhibit 2.1 of
this Form 8-K. StatScript was represented by a financial intermediary who
solicited proposals from potential purchasers, and the purchase price and other
terms of the Agreement were negotiated at arm's length with StatScript.
StatScript, which is privately held, owned and operated nine retail pharmacies
in the states of Missouri, Arizona, Texas, Illinois and Florida. These
pharmacies sell pharmaceuticals and other medical products and services to
patients whose chronic illnesses require long term medication, including but not
limited to patients with HIV and AIDS.
Under the terms of the Agreement, Chronimed paid ten million two hundred fifty
thousand dollars ($10,250,000.00) in cash. Furthermore, the Agreement calls for
an additional contingent payment in an amount up to but not in excess of two
million two hundred and fifty thousand dollars ($2,250,000.00) contingent upon
the realization of revenues in excess of seventeen million dollars from the
acquired businesses over the first year of operations. The cash consideration
was paid from Chronimed's available cash resources.
ITEM 7. FINANCIAL REPORTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Audited financial statements of StatScript are currently not
available. The financial statements will be filed as soon as
practicable but not later than September 16, 1996.
(b) Pro Forma Financial Information
The required pro forma financial information relative to the
acquisition is currently not available. The pro forma
financial information will be filed as soon as practicable,
but not later than September 16, 1996.
(c) Exhibits:
2.1 Acquisition Agreement dated as of June 21, 1996, by
and among Chronimed Holdings Inc., a Minnesota
corporation (the "Buyer"), each of the companies
listed on Schedule I attached to the Acquisition
Agreement (each, a "Company" and collectively, the
"Companies") and Phillip D. Short (the
"Representative"; the Companies and the
Representative are sometimes collectively referred to
as "Seller"), who owns all or substantially all of
the issued and outstanding capital stock or limited
liability company interests, as the case may be, of
each of the Companies.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf of the undersigned
thereunto duly authorized.
CHRONIMED INC.
Dated July 10, 1996 By: /s/ Norman A. Cocke
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Norman A. Cocke
Its Chief Financial Officer
EXHIBIT 2.1
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 21st day
of June, 1996, by and among CHRONIMED HOLDINGS INC. a Minnesota corporation (the
"Buyer"), each of the companies listed on Schedule I attached hereto (each, a
"Company" and collectively, the "Companies") and Phillip D. Short (the
"Representative"; hereinafter the Companies and the Representative are sometimes
collectively referred to as "Seller"), who owns all or substantially all of the
issued and outstanding capital stock or limited liability company interests, as
the case may be, of each of the Companies, as described on Schedule I.
WITNESSETH:
WHEREAS, the Buyer desires to purchase, and the Companies and the
Representative desire to sell, the assets and business of the Companies for the
consideration set forth below, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
meanings set forth below, and where said meanings are intended, said terms shall
be capitalized. Any reference to an asset or item of or owned by "the Companies"
shall be deemed to include every such asset and item of or owned by each
Company. The terms are:
1.1 "BUSINESS" shall mean the Companies' business of operating
pharmacies and selling pharmaceutical and other medical products and services to
patients, including but not limited to the Companies' business in the area of
HIV and AIDS, but shall not include the business of viatical settlements or the
repackaging of biotech drugs for sale to retailers.
1.2 "INVENTORY" shall mean all of the Companies' inventory and
supplies.
1.3 "RECEIVABLES" shall mean the Companies' accounts
receivable arising from sales of merchandise or services to customers in the
ordinary course of the Companies' business.
1.4 "EQUIPMENT" means all of the Companies' tangible assets,
other than the Inventory, including but not limited to furniture, machinery,
equipment, computers and the software utilized therewith, and vehicles,
specifically including but not limited to the items listed on Schedule 1.4.
1.5 "CASH" shall mean the Companies' cash and cash
equivalents, including but not limited to amounts on deposit at financial
institutions and investments owned by the Companies.
1.6 "CONTRACTS" shall mean all of Companies' right, title and
interest in and to all contracts, leases, commitments and agreements which
relate to the Assets or the Business, all of which (other than those which are
not material to the Companies and which can be terminated upon less than ninety
(90) days notice without further liability of the Companies) are listed on
Schedules 3.10 and 3.13 attached hereto.
1.7 "ORDERS" shall mean all the Companies' orders from
customers.
1.8 "PERMITS" shall mean all licenses, permits, franchises,
approvals and authorizations by governmental authorities or third parties
(including NABP numbers) held by the Companies.
1.9 "BOOKS AND RECORDS" shall mean all of the Companies' books
and records relating to the Assets or the Business (other than the Companies'
tax returns) including without limitation, lists of customers and suppliers, and
records with respect to pricing, volume, payment history, cost, inventory,
machinery and equipment, mailing lists, distribution and customer lists, sales,
purchasing and materials, and including any such records which are maintained on
computer.
1.10 "INTELLECTUAL PROPERTY RIGHTS" shall mean all patents,
copyrights, trademarks, trade names, trade secrets, and knowhow utilized by the
Companies, whether or not registered, including but not limited to all the
Companies' right, title and interest to their respective names, including but
not limited to "Statscript".
1.11 "GOODWILL" shall mean all goodwill and Business of the
Companies.
1.12 "ASSETS" shall mean all of the assets, properties and
rights of the Companies, including but not limited to the Business, Inventory,
Equipment, Contracts, Orders, Permits, Books and Records, Cash, Intellectual
Property Rights, and Goodwill.
2. PURCHASE AND SALE OF THE ASSETS.
2.1 PURCHASE OF THE ASSETS FROM THE COMPANIES. Subject to and
upon the terms and conditions of this Agreement, at the closing of the
transactions contemplated by this Agreement (the "Closing"), each Company shall
sell, transfer, convey, assign and deliver to the Buyer, and the Buyer shall
purchase, acquire and accept from each Company, all of the Assets owned by such
Company. At the Closing each Company shall deliver instruments of conveyance
conveying the Assets to Buyer.
2.2 FURTHER ASSURANCES. From time to time after the Closing,
at the Buyer's request and without further consideration, each of the Companies
shall promptly execute and deliver such instruments of sale, transfer,
conveyance and assignment, and take all such other action as the Buyer may
reasonably request, more effectively to transfer, convey and assign to the Buyer
all of the Assets.
2.3 PURCHASE PRICE FOR THE ASSETS.
(a) The purchase price to be paid by the Buyer for
the Assets shall be (i) Ten Million Two Hundred Fifty Thousand Dollars
($10,250,000) (the "Initial Payment") plus, (ii) if and to the extent
earned, the contingent payment (the "Contingent Payment") provided for
in Section 2.4 hereof. (Hereinafter the Initial Payment plus the
Contingent Payment are sometimes collectively referred to as the
"Purchase Price"). The Initial Payment shall be payable in the manner
described in paragraph (b) of this Section 2.3. The Purchase Price
shall be allocated among the Companies as will be agreed to by the
Companies and as to the stockholders of Stat Script, Inc. will be set
forth on Schedule II to be delivered to the Buyer prior to the Closing.
(b) At the Closing, the Buyer shall deliver, in the
manner provided in Section 2.8, to the Representative (as defined in
Section 2.7 hereof), the Initial Payment in full by wire transfer of
immediately available funds to account(s) designated by the
Representative, for distribution to the Companies by the Representative
in the amount set forth opposite each such Company's name on Schedule
II.
(c) If any amount has been paid to employees or paid
or distributed to the shareholders or members of the Companies,
including the Representative, in excess of the amounts permitted under
the provisions of Section 3.4(c), the excess amount paid or distributed
shall be credited, dollar for dollar, against the Initial Payment. If
any amounts are determined to have been paid or distributed in excess
of the amounts permitted under Section 3.4(c) after the Closing Date,
so that credit against the Initial Payment was not possible, the amount
thereof shall be immediately due from Seller to Buyer. This
indemnification is unlimited as to amount; therefore the $150,000
deductible and the $500,000 cap on indemnification provided in Section
9.1 shall not apply to any payments required under this subsection
2.3(c), nor shall any payment made pursuant to this subsection 2.3(c)
count against either the $150,000 deductible or the $500,000 cap set
forth in Section 9.1.
2.4 CONTINGENT PAYMENT.
(a) The Contingent Payment shall be, if and to the
extent earned, an amount up to but not in excess of $2,250,000. The
amount of the Contingent Payment shall be determined based on the
Revenues, as defined below. The amount of the Contingent Payment shall
be determined as follows:
(i) If the Revenues are less than or equal
to $17,000,000, the Contingent Payment will be zero;
(ii) If the Revenues are more than
$17,000,000, the Contingent Payment shall be an amount equal
to (A) the Revenues, less (B) $17,000,000; provided, however,
that in no event shall the Contingent Payment exceed
$2,250,000.
For purposes of this section, "Revenues" shall mean the aggregate of
the gross revenues earned by the nine pharmacies presently operated by
Seller, during Buyer's fiscal year which commences June 29, 1996, and
ends June 27, 1997, determined on an accrual basis and net of returns,
bad debts, discounts, adjustments/write-offs, and payor allowances;
provided that in determining Revenues--except that an allowance will be
determined in accordance with generally accepted accounting principles
to provide for the estimated nonpayment of co-payments billed in
connection with the co-pay billing practices instituted by the
Companies--Buyer will not change current practices of Seller in
determining Revenues or adopt new practices, which in either case would
change the manner in which Revenues are currently determined by the
Companies in a way that is adverse to Seller. Gross revenues from the
nine pharmacies shall include (i) revenues from mail order sales, and
(ii) revenues from sales to patients ("Transferred Patients") of the
nine pharmacies whose business is transferred to other pharmacies
("Other Buyer Pharmacies") operated by Buyer, by Buyer's parent
company, Chronimed Inc. or by any subsidiaries of Chronimed Inc. from
and after the Closing Date; provided, however, that in the case of
revenues which are from the sale of prescription drugs for organ
transplant patients and which are attributable to any of the nine
pharmacies other than Fort Lauderdale, Miami, or Kansas City, only
fifty percent (50%) of such revenues shall be included in gross
revenues in accordance with the foregoing provisions.
During Buyer's above-referenced fiscal year, Buyer shall
operate the nine pharmacies in the ordinary course of business, subject
to the exercise of Buyer's reasonable business judgment. If in the
exercise of Buyer's reasonable business judgment, Buyer closes or moves
a pharmacy or materially alters its operations (including the transfer
of a pharmacist from one of the nine pharmacies to an Other Buyer
Pharmacy) in a way that reduces the patients it serves, it is
understood that any patients of such pharmacy who are affected by such
actions and who thereafter become a patient of an Other Buyer Pharmacy
shall be deemed to be Transferred Patients under the foregoing
provisions, regardless of whether a formal transfer has occurred. Buyer
will notify Representative when a pharmacy is closed or moved or a
pharmacist transferred or (on a quarterly basis) when a patient is
changed to a mail-order basis or is transferred to another pharmacy of
Buyer.
