-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NtN3s1PTsMgKquYZ0XJxXj55J1TBILPXaackuFXsoZ1pllm2J9Do6cJoSBIhLS3i 4HlLFisSutCPNBmKQodanQ== 0001047469-98-029933.txt : 19980810 0001047469-98-029933.hdr.sgml : 19980810 ACCESSION NUMBER: 0001047469-98-029933 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980723 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980807 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HORIZON PHARMACIES INC CENTRAL INDEX KEY: 0001036260 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 752441557 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-22403 FILM NUMBER: 98680019 BUSINESS ADDRESS: STREET 1: 275 W PRINCETON DR CITY: PRINCETON STATE: TX ZIP: 75407 BUSINESS PHONE: 9727362424 MAIL ADDRESS: STREET 1: 275 WEST PRINCETON DRIVE CITY: PRINCETON STATE: TX ZIP: 75407 8-K 1 8-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 24, 1998 HORIZON PHARMACIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 0-22403 75-2441557 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 275 W. PRINCETON DRIVE PRINCETON, TEXAS 75407 (Address of Principal Executive Offices) (Zip Code) (972) 736-2424 (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. ACQUISITION OF MARTIN DRUG CORPORATION ASSETS. On July 24, 1998, the Registrant acquired substantially all of the assets of Martin Drug Corporation d/b/a Interurban Pharmacy (the "Martin Store"), comprising primarily pharmacy files, equipment, inventory and supplies. The Registrant acquired the assets through arm's-length negotiations with David DeVido, the sole shareholder of the Martin Store. Prior to this transaction, no material relationships existed between the Martin Store and the Registrant or any of its affiliates, any director or officer of the Registrant, or any associate of such director or officer. The consideration for the acquisition consisted of: (i) $500,000 cash payable at closing; and (ii) 11,388 shares of the Registrant's Common Stock, par value $.01 per share (the "Registrant's Common Stock"). The Registrant intends to continue the Martin Store's operations under the HORIZON Pharmacies, Inc. name. In connection therewith, the Registrant has secured a real estate lease covering the current retail location of the Pharmacy and has secured a valid Texas license to do business at that location under the HORIZON Pharmacies, Inc. name. ACQUISITION OF CARLEN CORPORATION ASSETS. On July 25, 1998, the Registrant acquired substantially all of the assets of Carlen Corporation d/b/a Briargrove Pharmacy (the "Carlen Store"), comprising primarily pharmacy files, equipment, inventory and supplies. The Registrant acquired the assets through arm's-length negotiations with David DeVido, the sole shareholder of the Carlen Store. Prior to this transaction, no material relationships existed between the Carlen Store and the Registrant or any of its affiliates, any director or officer of the Registrant, or any associate of such director or officer. The consideration for the acquisition consisted of: (i) $465,000 cash payable at closing; and (ii) 55,321 shares of the Registrant's Common Stock. The Registrant intends to continue the Carlen Store's operations under the HORIZON Pharmacies, Inc. name. In connection therewith, the Registrant has secured a real estate lease covering the current retail location of the Pharmacy and has secured a valid Texas license to do business at that location under the HORIZON Pharmacies, Inc. name. ACQUISITION OF STIRNIMINN, INC. ASSETS. On July 26, 1998, the registrant, HORIZON Pharmacies, Inc. ("Registrant"), acquired substantially all of the assets of Stirniminn, Inc. d/b/a Kirkwood Pharmacy (the "Stirniminn Store"), comprising primarily pharmacy files, equipment, inventory and supplies. The Registrant acquired the assets through arm's-length negotiations with David DeVido, the sole shareholder of the Stirniminn Store. Prior to this transaction, no material relationships existed between the Stiriniminn Store and the Registrant or any of its affiliates, any director or officer of the Registrant, or any associate of such director or officer. The consideration for the acquisition consisted of: (i) $150,000 cash payable at closing; and (ii) 18,061 shares of the Registrant's common stock. The Registrant intends to continue the Stirniminn Store's operations under the HORIZON Pharmacies, Inc. name. In connection therewith, the Registrant has secured a real estate lease covering the current retail location of the Pharmacy and has secured a valid Texas license to do business at that location under the HORIZON Pharmacies, Inc. name. -2- ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. It is impracticable at this time to provide the required financial statements of the acquired business described in Item 2. This information will be provided within 60 days by an amendment to this report. (b) PRO FORMA FINANCIAL INFORMATION. See (a) above. (c) EXHIBITS. The following exhibits are filed with this report: Exhibit No. Name of Exhibit ----------- --------------- 2.1 Purchase Agreement dated July 24, 1998 by and between Martin Drug Corporation d/b/a Interurban Pharmacy, a Texas corporation, and HORIZON Pharmacies, Inc. Omitted from this Agreement, as filed, are the exhibits thereto. The Registrant will furnish supplementally a copy of any such omitted exhibits to the Commission upon request. 