(b) Unless payment is delayed pending final
determination of the amount of Revenues pursuant to the provisions set
forth below, payment of the Contingent Payment, if any, shall be made
by September 30, 1997. Where a payment is delayed under the procedures
set forth below, payment shall be made within ten (10) days after the
amount of Revenues and, correspondingly, the amount of the Contingent
Payment, if any, is finally determined. Payment shall be made in cash,
by cashier's or certified check, or by wire transfer of immediately
available funds to an account designated by the Representative, to be
distributed by Representative among the Companies as agreed by the
Companies.
(c) The determination of Revenues for purposes of
this section shall be made by Buyer, with a representative of Seller
having the right to participate in such determination at the election
of Representative. For purposes of verifying the determination of
Revenues, Representative shall have the right, at his election, to
audit the determination of the amount of Revenues, with such audit, if
any, to be scheduled at a mutually convenient time and location. Buyer
shall provide the Representative or his agent reasonable assistance in
the conduct of such audit, including providing access to books and
records relevant to the conduct of such audit and providing a
reasonable location in which to perform the audit. Seller shall be
responsible for the cost of such audit; provided, however, that if such
audit reveals a shortfall in the amount of the Revenues which was more
than three percent (3%) of the correct total of Revenues, then Buyer
shall be responsible for the cost of such audit.
(d) Buyer shall deliver to the Representative monthly
reports showing the amount of Revenues in the same form as the monthly
reports currently used by the Companies. If Representative finds
matters revealed in such reports to which Representative objects or
which Representative believes are not in compliance with the provisions
of this Section 2.4, Representative shall use all reasonable efforts to
notify Buyer of Representative's objections, and the parties shall use
reasonable efforts to resolve such objections. It is understood,
however, that failure to take such action shall not impair or reduce
the Representative's rights under subparts (c) and (e) hereof.
(e) Buyer shall deliver a report of its determination
of the amount of Revenues to the Representative by August 31, 1997.
Representative shall have fifteen (15) days after the delivery of such
report to advise Buyer of whether or not Representative agrees with the
determination. If no notice of disagreement is delivered within said
period (or if at any time, Representative indicates in writing that he
agrees with the determination), then such determination shall be final.
If Representative disagrees with such determination, Representative
shall have the right, at his election, to exercise the audit rights
referred to above.
After completion of such audit, if Representative elects to
carry out the audit, or if no audit is conducted, commencing ten (10)
days after Representative has delivered his notice of disagreement,
Representative and Buyer shall first endeavor for a period of fifteen
(15) days to reach agreement as to the amount of the Contingent
Payment. In the event that Representative and Buyer are unable to reach
agreement as to such amount, then a certified public accounting firm
which has not previously provided services to Buyer or its parent
company, Chronimed Inc., or to any other subsidiaries or affiliates of
Chronimed Inc., or to Representative or any of the Companies shall be
designated by the parties to resolve such dispute. Unless another firm
is agreed to by Buyer and Representative, said accounting firm shall be
a "Big Six" firm which satisfies the requirements set forth above. If
Buyer and the Representative cannot agree on a Big Six firm, they shall
ask their respective accounting firms to agree upon a Big Six firm, and
the parties shall be deemed to have agreed upon that firm. The firm
thus designated shall have sixty (60) days to complete its
determination. The determination made by such firm shall be final for
all purposes. The costs charged by such firm shall be borne equally by
Buyer and Seller, unless there is a shortfall in the amount of Revenues
of more than three percent (3%) in which case the Buyer shall pay all
of such costs.
(f) The Contingent Payment shall be due only if, and
to the extent that Revenues are actually achieved in excess of
$17,000,000. If, and to the extent that, Revenues in excess of said
amount are not achieved--for whatsoever reason--there will be no
obligation to pay Seller the Contingent Payment, and Seller
specifically acknowledges and agrees that it has no basis for any claim
for a Contingent Payment except to the extent that Revenues in excess
of $17,000,000 are in fact achieved as determined in accordance with
this Section 2.4.
2.5 ASSUMPTION OF SPECIFIED LIABILITIES. On the Closing Date,
Buyer shall assume (the "Assumed Liabilities") (a) the liabilities of the
Companies as shown on the unaudited consolidated balance sheet of the Companies
dated as of May 31, 1996 (the "Pre-Closing Balance Sheet"), which Pre-Closing
Balance Sheet may include certain accounting adjustments recommended by Ernst &
Young and agreed to by the parties, (b) the liabilities which have arisen in the
ordinary course of business of the Companies (none of which, individually or in
the aggregate, shall have a material adverse effect on the Companies taken as a
whole, it being understood that amounts due to McKesson for purchases in the
ordinary course will not be deemed to have a material adverse effect) from the
date of the Pre-Closing Balance Sheet through the close of business of the day
immediately preceding the Closing Date, and (c) liabilities arising under
Contracts acquired by Buyer, but only with respect to actions and transactions
occurring under said acquired Contracts from and after the Closing Date (the
"Post-Closing Contract Liabilities"). (To the extent that the liabilities
assumed under clause (b) include reasonable and proper business expenses
incurred by the Representative after the date of the Pre-Closing Balance Sheet,
it is understood that such expenses shall constitute a liability assumed by
Buyer under clause (b) for which the Representative may seek payment from
Buyer.)
Except for the Assumed Liabilities specified above, Purchaser shall not
assume or become liable for any liabilities of the Companies. Without limiting
the generality of the foregoing, it is specifically understood and agreed that
although Purchaser is contemplating hiring all of the employees of the Companies
other than the Representative, the Companies shall be responsible for any and
all liabilities and obligations owed to their employees through the day
immediately preceding the Closing Date, including but not limited to any
termination payments, vacation pay for vacation taken prior to the Closing Date,
unpaid wages, including those for the current week, and otherwise. All such
obligations of the Companies to employees shall be satisfied, or arrangements
for the satisfaction thereof acceptable to Buyer shall be made, on or before the
Closing Date.
2.6 REPRESENTATIVE.
(a) The Companies hereby designate Phillip D. Short
as their representative (the "Representative") for the purposes of
receiving and distributing the Purchase Price, waiver of any condition
to the obligations of the Companies to consummate the transactions
contemplated hereby, defense and settlement of any claims hereunder,
and to otherwise administer the performance of this Agreement on their
behalf.
(b) All decisions and actions by the Representative
relating to this Agreement and the consummation of the transactions
contemplated hereby shall be binding upon all of the Companies, and, as
between the Companies and the Representative, none of the Companies
shall have the right to object, dissent, protest or otherwise contest
the same, unless such action or decision is the result of fraud or
willful breach of this Agreement by the Representative. In any event,
Buyer shall be entitled to rely on all decisions, actions, and
agreements made or taken by the Representative relating to this
Agreement in all cases.
(c) All fees and expenses incurred by the
Representative shall be paid by the Companies in proportion to their
allocations as agreed upon by the Companies.
2.7 CLOSING; EFFECTIVE TIME. Unless otherwise mutually agreed
upon in writing by the parties, the provisions of this Section 2.7 shall govern
the timing and conduct of the Closing and the effective time of the transactions
contemplated hereby.
The Closing shall take place at the offices of Blackwell Sanders
Matheny Weary & Lombardi L.C. commencing at 10:00 am., local time, on July 1,
1996. At the Closing, the parties shall execute all documents required for
Closing and take all other actions required in connection with the Closing.
The transfer of the Assets by the Companies to the Buyer shall be
deemed to occur at the opening of business on July 1, 1996.
3. REPRESENTATIONS OF THE REPRESENTATIVE AND THE COMPANIES REGARDING
THE COMPANIES. Each of the Representative and the Companies, jointly and
severally, represents and warrants to the Buyer that:
3.1 ORGANIZATION. Each Company is a corporation or limited
liability company duly organized, validly existing and in good standing under
the laws of the state set forth on Schedule I, and has all requisite power and
authority to own its properties, to carry on its business as now being
conducted, to execute and deliver this Agreement and the agreements contemplated
herein, and to consummate the transactions contemplated hereby and thereby. Each
Company is duly qualified to do business and in good standing in all
jurisdictions in which its ownership of property or the character of its
business requires such qualification, except where failure to qualify would not
have a material adverse effect on such Company. Certified copies of the Articles
of Incorporation and Bylaws or Articles of Organization and Operating Agreement
of each Company, as amended to date, have been previously delivered to the
Buyer, are complete and correct, and no amendments have been made thereto or
have been authorized since the date of such delivery to the Buyer.
3.2 CAPITALIZATION OF THE COMPANIES. Each Company's
capitalization is as set forth on Schedule I. Ownership of the shares and LLC
interests by the stockholders and members of the Companies is as set forth on
Schedule I.
3.3 AUTHORIZATION. The execution and delivery by the
respective Companies of this Agreement, and the consummation by the Companies of
all transactions contemplated hereby, have been duly authorized by all requisite
corporate or company action. This Agreement has been duly executed by each
Company and the Representative. This Agreement and all other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which each Company or the Representative is a party
constitute the valid and legally binding obligations of the Companies and the
Representative, enforceable against them in accordance with their respective
terms.
The execution, delivery and performance by the respective Companies and
the Representative of this Agreement, and the consummation by the respective
Companies and the Representative of the transactions contemplated hereby, will
not, with or without the giving of notice or the passage of time or both, (a)
violate the provisions of the Articles of Incorporation or Bylaws or Articles of
Organization or Operating Agreements of any of the Companies; (b) violate any
judgment, decree, order or award of any court, governmental body or arbitrator
to which any of the Companies or the Representative is a party or by which it or
he is bound, or (c) conflict with or result in the breach or termination of any
material term or provision of, or constitute a material default under, or cause
the creation of any lien, charge or other encumbrance upon the properties or
assets of any of the Companies pursuant to any indenture, mortgage, deed of
trust or other instrument or agreement to which any of the Companies is a party
or by which any of the Companies or their properties are bound. Each of the
Companies and the Representative has or will have prior to the Closing Date the
full right, power and authority to enter into this Agreement and to carry out
the transactions contemplated hereby.
Except as set forth in Section 13 hereof, no broker or finder has acted
for the Companies or the Representative in connection with this Agreement or the
transactions contemplated hereby, and no broker or finder is entitled to any
brokerage or finders' fee or other commission in respect to such transactions
based on agreements, arrangements or understandings made by or on behalf of the
Companies or the Representative.
3.3A. TITLE. Except as set forth on Schedule 3.3A, each
Company has good and marketable title to the Assets which are to be transferred
to the Buyer by such Company pursuant hereto, free and clear of any and all
covenants, conditions, restrictions, liens, charges, encumbrances, options and
adverse claims. At the Closing, Buyer will acquire good and marketable title to
all the Assets, and each Company will convey good and marketable title to the
Assets which are to be transferred to the Buyer by such Company pursuant hereto,
free and clear of any and all covenants, conditions, restrictions, liens,
charges, encumbrances, options and adverse claims.
3.4 FINANCIAL STATEMENTS; RESTRICTION ON DISTRIBUTIONS.
(a) The Representative has previously delivered to
the Buyer the audited consolidated balance sheet of the Companies as of
December 31, 1995 (the "Audited Balance Sheet") and the related
statements of income, owners' equity, retained earnings and changes in
financial condition of the Companies for the fiscal year then ended
(collectively, the "Audited Financial Statements"). The Representative
has also previously delivered to the Buyer the unaudited consolidated
balance sheet of the Companies as of April 30, 1996, and the related
statements of income, retained earnings and changes in financial
condition of the Companies for the 4-month period then ended (the
"Interim Financial Statements"). The Audited Financial Statements and
the Interim Financial Statements are referred to collectively herein as
the "Financial Statements". The Audited Financial Statements have been
prepared in accordance with generally accepted accounting principles
applied consistently with past practices. The Interim Financial
Statements have been prepared consistently with past practices.
(b) The Financial Statements fairly present, as of
their respective dates, the financial condition, retained earnings,
assets and liabilities of the Companies and the results of operations
of the Companies' business for the periods indicated, except for taxes
not yet due.
(c) Since the date of the Audited Balance Sheet there
have not been, and through the Closing Date, there will not be, (i) any
payments to or for employees of bonuses, incentive payments, profit
sharing or other payments other than payment of regular compensation,
reimbursement of reasonable business expenses incurred in the ordinary
course of business, and contributions to and distributions from the
Companies' 401(k) and Profit Sharing Plan (the "Plan") at rates
consistent with 1995 in the case of contributions, and in accordance
with the terms of the Plan in the case of distributions ("Normal Profit
Sharing Contributions and Distributions"), or (ii) any payments,
dividends or distributions of any kind to the shareholders or members
of the Companies, or to the shareholders and members of any company now
or previously under common control with the Companies or which operated
a Statscript Pharmacy, in each case including but not limited to the
Representative, except only for (A) payment of regular compensation
(but not bonuses, incentive compensation or profit sharing other than
Normal Profit Sharing Contributions and Distributions) to shareholders
or members who are employees of any of the Companies in the ordinary
course of business in amounts consistent with regular compensation paid
in 1995, (B) reimbursement of reasonable business expenses incurred in
the ordinary course of business, and (C) payments and distributions
specifically permitted on Schedule 3.4. Notwithstanding the foregoing,
where Seller advises Buyer before Closing of a distribution or payment
which has been made which would otherwise be in violation of this
Section 3.4(c) without such notification, and the reduction in Purchase
Price provided for in Section 2.3(c) is made at the time of Closing, no
breach of the warranty in this Section 3.4(c) shall be deemed to occur;
Schedule 3.4 sets forth, as of the date of this Agreement any such
distributions or payments which have occurred and specifies the amount
of reduction in Purchase Price to be made with respect to such
distribution or payment.
3.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the
extent (a) reflected and reserved against in the Financial Statements or
Pre-Closing Balance Sheet, (b) set forth on Schedule 3.5 attached hereto, or (c)
incurred in the ordinary course of business after the date of the Interim
Financial Statements or Pre-Closing Balance Sheet, to the knowledge of the
Representative, the Companies, taken as a whole, do not have any material
liability or obligation, secured or unsecured, whether accrued, absolute or
contingent.
3.6 LITIGATION. Except as set forth on Schedule 3.6 attached
hereto, there is no action, suit or proceeding to which any of the Companies is
a party (either as a plaintiff or defendant) pending or, to the knowledge of the
Representative and the Companies, threatened before any court or governmental
agency, and, to the knowledge of the Representative and the Companies, there is
no basis for any such action, suit or proceeding.
3.7 INSURANCE. Schedule 3.7 attached hereto sets forth a true,
correct and complete list of all fire, theft, casualty, general liability,
workers' compensation, business interruption and automobile and other insurance
policies maintained by the Companies as of the date hereof.
3.8 PERSONAL PROPERTY. Except as disclosed in Schedule 3.8:
(a) The respective Companies each have good and
marketable title to each item of tangible personal property used in
their business (collectively "Personal Property"), including the
Inventory and Equipment, free and clear of all liens and encumbrances,
except for liens, if any, for personal property taxes not due; and
(b) The Personal Property is in good operating
condition and repair, normal wear and tear excepted, is currently used
by the relevant Company in the ordinary course of its business and
normal maintenance has been consistently performed with respect to the
Personal Property.
3.9 TRADEMARKS, TRADE NAMES AND OTHER INTELLECTUAL PROPERTY.
None of the Companies owns or uses or has used in its Business any registered
patents, registered copyrights, or registered trademarks or material
unregistered trademarks or material trade names, or any applications for
registration of patents, copyrights or trademarks, except that the Companies use
the trade name and unregistered trademark "Statscript" in connection with their
Business, and have the right and authority to "Statscript" in connection with
the conduct of their Business in the manner presently conducted. To the
knowledge of the Companies and the Representative, such use of "Statscript" does
not conflict with, infringe upon or violate any rights of any other person,
corporation or entity and each Company's operations, activities and services do
not infringe any patent, trademark, trade name, copyright, trade secret or other
property right of a third party.
3.10 LEASES; NO OWNED REAL PROPERTY. Schedule 3.10 attached
hereto sets forth (a) a true, correct and complete list as of the date hereof of
all leases of real property to which any of the Companies is a party
(collectively, the "Leases"). True, correct and complete copies of all Leases
and all amendments, modifications and supplemental agreements thereto, have
previously been delivered by the Representative to the Buyer. The Leases are in
full force and effect, are binding and enforceable against each of the parties
thereto in accordance with their respective terms and, except as set forth on
Schedule 3.10, have not been modified or amended since the date of delivery to
the Buyer. No party to any Lease has sent written notice to the other claiming
that such party is in default thereunder and that such default remains uncured.
Except as set forth on Schedule 3.10, there has not occurred any event which
would constitute a material breach of or material default in the performance of
any covenant, agreement or condition contained in any Lease, nor has there
occurred any event which with the passage of time or the giving of notice or
both would constitute such a material breach or material default.
None of the Companies owns, and none of the Companies has ever owned,
any real property.
3.11 TAX MATTERS.
(a) Except as set forth on Schedule 3.11 attached
hereto:
(i) Within the times and in the manner
prescribed by law, each of the Companies has filed all
federal, state and local tax returns which are required to be
filed through the Closing Date;
(ii) Each of the Companies has paid all
taxes, interest, penalties, assessments and deficiencies which
have become due or which have been claimed to be due,
including without limitation income, franchise, sales and
withholding taxes and other employee benefits and taxes;
(iii) To the knowledge of the Representative
and the Companies, all tax returns filed by the respective
Companies for the taxable years 1986 through 1994 constitute
complete and accurate representations of the respective tax
liabilities of the Companies for such years and accurately set
forth all items (to the extent required to be included or
reflected in such returns) relevant to their future tax
liabilities, including the tax bases of their properties and
assets. 1995 tax returns have not been filed;
(iv) None of the Companies has waived or
extended any applicable statute of limitations relating to the
assessment and of federal, state, local or foreign taxes; and
(v) To the knowledge of the Representative
and the Companies, no examinations of the federal, state,
local or foreign tax returns of any of the Companies is
currently in progress or threatened, and no deficiencies have
been asserted or assessed against any of the Companies as a
result of any audit by the Internal Revenue Service or any
state or local taxing authority and no such deficiency has
been proposed or threatened.
(b) Schedule 3.11 sets forth those taxable years for
which the tax returns of any of the Companies have been reviewed or
audited by applicable federal, state, local and foreign taxing
authorities and those tax years for which said tax returns have
received clearances or other indications of approval from applicable
federal, state, local and foreign taxing authorities.
3.12 BOOKS AND RECORDS. The general ledgers and books of
account of the respective Companies and all federal, state and local income,
franchise, property and other tax returns filed by the respective Companies are
in all material respects complete and correct and have been maintained in the
ordinary course of business.
3.13 CONTRACTS AND COMMITMENTS.
(a) Schedule 3.13 attached hereto contains a true,
complete and correct list of the following contracts and agreements,
whether written or oral (collectively, the "Contracts"):
(i) All loan agreements, indentures,
mortgages and guaranties to which any of the Companies is a
party or by which any of the Companies or their properties are
bound;
(ii) All pledges, security agreements,
equipment obligations, material personal property leases and
material lease purchase agreements to which any of the
Companies is a party or by which any of the Companies or their
properties are bound;
(iii) All contracts, agreements,
commitments, purchase orders or other understandings or
arrangements to which any of the Companies is a party or by
which any of the Companies or their properties are bound which
involve payments or receipts by the Company of more than
$2,000 per year in the case of any single contract, agreement,
commitment, understanding or arrangement under which full
performance (including payment) has not been rendered by all
parties thereto;
(iv) All collective bargaining agreements,
employment or consulting agreements, executive compensation
plans, bonus plans, deferred compensation agreements, pension
plans, retirement plans, employee stock option or stock
purchase plans and group life, health and accident insurance
and other employee benefit plans, agreements, arrangements or
commitments to which any of the Companies is a party or by
which any of the Companies or their property is bound;
(v) All contracts and agreements between any
of the Companies and any of the stockholders or members or
their Affiliates (as defined herein);
(vi) All material leases of personal
property, whether operating, capital or otherwise, under which
any of the Companies is lessor or lessee;
(vii) All licenses or franchise agreements
to which any of the Companies is a party or by which any of
the Companies is bound, whether as licensor or licensee or
franchisor or franchisee, including involving intellectual
property, and any distributor, dealership or sales agency
contract, agreement or understanding to which any of the
Companies is a party or by which any of the Companies is
bound;
(viii) Contract or agreement granting any
person a right to use any property or property right of any of
the Companies;
(ix) All construction contracts to which any
of the Companies is a party or by which any of the Companies
is bound;
(x) All joint venture contracts or
partnerships or arrangements or other agreements involving the
sharing of profits to which any of the Companies is a party or
by which any of the Companies is bound;
(xi) Any other material agreements or
contracts entered into by any of the Companies.
(b) Except as set forth on Schedule 3.13:
(i) Each Contract is a valid and binding
agreement of the relevant Company enforceable against such
Company in accordance with its terms;
(ii) The relevant Company has fulfilled all
material obligations required pursuant to the Contracts to
have been performed by such Company on its part prior to the
date hereof; and
(iii) The relevant Company, and to the
knowledge of the Companies and the Representative, the other
party or parties thereto, is not in material breach of or
material default under any Contract, and no event has occurred
which with the passage of time or giving of notice or both
would constitute such a material breach or material default,
result in a material loss of rights or result in the creation
of any lien, charge or encumbrance, thereunder or pursuant
thereto.
(c) True, correct and complete copies of all
Contracts have previously been delivered by the Companies or the
Representative to the Buyer.