2.2 Purchase Agreement dated July 25, 1998 by and between Carlen Corporation d/b/a Briargrove Pharmacy, a Texas corporation, and HORIZON Pharmacies, Inc. Omitted from this Agreement, as filed, are the exhibits thereto. The Registrant will furnish supplementally a copy of any such omitted exhibits to the Commission upon request. 2.3 Purchase Agreement dated July 26, 1998 by and between Stirniminn, Inc. d/b/a Kirkwood Pharmacy, a Texas corporation, and HORIZON Pharmacies, Inc. Omitted from this Agreement, as filed, are the exhibits thereto. The Registrant will furnish supplementally a copy of any such omitted exhibits to the Commission upon request. 2.4 Amendment No. 1 to the Purchase Agreement dated July 24, 1998. 2.5 Amendment No. 1 to the Purchase Agreement dated July 25, 1998.
-3- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REGISTRANT: HORIZON PHARMACIES, INC. Date: August 6, 1998 By: /s/ Ricky D. McCord -------------------------- Ricky D. McCord, President -4- EX-2.1 2 EXHIBIT 2.1 PURCHASE AGREEMENT AGREEMENT made the 24th day of July, 1998 between Martin Drug Corporation, a Texas Corporation ("Seller"), and HORIZON Pharmacies, Inc., a Delaware Corporation ("Buyer"). W I T N E S S E T H WHEREAS, Seller operates a retail pharmacy doing business as Interurban Pharmacy, (the Drug Store") located at 12510 Memorial Drive, Houston, Texas 77024 (the "Retail Location"). WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase certain assets utilized in connection with and as part of Seller's operation of the Drug Store upon the terms and conditions stated herein: NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. SALE OF ASSETS. 1.1 ASSETS TO BE PURCHASED Seller hereby agrees to convey, transfer, assign, and deliver to Buyer on a going concern basis, and Buyer hereby agrees to purchase from Seller all of Seller's assets located at or used in connection with Seller's operation of the Drug Store including but not limited to: A. MARKETABLE INVENTORY. All marketable pharmaceutical and retail inventory of Seller held for retail sale by the Drug Store, a summary of which is attached as Exhibit "C". B. PRESCRIPTION FILES AND PATIENT PROFILES. All prescription files, patient profiles and customer list and telephone numbers. C. FURNITURE, FIXTURES AND EQUIPMENT. Supplies and all furniture, fixtures, equipment described in Exhibit "A" attached hereto and made a part hereof, including but not limited to computers, peripherals, cash registers, refrigerators, typewriters, microfiche, fax machines, copiers, sound system, alarm system, telephone equipment, shelving, counters, bottles, vials, ointment jars and other usable supplies. D. COPYRIGHTS, TRADE NAMES, AND TRADEMARKS. All copyrights, trade names and trademarks associated with the Pharmacy Location (s) including, but not limited to Interurban Pharmacy and all variations thereof. 1.2 ASSETS NOT PURCHASED BY BUYER Unless otherwise agreed by the parties in writing, Buyer shall not purchase the following: (I) consigned merchandise; (ii) merchandise held in layaway; (iii) merchandise which is damaged; (iv) merchandise which is unsalable because its expiration date has expired; or (v) prescription merchandise expiring within 30 days or prescription merchandise or over-the-counter drugs which are (a) in a partially filled container with a date which will expire within 30 days of the closing date; or (b) in a full, sealed container with a date which is expired; (vi) all accounts receivable for services rendered on or before closing, including, but not limited to, third party insurance receivables, individual charge account receivables, and Worker's Compensation receivables; (vii) and Seller's full interest in a class action lawsuit brought against certain pharmaceutical companies based on claims of anti-trust and other legal violations, which lawsuit is currently pending. 1 - -------------- ------------- Seller initial Buyer Initial 1.3 TELEPHONE NUMBERS. Seller agrees to use all reasonable efforts and take all action necessary to assure that all telephone numbers used at the Drug Store shall be transferred without interruption to Buyer. 1.4 POST OFFICE AND LOTTERY. Buyer acknowledges that a portion of the premises is being used as Post Office and that the Seller sells Lottery tickets. Additionally, Buyer acknowledges that Buyer is responsible for making the necessary arrangements to continue both services. 2. PURCHASE PRICE. 2.1 COMPUTATION. The purchase price to be paid by the Buyer for the Drug Stores Assets shall be computed as follows: (i) $180,000 for prescription files, patient profiles, furniture, fixtures, equipment, and goodwill; plus (ii) the discounted fair market value of all inventory constituting a part of the Drug Store Assets determined in accordance with Section 2.6, below; 2.2 ALLOCATION. The total purchase price described in Section 2.1, above, shall be allocated as set forth in Exhibit "B" attached hereto and made a part hereof. 