3.14 COMPLIANCE WITH AGREEMENTS AND LAWS. Each Company has all
material licenses, permits and certificates from federal, state and local
authorities necessary to conduct their respective businesses and own and operate
their respective assets (collectively, the "Permits"). Schedule 3.14 attached
hereto sets forth a true, correct and complete list of all such Permits, copies
of which have previously been delivered by the Companies or the Representative
to the Buyer. None of the Companies is in material violation of any law,
regulation or ordinance relating to its business or properties.
3.15 EMPLOYEE RELATIONS.
(a) To the knowledge of the Representative and the
Companies, each Company is in compliance in all material respects with
all federal, state and local laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours.
None of the employees of any of the Companies is represented by any
labor union, and there is no unfair labor practice complaint against
any of the Companies pending or, to the knowledge of the Representative
and the Companies, threatened before any federal, state or local
agency. To the knowledge of the Representative and the Companies, none
of the Companies is currently subject to (i) any threats of strikes or
work stoppages, or (ii) any organizational efforts or demands for
collective bargaining or any union organization.
(b) Schedule 3.15 sets forth a true, correct and
complete list of the current payroll of Statscript Management Services,
Inc., including the job descriptions and salary ranges for each class
of employees, and including any bonuses or incentive compensation paid
or accrued since January 1, 1996. Statscript Management Services, Inc.,
is the only Company with employees.
3.16 EMPLOYEE BENEFIT PLANS
(a) EMPLOYEES. None of the Companies other than
Statscript Management Services, Inc., has or has ever had any employees
or maintains, or has maintained in the past, any Employee Plans, as
defined below, other than Stat Script, Inc., which had employees and
maintained Employee Plans prior to the transfer of such employees and
Plans on or about January 1, 1993, to Statscript Management Services,
Inc.
(b) EMPLOYEE PLANS. Schedule 3.16 attached hereto
contains a true, correct and complete list of all pension, benefit,
profit sharing, retirement, deferred compensation, welfare, insurance,
disability, bonus, vacation pay, severance pay and other similar plans,
programs and agreements relating to the employees of Statscript
Management Services, Inc. (the "Employee Plans").
(c) PROHIBITED TRANSACTIONS. None of the Companies
nor any of their directors, officers, employees or agents, or any
"party in interest" or "disqualified person," as such terms are defined
in Section 3 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code has, with respect to
any Employee Plan, engaged in or been a party to any nonexempt
"prohibited transaction," as such term is defined in Section 4975 of
the Code or section 406 of ERISA, in connection with which, directly or
indirectly, the Buyer or any of is affiliates, directors or employees
or any Employee Plan or any related funding medium could be subject to
either a penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code.
(d) COMPLIANCE. With respect to all Employee Plans,
the relevant Company is in compliance in all material respects with the
requirements prescribed by ERISA and the Code, applicable to such
Employee Plans. The relevant Company has in all material respects
performed all obligations required to be performed by it under, and is
not in material violation in any respect of, any of the Employee Plans.
(e) MULTIEMPLOYER PLANS. None of the Companies has
ever been obligated to contribute to any "multiemployer plan," as such
term is defined in Section 3(37) of ERISA.
(f) COPIES OF EMPLOYEE PLANS AND RELATED DOCUMENTS.
The Representative or the Companies have previously delivered to the
Buyer true, correct and complete copies of all Employee Plans which
have been reduced to writing and written descriptions of all Employee
Plans which have not been reduced to writing, and all agreements,
including trust agreements and insurance contracts, related to such
Employee Plans, and the Summary Plan Description and all modifications
thereto for each Employee Plan communicated to employees.
(g) QUALIFICATIONS. Each Employee Plan and all
amendments thereto intended to qualify under Section 401(a) of the Code
have been determined by the Internal Revenue Service to so qualify, and
the trusts created thereunder have been determined to be exempt from
tax under the provisions of Section 501(a) of the Code, and copies of
all determination letters with respect to each such Employee Plan have
been previously delivered by the Representative or the Companies to the
Buyer, and all such Employee Plans have been administered in material
compliance with and consistent with all applicable requirements of the
Code and ERISA, including, without limitation, all reporting and
disclosure requirements.
(h) FUNDING STATUS. With respect to each Employee
Plan which is a qualified profit-sharing or stock bonus plan, as
defined in ERISA, all employer contributions accrued for Plan years
ending prior to the Closing Date under the Plan terms and applicable
law have been made or reflected as liabilities in the Financial
Statements by the relevant Company.
(i) CLAIMS AND LITIGATION. There are no threatened or
pending claims, suits or other proceedings by present or former
employees of any of the Companies or their affiliates, plan
participants, beneficiaries or spouses of any of the above, including
claims against the assets of any trust, involving any Employee Plan, or
any rights or benefits thereunder, other than ordinary and usual claims
for benefits by participants or beneficiaries.
(j) TRANSFER. The relevant Company shall take any
actions as may be necessary or appropriate under all applicable laws
and the terms of the Employee Plans of the relevant Company to
terminate or otherwise appropriately deal with the Employee Plans after
the closing of the transactions provided for herein.
3.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
on Schedule 3.17 attached hereto and except as may be specifically disclosed in
the Interim Financial Statements or the Pre-Closing Balance Sheet, since
December 31, 1995, none of the Companies has entered into any transaction which
is not in the usual and ordinary course of business, including the following:
(a) Incurred any material obligation or liability for
borrowed money;
(b) Discharged or satisfied any material lien or
encumbrance or paid any material obligation or liability other than
current liabilities reflected in the Interim Financial Statements or
Pre-Closing Balance Sheet;
(c) Mortgaged, pledged or subjected to lien, charge
or other encumbrance any of their respective properties or assets;
(d) Sold or purchased, assigned or transferred any of
their tangible assets, except for assets disposed of in the ordinary
course and inventory sold and purchased in the ordinary course, with
purchases of sizable inventories of new drugs on the market deemed to
be purchases in the ordinary course;
(e) Canceled any debts or claims, except for accounts
receivable written off in a manner consistent with past practice;
(f) Made any material amendment to or terminated any
material Lease or material Contract unless such Lease or Contract was
terminated pursuant to its terms, or done any act or omitted to do any
act which would cause the material breach of any Lease or Contract;
(g) Suffered uninsured losses of personal property in
excess of $5,000 aggregate for the Companies taken as a whole;
(h) Made any material change in the terms, status or
funding condition of any Employee Plan other than normal Profit Sharing
Contributions and Distributions;
(i) Incurred capital expenditures in excess of
$25,000 in the aggregate for the Companies taken as a whole, except for
capital expenditures for the new pharmacy in Miami developed in
accordance with the Companies' past practices;
(j) Made any alteration in the manner of keeping the
books, accounts or records of any of the Companies or in the accounting
practices therein reflected;
(k) Suffered any material adverse change in the
consolidated results of operations, condition (financial or otherwise),
assets, liabilities (whether absolute, accrued, contingent or
otherwise), business or prospects of the Companies taken as a whole;
(l) Made any payments, dividends or distributions to
its stockholders or members other than as permitted in Section 3.4(c);
(m) Sold, assigned, licensed or transferred the trade
name "Statscript" or any interest therein;
(n) Suffered a termination of, or amended, any
Permit, except for Permits not necessary for the conduct of a Company's
Business;
(o) Acquired a significant portion of the assets or
stock of any person or business entity.
3.18 SUPPLIERS. Schedule 3.18 attached hereto sets forth a
true, correct and complete list of (a) the names and addresses of each of the
suppliers of the Companies which accounted for a dollar volume of purchases by
the Companies in excess of $10,000 for the fiscal year ended December 31, 1995,
and (b) the present sole source suppliers of significant drug or medical
supplies, designating those sole suppliers with respect to which practical
alternative sources of supply are not available on comparable terms and
conditions, and indicating the contractual arrangements for continued supply
from each such supplier. Except as set forth on Schedule 3.18, the Companies
have good relations with all of the suppliers listed on Schedule 3.18. To the
knowledge of the Companies and the Representative, those suppliers who are
material to the Companies and who provide favorable terms or assistance to the
Companies, such as but not limited to extended payment terms, do not intend to
cease providing such favorable terms or assistance to the Companies.
3.19 BANK ACCOUNTS. Schedule 3.19 attached hereto sets forth
a true, correct and complete list of:
(a) Each bank, savings and loan or other financial
institution in which any of the Companies has an account or safety
deposit box and the numbers of the accounts or safety deposit boxes
maintained by the Companies; and
(b) The names of all persons authorized to draw on
each such account or to have access to any such safety deposit box
facility.
3.20 POWERS OF ATTORNEY. Except as set forth on Schedule 3.20
attached hereto, none of the Companies has any general or special powers of
attorney outstanding (whether as grantor or grantee thereof or has any
obligation or liability (whether actual, accrued, accruing, contingent or
otherwise) as guarantor, surety, consignor, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity, except as endorser or
maker of checks endorsed or made in the ordinary course of business.
3.21 APPROVALS. All material consents, approvals and
authorizations prescribed by any law, rule or regulation or by any third party,
including under the Leases, the Contracts and the Permits, which must be
obtained or satisfied by any of the Companies and which are necessary for the
execution, delivery and performance by the Companies and the Representative of
this Agreement, or any documents to be executed and delivered by Companies or
the Representative in connection herewith, are set forth on Schedule 3.21
attached hereto. Where designated on Schedule 3.21, such consents, approvals and
authorizations have been obtained. In the case of those which have not been
obtained, the Companies and the Representative shall use all reasonable efforts
to assist Buyer in obtaining such consents, approvals and authorizations prior
to the Closing hereunder.
3.22 OTHER OPERATIONS. The Representative does not have any
significant ownership interest in any corporations or business entities which
are engaged in a business substantially similar to that engaged in by the
Companies.
3.23 INVENTORY. The Inventory reflected on the Interim
Financial Statements is valued at the lower of cost or market and has not been
written down since the date of said statements. The cost of all such Inventory
is determined using the lower of cost (FIFO) or market (net realizable value)
method, in a manner which fairly presents the cost of such Inventory.
The items of Inventory which will be sold to Buyer hereunder will be in
good condition and not obsolete. No material amounts of such items will be
beyond or close to applicable expiration dates.
3.24 RECEIVABLES. Except as disclosed in Schedule 3.24, all
receivables of the Companies reflected in the Interim Financial Statements
originated in the ordinary course of the Companies' business, and said
receivables and the reserve against receivables shown on the Interim Financial
Statements have been presented and determined in accordance with past practices.
The information provided to Buyer regarding the receivables of the Companies is
true, complete, and correct in all material respects.
3.25 ASSETS COMPLETE. The Assets which will be acquired by
Buyer at Closing include all material assets used in and necessary for the
operation of the Business of the Companies, except for assets leased under
Leases disclosed herein. All of the Assets are located at the business locations
at which the Companies conduct business, which locations are subject to Leases
as disclosed herein.
3.26 PATIENTS AND PROVIDERS. Except as set forth on Schedule
3.17, to the knowledge the Companies and the Representative, the Companies have,
in all material respects, good relations with the patients who are customers of
the Companies, and the Companies have good relations with those health care
providers who have previously recommended or assisted the Companies in any
material way. The Companies and the Representative are not aware of any facts
which indicate that any significant portion of the patients or customers of the
Companies intend to cease being patients or customers of the Companies, or that
any such health care providers' intent to cease their recommendations or
assistance.
3.27 MATERIAL CHANGE. Since December 31, 1995, there has been
no material change in the condition, financial or otherwise of the Companies,
the Business or the Assets, except changes occurring in the ordinary course of
business, which changes have not materially adversely affected the Assets or the
Business. To the knowledge of the Companies and the Representative, there has
been no event or occurrence affecting the Companies, the Assets or the Business
which may have a material adverse effect upon the Business taken as a whole.
3.28 ACCURACY OF MATERIALS. Except as stated on Schedule 3.28,
the written materials regarding the Companies, their business and the Assets and
matters related thereto previously delivered to Buyer by the Companies, are
true, complete and correct in all material respects; provided, however, that it
is understood that where any such items include projections regarding future
performance then, instead of the foregoing representation, such projections have
been prepared in accordance with the Companies' usual custom and practice.
3.29 PRICING, ETC. Schedule 3.29 references documents provided
to Buyer regarding the Companies' pricing policies and price levels relative to
Average Wholesale Price (AWP). Except as stated on Schedule 3.29, such materials
are true, complete and correct in all material respects.
3.30 CERTAIN BUSINESS. To date, the Companies have not
received any revenues from the business of viatical settlements or the
repackaging of biotech drugs for sale to retailers.
3.31 DISCLOSURE. No representation or warranty made by the
Companies or the Representative herein or in any agreements, certificates, or
documents delivered in connection with this Agreement, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
such representation or warranty not misleading.
4. REPRESENTATIONS OF THE BUYER. The Buyer represents and warrants to
each Company and the Representative as follows:
4.1 ORGANIZATION AND AUTHORITY. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota, and has all requisite power and authority to own its
properties and to carry on its business as now being conducted. The Buyer has
full power to execute and deliver this Agreement and the agreements contemplated
herein, and to consummate the transactions contemplated hereby and thereby.
Certified copies of the Articles of Incorporation and the Bylaws of the Buyer,
as amended to date, have been previously delivered to the Representative, are
complete and correct, and no amendments have been made thereto or have been
authorized since the date of such delivery to the Representative.
Chronimed Inc. is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota, and has all requisite
power and authority to own its properties and to carry on its business as now
being conducted. Chronimed Inc. has full power to execute and deliver the
Guaranty following the signatures to this Agreement (the "Guaranty"), and to
consummate the transactions contemplated hereby and thereby. Certified copies of
the Articles of Incorporation and the Bylaws of Chronimed Inc., as amended to
date, have been previously delivered to the Representative, are complete and
correct, and no amendments have been made thereto or have been authorized since
the date of such delivery to the Representative.
4.2 CAPITALIZATION OF CHRONIMED INC. On the date hereof,
Chronimed Inc.'s authorized capital stock consists of 20,000,000 shares of
common stock, $.01 par value, of which 12,452,917 shares were issued and
outstanding as of June 6, 1996. All of the outstanding shares of capital stock
of Chronimed Inc. have been and on the Closing Date will be duly and validly
issued and are, or will be, fully paid and non-assessable.
4.3 AUTHORIZATION. The execution and delivery of this
Agreement by the Buyer, and the consummation by the Buyer of the transactions
contemplated hereby, have been duly authorized by all requisite corporate
action. This Agreement has been duly executed by the Buyer. This Agreement and
all other agreements and obligations entered into and undertaken in connection
with the transactions contemplated hereby constitute the valid and legally
binding obligations of the Buyer, enforceable against the Buyer in accordance
with their respective terms. The execution, delivery and performance of this
Agreement, and the consummation by the Buyer of the transactions contemplated
hereby, will not, with or without the giving of notice or the passage of time or
both, (a) violate the provisions of the Buyer's Articles of Incorporation or
Bylaws; (b) violate any judgment, decree, order or award of any court,
governmental body or arbitrator to which the Buyer is a party or by which it is
bound, unless such violation would not result in a material adverse effect on
the Buyer's ability to perform hereunder; or (c) conflict with or result in the
breach or termination of any material term or provision of, or constitute a
material default under, or cause the creation of any lien, charge or other
encumbrance upon the properties or assets of the Buyer pursuant to, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Buyer is a party or by which the Buyer is bound, unless such conflict, breach,
termination, default or encumbrance would not result in a material adverse
effect on the Buyer's ability to perform hereunder.
The execution and delivery of the Guaranty by Chronimed Inc., and the
consummation by Chronimed Inc. of the transactions contemplated thereby, have
been duly authorized by all requisite corporate action. The Guaranty has been
duly executed by Chronimed Inc. The Guaranty and any other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated thereby by Chronimed Inc. constitute the valid and legally binding
obligations of Chronimed Inc., enforceable against Chronimed Inc. in accordance
with their respective terms. The execution, delivery and performance of the
Guaranty, and the consummation by Chronimed Inc. of the transactions
contemplated thereby, will not, with or without the giving of notice or the
passage of time or both, (a) violate the provisions of Chronimed Inc.'s Articles
of Incorporation or Bylaws; (b) violate any judgment, decree, order or award of
any court, governmental body or arbitrator to which Chronimed Inc. is a party or
by which it is bound, unless such violation would not result in a material
adverse effect on Chronimed Inc.'s ability to perform hereunder; or (c) conflict
with or result in the breach or termination of any material term or provision
of, or constitute a material default under, or cause the creation of any lien,
charge or other encumbrance upon the properties or assets of Chronimed Inc.
pursuant to, any indenture, mortgage, deed of trust or other agreement or
instrument to which Chronimed Inc. is a party or by which Chronimed Inc. is
bound, unless such conflict, breach, termination, default or encumbrance would
not result in a material adverse effect on Chronimed Inc.'s ability to perform
thereunder.
4.4 APPROVALS. Except that this Agreement is subject to
approval by the Board of Directors of Chronimed Inc., Buyer's parent
corporation, all material consents, approvals and authorizations prescribed by
any law, rule or regulation or by any third party which must be obtained or
satisfied by the Buyer and which are necessary for the execution and delivery by
the Buyer of this Agreement or any documents to be executed and delivered by the
Buyer in connection herewith or for the consummation of the transactions
contemplated by this Agreements are set forth on Schedule 4.4 attached hereto
and have been, or prior to the Closing Date will be, obtained.
4.5 ABILITY TO PAY PURCHASE PRICE. The Buyer currently has
available cash or cash equivalents in an amount sufficient to allow the Buyer to
pay the entire Purchase Price in cash on the Closing Date.
5. ACCESS TO INFORMATION; PUBLIC ANNOUNCEMENTS.
5.1 Access to Management Properties and Records. From the date
of this Agreement until the Closing Date, the Representative and the Companies
shall afford the officers, attorneys, accountants and other authorized
representatives of the Buyer access upon reasonable notice and during normal
business hours to key management personnel, offices, properties, books and
records of the Companies.
5.2 CONFIDENTIALITY.
(a) The respective Companies and the Representative
have furnished and will continue to furnish the Buyer with certain
information which is either non-public, confidential or proprietary in
nature. All such information furnished to the Buyer, its directors,
officers, employees, agents or representatives, including, without
limitation, attorneys, accountants, consultants, potential lenders,
investors and financial advisors (collectively "representatives"), by
the respective Companies, the Stockholders, the Members, or any of
their respective representatives, and all analyses, compilations, data,
studies or other documents prepared by the Buyer or its representatives
containing or based in whole or in part on any such furnished
information or reflecting the Buyer's review of, or interest in, the
Companies is hereinafter referred to as "Information."
(b) The Buyer hereby agrees to use the Information
solely in connection with the consummation of the transactions
contemplated by this Agreement and to transmit the Information only to
those representatives of the Buyer who need to know the Information in
order to assist the Buyer with such purpose.
(c) If the Closing does not occur, the Information,
and all copies thereof, will be returned by the Buyer, its directors,
officers, and employees, without retaining any copies thereof, to the
Representative.
(d) The restrictions set forth herein shall not apply
with respect to any Information or part thereof:
(i) which is in the public domain or known
to the relevant industry at the time of disclosure, or becomes
such through no fault of Buyer;
(ii) which is known to Buyer at the time of
disclosure;
(iii) which becomes known to Buyer from a
source other than the Companies or the Representative,
provided that such source is not known by Buyer to be bound by
a confidentiality agreement with the Companies or the
Representative; or
(iv) which is developed by Buyer
independently of the Information.
5.3 PUBLIC ANNOUNCEMENTS. The parties agree that prior to the
Closing Date, any and all public communications concerning this Agreement and
the purchase and sale of the Assets by the Buyer, and the timing, manner and
content of such disclosures, shall be subject to the mutual agreement of the
Companies, the Representative and the Buyer, except that it is understood that
Buyer, after first advising Representative, shall be permitted to make such
announcements as are required by law or the NASDAQ NMS.
6. PRE-CLOSING COVENANTS OF THE REPRESENTATIVE AND THE COMPANIES. From
and after the date hereof and until the Closing Date:
6.1 CONDUCT OF BUSINESS. The Companies shall carry on their
business in the ordinary course consistent with past practice. All of the
property of the Companies shall be used, operated, repaired and maintained in a
normal business manner consistent with past practice.