2.3 PAYMENT OF THE PURCHASE PRICE. Buyer shall cause the purchase price to be paid to Seller as follows: (a) $200,000 on the Closing Date by Company, certified or cashier's check (less the Earnest Money Deposit as such term is defined in Section 2.4, below); (b) Shares of Buyer's common stock, par value $ .01 per share (the "HORIZON Common Stock"), equivalent to $462,203.00 based upon the average closing price for the HORIZON common stock as reported in the Wall Street Journal for the ten (10) business days immediately preceding the Closing Date, as such term is defined in Section 7.1, below. The dollar amount will be equal to the actual valuation of the store inventory plus or minus any adjustments pursuant with 2.3(c) and 2.3(d). (c) Buyer shall deduct from the purchase price payable at Closing an amount equal to the sum of (i) Seller's pro rata share of personal property taxes as described in Section 2.5.2, below, and (ii) one half of the fee charged by the third party inventory service. (d) Additionally, Buyer and Seller shall prorate rent and utilities for the month of July upon presentation of invoices by Buyer (which may occur after closing) and Buyer shall purchase petty cash and register cash from Seller at closing and reimburse Seller for any security deposit on deposit with the landlord for the retail location. (e) Adjustments to the total purchase price, up or down, based on the actual inventory shall be made in the number of shares of Buyer's common stock given as consideration. 2.4 EARNEST MONEY DEPOSIT. Buyer herewith deposits with ___________ _________ (the "Escrow Agent"), the sum of $5,000 (the "Earnest Money Deposit")), which sum shall be applied to the cash portion of the purchase price at Closing. In the event Seller fails to perform each and every covenant and condition required hereunder, Buyer may terminate this Agreement by giving Seller written notice and Seller shall return the Earnest Money to Buyer within three (3) days of Seller's receipt of such notice. In the event Buyer fails to perform each and every obligation hereunder, Seller may terminate this Agreement and retain the 2 - -------------- ------------- Seller initial Buyer Initial Earnest Money as liquidated damages. The remedies provided in this Section shall be the exclusive remedies for a breach of this Section. 2.5 TAXES 2.5.1 SALES, USE, AND TRANSFER TAXES Buyer shall pay any and all sales, use, and transfer taxes arising out of the sale of the Drug Store Assets pursuant to this Agreement. 2.5.2 PERSONAL PROPERTY TAXES. Seller shall pay all personal property taxes attributable to the Drug Store Assets for the period up to and including the Closing Date, and Buyer shall pay all personal property taxes attributable to the Drug Store Assets for the period following the Closing Date. The parties shall, using last year's tax returns, estimate as of the Closing Date the personal property taxes anticipated to be owed on the Drug Store Assets for the current calendar year, and Seller's pro rata portion of such estimated taxes shall be withheld by Buyer from the purchase price described in Section 2.3, above. 2.6 INVENTORY EVALUATION A physical inventory of the Drug Store Assets shall be performed on the Closing Date by an independent third party inventory service. Each party shall pay one-half of the fee charged by the service company, with Seller's pro rata share of such costs to be deducted from the purchase price payable by Buyer at Closing. For purposes of calculating that portion of the purchase price attributed to inventory under Section 2, above, the marketable inventory shall be valued as follows, except as otherwise provided herein: Marketable Inventory Method of Valuation -------------------- ------------------- Prescription inventory Acquisition cost or AWP less 16% except for special deal prescription items or generic items which shall be valued at acquisition cost Non-Prescription inventory Acquisition cost
In the event Seller is unable to establish the acquisition cost of any non-prescription inventory, the following formula shall be applied in valuing such inventory. Category of Merchandise Method of Valuation ----------------------- ------------------- HBA Retail price less 25% OTC Retail price less 25% Gifts Retail price less 50% Cards Retail price less 50% Cosmetics Retail price less 33 1/3% Watches/Cameras Retail price less 33 1/3% Fragrances Retail price less 25% Candy (box) Retail price less 40% Candy (loose) Retail price less 30% Jewelry Retail price less 50% Miscellaneous Retail price less 50% Seasonal Merchandise Retail price less 50%