6.2 ABSENCE OF MATERIAL CHANGES. Without the prior written
consent of the Buyer, the respective Companies shall not:
(a) Take any action to amend their charter documents,
bylaws or operating agreements;
(b) Issue any stock, bonds, limited liability
interests, or other company securities or grant any option or issue any
warrant to purchase or subscribe for any of such securities or issue
any securities convertible into such securities, except for shares and
LLC interests issued to Company employees as bonuses;
(c) Incur any obligation or liability (absolute or
contingent), except current liabilities incurred and obligations under
contracts entered into in the ordinary course of business;
(d) Except for transactions specifically described in
and provided for in Schedule 3.4 hereto, declare or make any payment or
distribution to its stockholders or members with respect to its stock
or membership interests, or purchase or redeem any shares of its
capital stock or membership interests;
(e) Mortgage, pledge, or subject to any lien, charge
or other encumbrance any of their respective assets or properties;
(f) Except for transactions specifically described in
and provided for in Schedule 3.4 hereto, sell, assign, or transfer any
of their assets, except for inventory sold in the ordinary course of
business;
(g) Cancel any debts or claims, except in the
ordinary course of business consistent with past practice;
(h) Merge or consolidate with or into any corporation
or other entity;
(i) Increase the rate of compensation payable or to
become payable by it to any of its officers, directors or employees
other than increases in the ordinary course of business consistent with
past practice;
(j) Make any election or give any consent under the
Code or the tax statutes of any state or other jurisdiction or make any
termination, revocation or cancellation of any such election or any
consent or compromise or settle any claim for past or present tax due;
(k) Take or permit any act or omission constituting a
material breach or material default under any contract, lease,
indenture or agreement by which they or their properties are bound;
(l) Fail to operate their business and maintain their
books, accounts and records in the ordinary course of business and
maintain in good repair their business premises, fixtures, machinery,
furniture and equipment, normal wear and tear excepted;
(m) Enter into leases, contracts or agreements with
payments which exceed $3,500 per month in the aggregate for all such
leases, contract and agreements for the Companies taken as a whole,
other than those entered into in the ordinary course of business;
(n) Incur capital expenditures in excess of $25,000
in the aggregate for the Companies taken as a whole, except for capital
expenditures for the new pharmacy in Miami developed in accordance with
the Companies' past practices;
(o) Engage new employees with salaries in excess of
$100,000 per annum in the aggregate for the Companies taken as a whole;
(p) Materially alter the terms, status or funding
condition of any Employee Plan;
(q) Make any payments or distributions prohibited
under Section 3.4(c), except only for such payments or distributions
which are credited dollar for dollar against the Initial Payment
pursuant to the provisions of Section 2.3(c); or
(r) Commit or agree to do any of the foregoing in the
future.
6.3 COMPLIANCE WITH LAWS. Each of the Companies will comply in
all material respects with all laws and regulations which are applicable to it
or to the conduct of its business and will perform and comply in all material
respects with all material contracts, commitments and obligations by which they
are bound.
6.4 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES. Neither
the Representative or any of the Companies will take any actions which would
result in any of the representations or warranties set forth in Section 3 hereof
being untrue.
6.5 CONTINUING OBLIGATION TO INFORM. From time to time prior
to the Closing Date, the Representative will deliver or cause to be delivered to
the Buyer supplemental information concerning material events subsequent to the
date hereof.
6.6 REPORTS; TAXES. The Companies will duly and timely file
all reports and returns required to be filed with federal, state, local and
foreign authorities and will promptly pay all federal, state, local and foreign
taxes, assessments and governmental charges levied or assessed upon them or any
of their properties through the day before the Closing Date (unless contesting
such in good faith and adequate provision has been made therefor).
6.A. ACCESS TO BOOKS AND RECORDS. The Buyer covenants and
agrees that it will allow the Representative to have access for any reasonable
purpose to all books and records of the Companies relating to matters occurring
on or before the Closing Date delivered by or on behalf of the Companies or the
Representative to the Buyer. The Buyer will give the Representative thirty (30)
days' written notice before it destroys or otherwise disposes of any such books
and records. Upon receipt of such notice, the Representative may notify the
Buyer that it wishes to take possession of such books and records within such
thirty (30) day period, and the Buyer will deliver such books and records to a
location designated by the Representative. Buyer shall be free to destroy or
dispose of any such books or records without obligation to the Companies or the
Representative after the expiration of any time period required by law or
regulation for the retention of such books and records, including any applicable
statute of limitations.
Buyer will indemnify the Companies against any actual damages suffered
by the Companies as a result of the intentional destruction or disposal by Buyer
of such records other than as permitted hereunder; provided that the Companies
and the Representative must use all reasonable efforts to mitigate or reduce any
such damages and cooperate with Buyer to such end. In any event, Buyer shall
have no liability if it maintains such records with the same standard of care a
company that operates pharmacies similar to those operated by the Companies
would reasonably be expected to follow.
7. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer
under this Agreement are subject to the fulfillment, at the Closing Date, of the
following conditions precedent, each of which may be waived in writing in the
sole discretion of the Buyer:
7.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE
REPRESENTATIVE AND THE COMPANIES; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The
representations and warranties of the Representative and the Companies in
Sections 3 and 13 of this Agreement shall be true on and as of the Closing Date
as though such representations and warranties were made on and as of such date,
except for any changes expressly permitted by the terms hereof or consented to
in writing by the Buyer. The Representative and the Companies shall have
performed and complied with all terms, conditions, covenants, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by each of them prior to or at the Closing Date.
7.2 PERFORMANCE BY THE REPRESENTATIVE AND THE COMPANIES. At
the Closing, the Representative and each Company shall have delivered to the
Buyer a certificate signed by the Representative and the President and Chief
Financial Officer of each Company as to each of their compliance with Section
7.1 hereof.
7.3 APPROVALS; CONSENTS; LICENSES AND PERMITS. The consents
and approvals listed on Schedule 3.21 shall have been obtained and Buyer shall
have obtained such licenses and permits as are necessary for Buyer to operate
the Business in the locations where it is presently conducted, or Buyer shall
have received assurances reasonably satisfactory to it that it shall obtain such
consents and approvals and licenses and permits and shall have made arrangements
reasonably satisfactory to it to operate until the consents, approvals or
licenses and permits, as the case may be, are obtained.
7.4 ADVERSE PROCEEDINGS No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
7.5 UPDATED SCHEDULES. The Companies and Representative shall
have delivered to the Buyer a set of Schedules to this Agreement, updated
through the Closing (it being understood, however, that this Agreement is
entered into on the basis of the Schedules attached hereto and, therefore, that
the changes made or new matters disclosed in the updated Schedules which are not
corrected prior to Closing may constitute breaches of the representations and
warranties made by Representative and the Companies hereunder).
7.6 EMPLOYEES. Buyer shall have entered into employment
agreements or reached other arrangements satisfactory to Buyer for the
employment by Buyer of Perry Anderson and of other employees of Seller deemed
significant by Buyer. In this connection, Buyer agrees that it will offer Perry
Anderson and such other employees of Seller employment at a salary at least
equal to the salary presently paid by the Companies to each such individual,
plus the standard benefits package provided by Chronimed Inc. to its employees.
7.7 OPINION OF COUNSEL. Buyer shall have received an opinion
of Blackwell Sanders Matheny Weary & Lombardi L.C., counsel to the Company dated
the Closing Date and addressed to Buyer substantially in the form of Schedule
7.7.
7.8 CLOSING DELIVERIES. The Buyer shall have received at or
prior to the Closing such documents, instruments or certificates as the Buyer
may reasonably request including, without limitation:
(a) Bill of Sale, Assignments, certificates of title,
and other instruments of conveyance reasonably requested by Purchaser;
(b) Assignment of all Sellers' right, title and
interest to the trade name "Statscript";
(c) A current certified search showing all financing
statements on file against the Assets, together with appropriate
releases or termination statements for any security interests in the
Assets;
(d) Such certificates of the Companies' officers and
of the Representative and such other documents evidencing satisfaction
of the conditions specified in this Section 7 as the Buyer shall
reasonably request;
(e) Certificates of the Secretaries of State of the
States of Missouri, Illinois, Texas, Florida and Arizona as to the
legal existence and good standing (including tax) of the respective
Companies in those states;
(f) Certificates of the Secretaries of each Company
attesting to the incumbency of the Company's officers, the authenticity
of the resolutions authorizing the transactions contemplated by this
Agreement, and the authenticity and continuing validity of the charter
documents delivered pursuant to Section 3.1;
(g) Where required by the applicable Lease, consent
to assignment and/or estoppel certificates from each lessor from whom a
Company leases real or personal property consenting to the acquisition
of the Assets by and assignment of the Lease to, as the case may be, by
the Buyer and the other transactions contemplated hereby, and
representing that there are no outstanding claims against such Company
under such Lease;
(h) A cross receipt executed by the Buyer, the
Representative and the Companies; and
(i) All other items or documents necessary or
reasonably appropriate hereunder.
7.9 ADVERSE DEVELOPMENT. Since the date of execution of this
Agreement, there shall have been no developments in the Business, operations, or
financial performance of Seller, or in or to the Assets, which are not corrected
prior to Closing and which would have a material adverse effect on Seller, the
Assets, or on the Business, Seller's operations, or the financial performance of
the Business.
7.10 BOARD APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved by the Board of Directors of
Buyer's parent company, Chronimed Inc. As part of such approval, the Chronimed
Board may require a fairness opinion from a firm retained by Chronimed, which
the Board will use best efforts to obtain on or before June 18, 1996.
8. CONDITIONS TO OBLIGATIONS OF THE COMPANIES AND THE REPRESENTATIVE.
The obligations of the Companies and the Representative under this Agreement are
subject to the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of the
Representative, who shall have the power and authority to bind all of the
Companies and the Representative:
8.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE
BUYER; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and
warranties of the Buyer in this Agreement shall be true on and as of the Closing
Date as though such representations and warranties were made on and as of such
date, except for any changes consented to in writing by the Representative. The
Buyer shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
8.2 CORPORATE PROCEEDINGS. All corporate and other proceedings
required to be taken on the part of the Buyer to authorize or carry out this
Agreement shall have been taken.
8.3 APPROVALS; CONSENTS. The consents and approvals listed on
Schedule 4.4 shall have been obtained.
8.4 ADVERSE PROCEEDINGS. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
8.5 CLOSING DELIVERIES. The Companies shall have received at
or prior to the Closing such documents, instruments or certificates as the
Representative may reasonably request including, without limitation:
(a) Such certificates of the Buyer's officers and
such other documents evidencing satisfaction of the conditions
specified in this Section 8 as the Representative shall reasonably
request;
(b) A certificate of the Secretary of State of the
State of Minnesota as to the legal existence and good standing
(including tax) of the Buyer in such state;
(c) A certificate .of the Secretary of the Buyer
attesting to the incumbency of the Buyer's officers, the authenticity
of the resolutions authorizing the transactions contemplated by this
Agreement, and the authenticity and continuing validity of the charter
documents delivered pursuant to Section 4.1;
(d) An opinion of Gray, Plant, Mooty, Mooty &
Bennett, P.A., dated the Closing Date and addressed to each of the
Companies and the Representative substantially in the form of Schedule
8.5;
(e) Payment of the Purchase Price in the manner
described in Section 2.3; and
(f) A cross receipt executed by the Buyer, the
Representative and the Companies.
8.6 OTHER SHAREHOLDERS. The Representative shall have received
satisfactory assurances that the other shareholders of Stat Script, Inc. either
have not engaged a broker or finder to sell the assets or stock of the Companies
or that the Representative and the Companies shall be indemnified therefor;
provided, however, that if the Companies and the Representative propose to use
this Section 8.6 as a condition to prevent their closing the transactions
contemplated hereunder, Buyer can agree that the phrase "on behalf of a
stockholder or a member of the Companies" is deleted from the final sentence of
Section 13.1, whereupon the condition in this Section 8.6 shall be of no further
force and effect.
9. INDEMNIFICATION.
9.1 BY THE REPRESENTATIVE AND THE COMPANIES. Each of the
Companies and the Representative hereby jointly and severally indemnifies and
holds harmless the Buyer, from and against all claims, damages, losses,
liabilities, and reasonable costs and expenses (collectively, the "Losses") in
connection with each of the following (a "Breach of Warranty"):
(a) Any material misrepresentation or material breach
of any representation or warranty made in Sections 3 or 13 of this
Agreement that is not corrected prior to Closing;
(b) Any material breach of any covenant, agreement or
obligation of the Representative or a Company contained in this
Agreement; and
(c) Any liability or obligation of any Company
incurred prior to the Closing Date which is not assumed by Buyer as
provided herein;
provided, however, that the Representative and the Companies shall not be liable
for any Losses for Breach of Warranty hereunder except for that portion of such
Losses, if any, that exceeds $150,000 in the aggregate for the Companies taken
as a whole; and provided further, that the total liability, if any, for Losses
for Breach of Warranty which exceed $150,000 pursuant to this Section 9.1 shall
be limited to an amount not to exceed $500,000 in the aggregate for the
Companies taken as a whole. Subject to the limitations set forth in this Section
9.1, any claim for indemnification by Buyer may be offset against any amounts
owed by Buyer to any of Seller. Any such offset shall be without prejudice to
Seller's right to contest the claim. Wherever Buyer exercises such right of
offset, Seller, by notice delivered to Buyer, can require that the amount offset
be paid by Buyer to an independent third party escrow agent to be held by such
third party escrow agent until the claim is finally resolved, or until Buyer and
Seller agree upon the disposition of the funds held in escrow.
9.2 BY THE BUYER. The Buyer hereby indemnifies and holds
harmless the Stockholders, the Members and the Companies, from and against all
Losses in connection with each of the following (a "Breach of Warranty "):
(a) Any material misrepresentation or material breach
of any representation or warranty made by the Buyer in this Agreement;
and
(b) Any material breach of any covenant, agreement or
obligation of the Buyer contained in this Agreement;
provided, however, that, except only for the Buyer's obligation to pay the
Purchase Price if the Closing occurs hereunder, the Buyer shall not be liable
for any Losses for Breach of Warranty hereunder except for that portion of such
losses if any that exceeds $150,000 in the aggregate; and provided further, that
the total liability, if any, for Losses of Breach of Warranty which exceed
$150,000 pursuant to this Section 9.2 shall be limited to an amount not to
exceed $500,000 in the aggregate.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise
for indemnification under this Section 9, the party seeking indemnification (the
"Indemnified Party"), shall promptly, and in any case no later than fifteen (15)
days after the facts constituting the basis for such claim are known to the
Indemnified Party, notify the Representative or the Buyer, as the case may be,
of the claim and the facts constituting the basis for such claim. In the event
of any such claim for indemnification hereunder resulting from or in connection
with any claim or legal proceedings by a third party, the notice shall specify,
if known, the amount or an estimate of the amount of the liability arising
therefrom. The Indemnified Party shall not settle or compromise any claim by a
third party for which it is entitled to indemnification hereunder without the
prior written consent, such consent not to be unreasonably withheld, of the
Representative, who shall have the power and authority to bind all of the
Companies and the Representative, or the Buyer, as the case may be.
9.4 DEFENSE BY THE REPRESENTATIVE. In connection with any
claim which may give rise to indemnity hereunder resulting from or arising out
of any claim or legal proceeding by a person other than the Buyer, the
Representative, at the sole cost and expense of the Companies and the
Representative, may, upon written notice to the Buyer, assume the defense of any
such claim or legal proceeding. If the Representative assumes the defense of any
such claim or legal proceeding, the Representative shall select counsel
reasonably acceptable to the Buyer to conduct the defense of such claim or legal
proceeding and, at the sole cost and expense of the Companies and the
Representative shall take all steps necessary in the defense or settlement
thereof. The Representative shall not consent to a settlement of, or the entry
of any judgment arising from, any such claim or legal proceeding, without the
prior written consent of the Buyer, which consent shall not be unreasonably
withheld. The Buyer shall be entitled to participate in (but not control) the
defense of any such action, with its own counsel and at its own expense. If the
Representative does not assume the defense of any such claim or litigation
resulting therefrom within thirty (30) days after the date such claim is made:
(a) the Buyer may defend against such claim or litigation in such manner as it
may deem appropriate, but may not settle such claim or litigation without the
prior written consent of the Representative, which consent shall not be
unreasonably withheld, and (b) the Representative shall be entitled to
participate in (but not control) the defense of such action, with its counsel
and at the expense of the Companies and the Representative.
9.5 SURVIVAL OF REPRESENTATIONS; CLAIMS FOR INDEMNIFICATION.
(a) The representations and warranties made by the
Companies and the Representative in Sections 3 and 13 shall survive the
Closing Date for a period of one year.
(b) The representations and warranties made by the
Buyer in Section 4 of this Agreement shall survive the Closing Date for
a period of one year; provided, however, that the Buyer's obligation to
pay the Purchase Price shall not terminate until paid in full; and
provided further that Buyer's indemnification under Section 6.A shall
be limited only as set forth in Section 6.A and Buyer's indemnification
under Section 10.5 shall not terminate.
(c) Where a claim for breach of a representation or
warranty is made in writing before expiration of the time period
applicable under the foregoing provisions, such claim can be pursued
until it is finally resolved.
10. POST-CLOSING AGREEMENTS. The Representative and each of the
Companies agrees that from and after the Closing Date:
10.1 PROPRIETARY INFORMATION. The Representative and each of
his affiliates (as such term is defined in the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder) (individually, an
"Affiliate" and collectively, "Affiliates") and each of the Companies shall hold
in confidence and shall use all reasonable efforts to have all officers,
directors and personnel who continue after the Closing to be employed by the
Representative or any Affiliate thereof or any of the Companies to hold in
confidence all knowledge and information of a secret or confidential nature with
respect to the business of the Companies and not to disclose, publish or make
use of the same without the consent of the Buyer, except to the extent that such
information shall have become public knowledge other than by breach of this
Agreement by the Representative.
10.2 NON-COMPETITION AGREEMENT.
(a) For a period of three years after the Closing
Date, the Representative shall not, directly or indirectly, whether as
an owner, manager, employee, agent or otherwise, except as an officer
or employee of the Buyer, engage anywhere in North America in any
business competitive with the business of the Companies as conducted on
the Closing Date. The Buyer hereby acknowledges that the
Representative's engagement in the business of either (i) viatical
settlements or (ii) the repackaging of biotech drugs for sale to
retailers in which Representative has no interest, direct or indirect,
shall not be deemed competitive with the business of the Companies in
violation of this Section 10.2. For these purposes, engaging in the
retail pharmaceutical business or mail order sales of pharmaceuticals
to retail patients shall be deemed a competitive business.
(b) The parties hereto agree that the duration and
geographic scope of the non-competition provision set forth in this
Section 10.2 are reasonable. In the event that any court of competent
jurisdiction determines that the duration or the geographic scope, or
both, are unreasonable and that such provision is to that extent
unenforceable, the parties hereto agree that the provision shall remain
in full force and effect for the greatest time period and in the
greatest area that would not render it unenforceable. The
Representative agrees that damages are an inadequate remedy for any
breach of this provision and that the Buyer shall, whether or not it is
pursuing any potential remedies at law, be entitled to equitable relief
in the form of preliminary and permanent injunctions without bond or
other security upon any breach of this non-competition provision.
10.3 THE PLAN. In terminating the Plan, Seller shall use
reasonable efforts to comply with requests reasonably made by Buyer to address
the interests of the employees covered by the Plan, including providing 100
percent vesting for all employees covered by the Plan, and using reasonable
efforts to terminate and make distributions from the Plan on a timely basis, and
including, if appropriate, cooperating in a roll-over to Buyer's 401(k) Plan if
this is the best interest of the employees.
10.4 NAME CHANGE.
(a) After the Closing hereunder, Buyer may deliver
written notice to Seller that Buyer wishes the names of all of the
Companies to be changed so that such names do not include the word
"Statscript" or any other word similar thereto. Promptly after receipt
of such notice, Seller shall either change the names of the Companies
to comply with such request or shall liquidate any Company which
includes the name, with the choice to be at the election of Seller.
Seller shall coordinate such actions with Buyer as reasonably requested
by Buyer so as to insure Buyer's rights to the name "Statscript".
(b) The Buyer agrees that the Representative may
refer to himself orally and in printed materials, or electronic media
as the former owner of the Companies.
10.5 USE OF SELLER'S ENTITIES LICENSES, AGREEMENTS, ETC., POST
CLOSING; INDEMNIFICATION. The parties understand that if Closing is held on July
1, as scheduled, Buyer may not have received all licenses and permits it
requires to operate the Business, and that assignments of all leases and
contracts, together with required consents, (or in the alternative Buyer
entering into new leases or contracts in its own name to replace leases or
contracts to which the Companies are party) may not be completed. Seller
therefore agrees that after Closing, until the earlier of 90 days after Closing
Date or such time as all actions (the "Transfer Actions") have been completed to
permit Buyer to operate the Business in its own name, Buyer shall be permitted
to utilize (i) Seller's material licenses and permits as permitted by federal,
state and local law and regulation; (ii) Seller's material leases and material
contracts which have not been assigned to or replaced by Buyer where the terms
of the lease or contract so permit; and (iii) other material items of Seller
which have not yet been transferred to Buyer. In connection therewith, if
reasonably required by Buyer, Buyer can operate in the name of the appropriate
Company or Companies. All such utilization and operation by Buyer shall be at
Buyer's sole expense and responsibility, and, correspondingly, Buyer shall be
entitled to receive all revenues and profits from such operations as well as
being responsible for losses, if any, incurred in such operations. Buyer shall
provide Seller with a Certificate of Insurance showing Seller as an additional
named insured for matters governed by this Section 10.5 under Buyer's liability
insurance, which shall be in an amount of not less than $1,000,000 per
occurrence.
Buyer shall have such rights until (i) with the exercise of reasonable
diligence by Buyer and reasonable assistance from Seller, the Transfer Actions
are completed, or (ii) ninety (90) days after Closing, whichever is earlier. In
furtherance of the foregoing, Seller shall execute such documents as are
reasonably requested by Buyer, including letter agreements or other agreements
for each pharmacy relating to use of the pharmacy's license, the pharmacy's NABP
number, the pharmacy's DEA license, and the pharmacy's third-party payor
arrangements, as permitted by law or the contract as applicable.
Buyer agrees to indemnify and hold harmless Seller and each of Seller
from and against all claims, damages, losses, liabilities and reasonable costs
and expenses (collectively the "Losses") which Seller, or any of Seller may
suffer or incur as a result of Buyer's utilization and operations pursuant to
this Section. This indemnification is unlimited as to amount and survivability;
therefore, the $150,000 deductible and the $500,000 cap on indemnification
provided in Section 9.2 shall not apply to any payments required pursuant to
this indemnification, nor shall any payment made pursuant to this
indemnification count against either the $150,000 deductible or the $500,000 cap
set forth in Section 9.2.