3. REPRESENTATIONS AND WARRANTIES. 3 - -------------- ------------- Seller initial Buyer Initial 3.1. The Seller does hereby represent and warrant to Buyer as follows: 3.1.1 ORGANIZATION. Seller is a corporation duly organized and existing in good standing under the laws of its state of incorporation and is entitled to own and lease its properties and to carry on its business as and in the places where such properties are now owned, leased or operated and such business is conducted. 3.1.2 AUTHORITY. The execution, delivery and performance of this agreement by Seller has been duly authorized by all necessary corporate action and constitutes a legal, valid, and binding obligation on Seller enforceable in accordance with its terms. 3.1.3 TITLE TO PROPERTIES. The Seller has good and marketable title to all of the Drug Store assets, free and clear of all mortgages, liens, encumbrances, pledges, or security interests of any nature whatsoever, except for secured debts, if any, listed on Exhibit "D" attached hereto which shall be satisfied and released at or prior to closing. 3.1.4 BOOKS AND RECORDS. Seller's books and records which have been provided to Buyer for inspection are true, correct and complete, and contain no material omission with respect to Seller's business, operation or status. 3.1.5 STATEMENTS NOT MISLEADING. No representation, warranty or other information disclosed to Buyer in connection with this Agreement omits or will omit to state the material facts necessary to make such representation, warranty or information not misleading. 3.1.6 COMPLIANCE WITH APPLICABLE LAWS. Seller has received no notice of violation of any applicable law, regulation or requirement relating to the operation of the Drug Store, the Drug Store Assets or the Retail Location, and Seller has no knowledge of or reason to believe any such violation exists. Seller is in full compliance with all wages and hour laws, and to the best of its knowledge is not engaged in any unfair labor practice or discriminatory employment practice and no complaint of any such practice against Seller is filed or threatened to be filed with or by the National Labor Relation Board, the Equal Employment Opportunity Commission or any other administrative agency, Federal or state, that regulates labor or employment practices, nor is any grievances filed or threatened to be filed against Seller by any employee pursuant to any collective bargaining or other employment agreement to which Seller is a party. To the Seller's best knowledge it is in compliance with all applicable Federal and state laws and regulations regarding occupational safety and health standards and has received no material complaints from any Federal or state agency or regulatory body alleging violations of any such laws and regulations. The Drug Store and the use and operation thereof are currently in compliance with all applicable laws, ordinances, rules and regulations relating to public health and safety and protection of the environment. Seller has not released, generated, discharged, manufactured, treated, transported or disposed of hazardous material on, in, under or from the Drug Store or placed or stored any hazardous material on the property. To the best of Seller's knowledge, (a) no release, generation, discharge, manufacture, treatment, transportation or disposal of hazardous material has occurred on, in, under or from the Drug Store, (b) no hazardous material is or has been stored or otherwise located on, in or under the Drug Store, and (c) there are no underground storage tanks on the Drug Store premises. There are no pending or to the best of Seller's knowledge threatened requests for information, action or proceedings from or by any governmental agency or any other person or entity regarding the condition or use of the 4 - -------------- ------------- Seller initial Buyer Initial Drug Store or the release, generation, discharge, manufacture, treatment, transportation or discharge of hazardous material on, in, under or from the Drug Store. 3.1.7 CONTRACTS. Seller is not a party to any contract, understanding or commitment whether in the ordinary course of business or not, relating to Seller's operation of the Drug Store which extends beyond the Closing Date except those listed on Exhibit "F", which Buyer agrees to assume. 3.1.8 EMPLOYMENT CONTRACTS. Seller is not a party to any oral or written contract of employment between Seller and any officer or other employee, and the employment of each of Seller's officers and all the Drug Store's employees is terminable at will without any penalty or severance obligation of any kind. 3.1.9 LITIGATION. Seller is not a party to and has no knowledge of any suit, action, proceeding, investigation, claim, complaint or accusation pending or threatened against or affecting Seller or the Drug Store Assets, in any court or before any arbitration panel of any kind or before or by any Federal, state, local, foreign or other government agency, department, commission, board, bureau, instrumentality or body, and to the best knowledge and belief of Seller, there is no basis for any such suit, action, litigation, proceeding, investigation, claim, complaint or accusation. There is no outstanding order, writ, injunction, decree, judgment or award by any court, arbitration panel or government body against or affecting Seller, Drug Store, the Drug Store Assets or the Retail Location. 