11. TERMINATION OF AGREEMENT; OPTION TO PROCEED; DAMAGES.
11.1 TERMINATION BY LAPSE OF TIME. This Agreement shall
terminate at 5:00 p.m., Kansas City, MO local time, on July 30, 1996, if the
transactions contemplated hereby have not been consummated, unless such date is
extended by the written consent of the Buyer and the Representative.
11.2 TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement
may be terminated by the mutual written agreement of the parties hereto. In the
event of such termination by agreement, the Buyer shall have no further
obligation or liability to the Companies or the Representative under this
Agreement, and the Companies or the Representative shall have no further
obligation or liability to the Buyer under this Agreement.
11.3 AVAILABILITY OF REMEDIES AT LAW. In the event this
Agreement is terminated by the Buyer or the Representative, pursuant to the
provisions of this Section 11, the parties hereto shall have available to them
all remedies afforded to them by applicable law.
12. DISPUTE RESOLUTION.
12.1 GENERAL. In the event that any dispute should arise
between the parties hereto with respect to any matter covered by this Agreement,
the parties hereto shall resolve such dispute in accordance with the procedures
set forth in this Section 12; provided, however, that if such dispute relates to
the determination of the amount of the Contingent Payment, the procedures set
forth in Section 2.4 hereof shall be the exclusive means of resolving such
dispute.
12.2 CONSENT OF THE PARTIES. In the event of any dispute
between the parties with respect to any matter covered by this Agreement, the
parties shall first use their best efforts to resolve such dispute among
themselves. If the parties are unable to resolve the dispute within thirty (30)
calendar days after the commencement of efforts to resolve the dispute, the
dispute will be submitted to arbitration in accordance with Section 12.3 hereof.
12.3 ARBITRATION.
(a) Either the Buyer or the Representative may submit
any matter referred to in Section 12.2 hereof to arbitration by
notifying the other party hereto in writing of such dispute. Within ten
days after receipt of such notice, the Buyer and the Representative
shall designate in writing one arbitrator to resolve the dispute;
provided, that if the parties hereto cannot agree on an arbitrator
within such ten-day period, the arbitrator shall be selected by the
American Arbitration Association. The arbitrator so designated shall
not be an employee, consultant, officer, director, stockholder or
member of any party hereto or any Affiliate of any party to this
Agreement.
(b) Within fifteen (15) days after the designation of
the arbitrator, the arbitrator, the Buyer and the Representative shall
meet, at which time the Buyer and the Representative shall be required
to set forth in writing all disputed issues and a proposed ruling on
each such issue.
(c) The arbitrator shall set a date for a hearing,
which shall be no later than thirty (30) days after the submission of
written proposals pursuant to paragraph (b) above, to discuss each of
the issues identified by the Buyer and the Representative. Each such
party shall have the right to be represented by counsel. The
arbitration shall be governed by the rules of the American Arbitration
Association; provided, that the arbitrator shall have sole discretion
with regard to the admissibility of evidence.
(d) The arbitrator shall use his best efforts to rule
on each disputed issue within thirty (30) days after the completion of
the hearings described in paragraph (c) above. The determination of the
arbitrator as to the resolution of any dispute shall be binding and
conclusive upon all parties hereto. All rulings of the arbitrator shall
be in writing and shall be delivered to the parties hereto.
(e) The prevailing party in any arbitration shall be
entitled to an award of reasonable attorneys' fees incurred in
connection with the arbitration. The non-prevailing party shall pay
such fees, together with the fees of the arbitrator and the costs and
expenses of the arbitration. If the Representative is the nonprevailing
party, the Representative shall pay such fees, costs and expenses.
(f) Any arbitration pursuant to this Section 12.3
shall be conducted in Des Moines, Iowa. Any arbitration award may be
entered in and enforced by any court having jurisdiction thereover and
the parties hereby consent and commit themselves to the jurisdiction of
the courts of the States of Missouri and Minnesota for purposes of the
enforcement of any arbitration award.
13. BROKERS.
13.1 FOR THE COMPANIES AND THE REPRESENTATIVE. The
Representative and the Companies each represents and warrants jointly and
severally that, other than George K. Baum & Company, no person, firm or
corporation has acted in the capacity of broker or finder on its behalf to bring
about the negotiation of this Agreement. The Representative and the Companies
agree to pay all fees, expenses and other compensation owed to George K. Baum &
Company. Each Company and the Representative jointly and severally agree to
indemnify and hold harmless the Buyer against any claims or liabilities asserted
against it by any person acting or claiming to act as a broker or finder on
behalf of the Companies, on behalf of a stockholder or a member of the Companies
or on behalf of the Representative.
13.2 FOR THE BUYER. The Buyer agrees to pay all fees, expenses
and compensation owed to any person, firm or corporation who has acted in the
capacity of broker or finder on its behalf to bring about the negotiation of
this Agreement. The Buyer agrees to indemnify and hold harmless the Companies
and the Representative against any claims or liabilities asserted against it by
any person acting or claiming to act as a broker or finder on behalf of the
Buyer.
14. NOTICES. Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or sent by
telecopy, recognized overnight delivery service, or registered or certified
mail, postage prepaid, addressed as follows, or to such other address of which
the parties may have given notice:
To the Buyer: Chronimed Inc.
Suite 250, Ridgedale Office Center
13911 Ridgedale Drive
Minnetonka, Minnesota 55305
Attn: Norman A. Cocke
Senior Vice President and Chief Financial Officer
With a copy to: Gray, Plant, Mooty, Mooty & Bennett, P.A.
3400 City Center
33 South Sixth Street
Minneapolis, Minnesota 55402
Fax: (612)333-0066
Attn: John E. Brower, Esq.
To the Companies and
the Representative: Phillip D. Short
10401 Holmes Road, Suite 320
Kansas City, Missouri 64131
Fax: (816)941-3539
With a copy to: Blackwell Sanders Matheny Weary
& Lombardi L.C.
Two Pershing Square, Suite 1100
2300 Main Street
P.O. Box 419777
Kansas City, Missouri 64141-6777
FAX: (816)274-6914
Attention: John K. Brungardt, Esq.
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally, by telecopy
with confirmation of receipt, or by recognized overnight delivery service, or
(b) three business days after being sent, if sent by prepaid registered or
certified mail.
15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that the Buyer, on the one hand, and the Representative and the
Companies, on the other hand, may not assign their respective obligations
hereunder without the prior written consent of the other party. Any assignment
in contravention of this provision shall be void. No assignment shall release
the Buyer, the Companies or the Representative from any obligation or liability
under this Agreement.
16. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and all Schedules
hereto, and all agreements and instruments to be delivered by the parties
pursuant hereto represent the entire understanding and agreement among the
parties hereto with respect to the subject matter hereof and supersede all prior
oral and written and all contemporaneous oral negotiations, commitments and
understandings between such parties. This Agreement may be amended only by a
written instrument executed by the Buyer and the Representative.
17. SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
18. EXPENSES. Except as otherwise expressly provided herein, the Buyer,
on the one hand, and the Companies and the Representative, on the other hand,
will pay all fees and expenses (including, without limitation, legal and
accounting fees and expenses) incurred by them in connection with the
transactions contemplated hereby. Each Company shall be responsible for payment
of all sales or transfer taxes arising out of the conveyance of the Assets owned
by such Company.
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri.
20. SECTION HEADINGS. The section headings are for convenience of
reference only and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of and on the date first above written.
CHRONIMED HOLDINGS INC.
By:
Name:
Title:
STATSCRIPT MANAGEMENT SERVICES, INC.
By:
Name:
Title:
STAT SCRIPT, INC.
By:
Name:
Title:
OAKLAWN PHARMACY, INC.
By:
Name:
Title:
PRESTON CENTER PHARMACY, INC.
By:
Name:
Title:
MESA PHARMACY, INC.
By:
Name:
Title:
CHICAGO PHARMACY, LLC
By:
Name:
Title:
NORTH AVENUE PHARMACY, LLC
By:
Name:
Title:
HOUSTON PHARMACY, INC.
By:
Name:
Title:
FORT LAUDERDALE PHARMACY, INC.
By:
Name:
Title:
REPRESENTATIVE:
PHILLIP D. SHORT, for himself and as
Representative of the Companies
GUARANTY BY CHRONIMED INC.
The undersigned, being the sole shareholder of the Buyer under the
foregoing Acquisition Agreement (the "Agreement") hereby guarantees (i) payment
in full by Buyer of the Purchase Price (as defined in the Agreement) due under
the Agreement in accordance with and subject to the terms and conditions of the
Agreement and (ii) the accuracy of all representations and warranties of Buyer
and the performance by Buyer of all covenants, agreements and obligations made
under or pursuant to the Agreement. The effectiveness of this Guaranty is
subject to the approval of the undersigned's Board of Directors being obtained
as provided in the Agreement, with the meeting for such approval being scheduled
for June 18, 1996. Upon such approval of the undersigned's Board being obtained,
this Guaranty shall be in full force and effect.
This Guaranty is a direct and immediate guarantee of payment and not of
collectability, and is in no way conditional or contingent upon any attempt to
collect from Buyer. However, it is understood that any claims or defenses that
Buyer may have under or in connection with the Agreement shall also be available
to the undersigned under this Guaranty. The undersigned expressly waives
presentment, demand, notice of nonpayment, protest and notice of protest and
acceptance of this Guaranty.
This Guaranty shall be governed, enforced and construed according to
the laws of the State of Missouri.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty this
____ of June, 1996.
CHRONIMED INC.
By_________________________
Its_________________________
LIST OF SCHEDULES
Schedule I Companies, Stockholders and Members
Schedule II Purchase Price Allocation
Schedule 1.4 List of Equipment
Schedule 3.3A Title
Schedule 3.4 Permitted Payments, Tax Distribution Amount; Distributions
and Payments That Adjust Purchase Price
Schedule 3.5 Liabilities
Schedule 3.6 Litigation
Schedule 3.7 Insurance
Schedule 3.8 Personal Property
Schedule 3.10 Real Property Leases
Schedule 3.11 Tax Matters
Schedule 3.13 Contracts
Schedule 3.14 Permits
Schedule 3.15 Employees
Schedule 3.16 Employee Plans
Schedule 3.17 Material Changes
Schedule 3.18 Suppliers
Schedule 3.19 Bank Accounts
Schedule 3.20 Powers of Attorney
Schedule 3.21 Stockholder, Member and Company Approvals
Schedule 3.28 Materials
Schedule 3.29 Pricing
Schedule 4.4 Buyer Approvals
Schedule 7.7 Opinion of Counsel to the Companies
Schedule 8.5 Opinion of Counsel to Buyer and Chronimed Inc.
The Company has omitted the above schedules to the Acquisition Agreement and
hereby agrees to furnish supplementally a copy of any omitted schedule to the
Commission upon request.