3.1.10 EMPLOYEE BENEFITS All sums due for employee compensation and benefits and all vacation time owing to any employees of Seller have been duly and adequately accrued and reflected in the accounting records of Seller. Seller shall be responsible for all employee benefits, including but not limited to payment for accrued vacation, to the Closing Date. To the Seller's best knowledge, all employees of Seller are either United States citizens or resident aliens specifically authorized to engage in employment in the United States in accordance with all applicable laws. 3.1.11 TAXES. (a) Seller has filed all required Federal, state, local, foreign and other tax returns, notices and reports (including, but not limited to, income, property, sales, use, franchise, capital, stock, excise, added value, employee's income withholding, social security and unemployment tax returns) heretofore due; and to Seller's best knowledge all such returns, notices, and reports are correct, accurate, and complete. (b) Seller has made all deposits required to be made in connection with any tax including but not limited to, estimated income, franchise, sales, use, and employee withholding taxes. 3.1.12 INVESTMENT PURPOSE. Seller is acquiring the HORIZON Common Stock for investment, and not with a view to the sale or distribution thereof. Seller understands and acknowledges that the transfer of the HORIZON Stock issuable hereunder will be restricted and that Seller may not sell or otherwise dispose of such shares unless and until a registration statement under the Security Act of 1933, as amended (the "Securities Act"), is in effect with respect thereto and Seller has fully complied with the Securities Act and all applicable regulations thereunder, or Seller has received an 5 - -------------- ------------- Seller initial Buyer Initial opinion from Buyer's counsel that the contemplated sale or other disposition of the HORIZON Common Stock will not require registration under the Security Act. 3.1.13 INSURANCE. All inventories, buildings and fixed assets owned or leased by Seller are and will be adequately insured against fire to the Closing Date, valid policies therefor are and will be outstanding and in force, and the premiums will be paid before the Closing Date. 3.1.14 NO CHANGES. Until the Closing Date, Seller will not, except with Buyer's prior written consent: (i) conduct its business except in the regular and ordinary course; (ii) increase the amount of compensation currently being paid to employee or agent, or make any bonus arrangement with any employee or agent; (iii) enter into any transaction other than in the ordinary course of business; or (iv) pay out of assets being sold to Buyer any debt, obligation or liability which Buyer has not agreed to assume under the terms of this Agreement. 3.2 Buyer does hereby represent and warrant to Seller as follows: 3.2.1 ORGANIZATION. Buyer is a corporation duly organized and existing in good standing under the laws of Delaware, and is entitled to own or lease properties and carry on its business as and in the places where such properties are now owned, leased or operated and such business is now conducted. 3.2.2 COMMON STOCK. Buyer has authorized 14,000,000 shares of HORIZON Common Stock of which approximately 5,400,000 shares are currently issued and outstanding, and 1,000,000 share of preferred stock, par value $0.01 per share, none of which are currently issued and outstanding. 4. CONDITIONS TO CLOSING. 4.1. BUYER'S CONDITIONS TO CLOSING. All obligations of Buyer under this Agreement are subject to the fulfillment, prior to or at Closing, of each of the following conditions (unless waived in writing by Buyer). 4.1.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Seller contained in this Agreement shall be true and complete at the Closing Date as if they were made at such time. 4.1.2 COMPLIANCE. Seller shall have performed and complied with all terms and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date. 4.1.3 CONSENTS. All necessary consents to the transfer of the Drug Store Assets have been obtained from vendors and other third party, if any. 4.1.4 NO CASUALTY. The Drug Store's business and property shall not have been adversely affected in any material way as a result of any strike, lock-out, accident or other casualty or act of God or the public enemy, or any judicial, administrative or governmental proceeding. 6 - -------------- ------------- Seller initial Buyer Initial 4.1.5 LEASE OF RETAIL LOCATION. Buyer shall have executed a lease assignment covering the Retail Location. 4.1.6 LICENSE TO OPERATE RETAIL PHARMACY. Buyer shall have obtained a valid license to operate a retail pharmacy under the HORIZON Pharmacies, Inc. name in the state of TEXAS. 4.2 SELLER'S CONDITIONS TO CLOSING. All obligations of Seller under this Agreement are subject to the fulfillment, prior to or at Closing, of each of the following conditions (unless waived in writing by Seller). 4.2.1 REPRESENTATIONS. The representations and warranties of Buyer contained in this Agreement shall be true and complete at the Closing Date as if they were made at such time. 4.2.2 COMPLIANCE. Buyer shall have performed and complied with all terms and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date. 4.2.3 INSURANCE. Buyer shall have documentation of insurance coverage. 5. LIABILITIES NOT ASSUMED BY BUYER. The parties expressly agree and acknowledge that Buyer shall not, by virtue of this Agreement, the consummation of the transactions contemplated herein or otherwise, assume any liabilities or obligations of Seller or any liabilities or obligations constituting a charge, lien, encumbrance or security interest upon the Drug Store Assets, regardless of whether such liabilities or obligations are absolute or contingent, liquidated or unliquidated or otherwise; except as provided in Section 3.1.7 6. INDEMNIFICATION. 6.1 SELLER'S INDEMNIFICATION OF BUYER. Seller and DAVID DEVIDO shall indemnify and hold harmless Buyer against and in respect of any and all liabilities concerning or otherwise connected to the conduct or operation of the Drug Store as of or prior to the Closing Date, and with the exception of liabilities expressly assumed by Buyer, all liabilities and obligations of the Seller, of every kind and description, regardless of whether such liabilities or obligations are absolute or contingent, liquidated or unliquidated, accrued or otherwise, and regardless of how and when the same may have arisen, which are asserted against Buyer as a result of this Agreement or the consummation of the transactions contemplated herein. Seller and David DeVido also indemnify, defend, and hold harmless Buyer against and in respect of any cost, damage, expense, liability or loss incurred or suffered by Buyer resulting from or arising out of the breach, inaccuracy, misrepresentation or untruth of any representation or warranty which survives the Closing, or the nonfulfillment of the post-closing agreements of Seller, including without limitation the agreements of Seller set forth in Section 8.5 regarding access to records in order for Buyer to conduct an audit of the last two (2) fiscal years and unaudited financial data up to the Closing Date. The foregoing indemnifications shall be joint and several, and indemnified costs and expenses shall include reasonable attorney's fees and related expenses. The right of indemnification shall be in addition to and shall not operate as a limitation on any other right or remedy pursuant to this agreement or any document or instrument executed in connection with the consummation of the sale and 7 - -------------- ------------- Seller initial Buyer Initial purchase of the Drug Store. The provisions of this paragraph shall survive the closing of this transaction for a period of one (1) year. 6.2 BUYER'S INDEMNIFICATION OF SELLER. Buyer shall indemnify and hold harmless Seller against and in respect of any and all liabilities concerning or otherwise connected to the conduct or operation of the Drug Store following the Closing Date, or arising out of any misrepresentation or breach of any of the provisions contained herein. The provisions of this paragraph shall survive the closing of this transaction for a period of one (1) year. 7. CLOSING. 7.1 CLOSING DATE. The closing shall take place at the Retail Location on or before July 24, 1998 (the "Closing Date") but in no event later than August 8, 1998 unless otherwise agreed by the parties in writing. 7.2 SELLER'S OBLIGATIONS AT CLOSING. Seller shall deliver to Buyer at closing of this Agreement a Bill of Sale effective to vest in Buyer good and marketable title to the Drug Store Assets, free and clear of all mortgages, security interest, liens, encumbrances, pledges and hypothecation of every nature and description and all other instruments and documents that are necessary or appropriate to the sale and delivery of the Drug Store Assets. 7.3 BUYER'S OBLIGATIONS AT CLOSING. Buyer shall deliver to Seller at closing: (i) a check for the cash portion of the purchase price provided for in Section 2.3 made payable to Seller and Seller's secured lender; and (ii) evidence that the shares of Common Stock provided for in Section 2.3.(b) shall be promptly delivered. 8. MISCELLANEOUS. 8.1 SURVIVAL OF REPRESENTATION, WARRANTIES AND INDEMNIFICATIONS. All of the representations, warranties and indemnifications of the parties set forth in this Agreement shall survive the Closing hereof. The provisions of this paragraph shall survive the closing of this transaction for a period of one (1) year. 8.2 RISK OF LOSS. The risk of loss of damages of Drug Store Assets shall be upon Seller until the closing hereof. 8.3 COVENANT NOT TO COMPETE. Except as otherwise provided herein, David DeVido shall not, for a period of six (6) years after the Closing Date, directly or indirectly own an equity interest in, operate, manage or assist any person or entity other than Buyer in operating or managing, any business which includes a retail pharmacy, nursing home or home health care company, or which offers for sale or lease durable medical equipment within a five (5) miles radius of store location, excluding Shan-La, inc. d/b/a Park Plaza Pharmacy, located at 1213 Hermann Drive, Suite 140, Houston, Texas 77004. The parties expressly agree that David DeVido may serve no more than one (1) day per week as a relief pharmacist at retail pharmacies not owned or 8 - -------------- ------------- Seller initial Buyer Initial operated by Buyer. The parties acknowledge that the territorial and time limitations contained in the paragraph are reasonable and properly required for the adequate protection of the business to be conducted by Buyer with the assets and properties to be transferred hereunder and can not be changed except by written permission of Buyer. 8.4 RIGHT TO ENJOIN BREACH. The parties agree that in the event of a breach by Seller of any provision of this paragraph, monetary damages alone would be inadequate and Buyer shall, in addition to all other legal remedies, be entitled to obtain an order enjoining Seller from violating the covenants set forth herein. 8.5 ACCESS TO RECORDS. Seller shall give Buyer, its counsel, accountants and representatives, reasonable access during normal business hours to all of Seller's books, contracts, commitments and records and furnish Buyer with all information which Buyer reasonably may request to conduct a financial audit of the last two (2) fiscal years and unaudited financial data up to Closing Date at Buyer's expense. The Buyer's audit will be conducted after the Closing Date. Seller and David DeVido agree and certify that they are aware that the post-Closing audit by Buyer is required in order to satisfy Buyer's regulatory reporting and disclosure requirements and for Buyer's general business purposes, that their prompt and complete cooperation and compliance with the provisions of this Section are required in order for such audit to be completed on a thorough and timely basis and that their failure to cooperate and comply could subject them to a claim to be indemnified, defended and held harmless or for other remedies available under this agreement or pursuant to applicable law or regulation. 8.6 SELLER'S COLLECTION OF ACCOUNTS RECEIVABLE. Buyer acknowledges and agrees that Seller will need assistance from Drug Store employees to properly direct collections on account and to properly allocate between Buyer and Seller based upon the invoice date referenced by the payment. 8.7 GOVERNING LAW. This agreement shall be governed and construed in accordance with the laws of the state of Texas. 8.8 ENTIRE AGREEMENT MODIFICATION. This agreement contains the entire agreement between the parties, and no representations, warranties or promises, unless contained herein, shall be binding upon the parties hereto, their successors and assigns. This Agreement may not be amended or terminated except by an instrument executed by both parties. 8.9 ASSIGNMENT. This agreement may not be assigned by Buyer without written consent of Seller, which consent will not be unreasonably withheld. 8.10 TIME OF THE ESSENCE. Time is of the essence of this Agreement. 9 - -------------- ------------- Seller initial Buyer Initial IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written. BUYER: HORIZON Pharmacies, Inc. Witness: -------------------- ----------------------- Rick McCord, President SELLER: Martin Drug Corporation Witness: -------------------- ----------------------- David DeVido, President 10 - -------------- ------------- Seller initial Buyer Initial EX-2.2 3 EXHIBIT 2.2 PURCHASE AGREEMENT AGREEMENT made the 25th day of July, 1998 between Carlen Corporation, a Texas corporation ("Seller"), and HORIZON Pharmacies, Inc., a Delaware Corporation ("Buyer"). W I T N E S S E T H WHEREAS, Seller operates a retail pharmacy doing business as Briargrove Pharmacy, (the Drug Store") located at 6435 San Felipe, Houston, Texas 77057 (the "Retail Location"). WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase certain assets utilized in connection with and as part of Seller's operation of the Drug Store upon the terms and conditions stated herein: NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. SALE OF ASSETS. 1.1 ASSETS TO BE PURCHASED Seller hereby agrees to convey, transfer, assign, and deliver to Buyer on a going concern basis, and Buyer hereby agrees to purchase from Seller all of Seller's assets located at or used in connection with Seller's operation of the Drug Store including but not limited to: A. MARKETABLE INVENTORY. All marketable pharmaceutical and retail inventory of Seller held for retail sale by the Drug Store, a summary of which is attached as Exhibit "G". B. PRESCRIPTION FILES AND PATIENT PROFILES. All prescription files, patient profiles, customer list and telephone numbers. C. FURNITURE, FIXTURES AND EQUIPMENT. Supplies and all furniture, fixtures, equipment described in Exhibit "A" attached hereto and made a part hereof, including but not limited to computers, peripherals, cash registers, refrigerators, typewriters, microfiche, fax machines, copiers, sound system, alarm system, telephone equipment, shelving, counters, bottles, vials, ointment jars and other usable supplies. D. COPYRIGHTS, TRADE NAMES, AND TRADEMARKS. All copyrights, trade names and trademarks associated with the Pharmacy Location(s) including, but not limited to Briargrove Pharmacy and all variations thereof. 1.2 ASSETS NOT PURCHASED BY BUYER Unless otherwise agreed by the parties in writing, Buyer shall not purchase the following: (i) consigned merchandise; (ii) merchandise held in layaway; (iii) merchandise which is damaged; (iv) merchandise which is unsalable because its expiration date has expired; or (v) prescription merchandise expiring within 30 days or prescription merchandise or over-the-counter drugs which are (a) in a partially filled container with a date which will expire within 30 days of the closing date; or (b) in a full, sealed container with a date which is expired; (vi) all accounts receivable for services rendered on or before closing, including, but not limited to, third party insurance receivables, individual charge account receivables, and Worker's Compensation receivables; and Seller's full interest in a class action lawsuit brought against certain pharmaceutical companies based on claims of anti-trust and other legal violations, which lawsuit is currently pending. 1 ______________ _____________ SELLER INITIAL BUYER INITIAL 1.3 TELEPHONE NUMBERS. Seller agrees to use all reasonable efforts and take all action necessary to assure that all telephone numbers used at the Drug Store shall be transferred without interruption to Buyer. 2. PURCHASE PRICE. 2.1 COMPUTATION. The purchase price to be paid by the Buyer for the Drug Stores Assets shall be computed as follows: (i) $700,000 for prescription files, patient profiles, furniture, fixtures, equipment and goodwill; PLUS (ii) the discounted fair market value of all inventory constituting a part of the Drug Store Assets determined in accordance with Section 2.6, below; 2.2 ALLOCATION. The total purchase price described in Section 2.1, above, shall be allocated as set forth in Exhibit "B" attached hereto and made a part hereof. 2.3 PAYMENT OF THE PURCHASE PRICE. Buyer shall cause the purchase price to be paid to Seller as follows: (a) $765,000 on the Closing Date by Company, certified or cashier's check (less of the Earnest Money Deposit as such term is defined in Section 2.4, below); (b) Shares of Buyer's common stock, par value $.01 per share (the "HORIZON Common Stock"), equivalent to $487,986.00 based upon the average closing price for the HORIZON common stock as reported in the Wall Street Journal for the ten (10) business days immediately preceding the Closing Date, as such term is defined in Section 7.1, below. The dollar amount will equal the actual evaluation of the store inventory less $135,000, and plus or minus any adjustments per Sections 2.3(d) and 2.3(e) below; (c) Pursuant to Section 8.3, a negotiable promissory note for $100,000.00, payable to David DeVido in two equal installments due six (6) months and twelve (12) months from the date of purchase in the form attached as Exhibit "C" attached hereto secured by the inventory of the Drug Store in amount sufficient to cover the outstanding principal plus accrued interest due thereon; (d) Buyer shall deduct from the purchase price payable at Closing an amount equal to the sum of (i) Seller's pro rata share of personal property taxes as described in Section 2.5.2, below, and (ii) one half of the fee charged by the third party inventory service; (e) Additionally, Buyer and Seller shall prorate rent and utilities for the month of July upon presentation of invoices By Buyer (which may occur after the closing) and Buyer shall purchase petty cash and register cash from Seller at closing and reimburse Seller for any security deposit on deposit with the landlord of the retail location; and (f) Adjustments to the total purchase price, up or down, based on the actual inventory, shall be made in the number of shares of Buyer's common stock given as consideration. 2.4 EARNEST MONEY DEPOSIT. Buyer herewith deposits with ________N/A___ _________ (the "Escrow Agent"), the sum of $10,000 (the "Earnest Money Deposit"), which sum shall be applied to the cash portion of the purchase price at Closing. In the event Seller fails to perform each and every covenant and condition required hereunder, Buyer may terminate this Agreement by giving Seller written notice and Seller shall return the Earnest Money to Buyer within three (3) days of Seller's receipt of such notice. In the event Buyer fails to perform each and every obligation hereunder, Seller may terminate this Agreement and retain the 2 ______________ _____________ SELLER INITIAL BUYER INITIAL Earnest Money as liquidated damages. The remedies provided in this Section shall be the exclusive remedies for a breach of this Section. 2.5 TAXES 2.5.1 SALES, USE, AND TRANSFER TAXES Buyer shall pay any and all sales, use, and transfer taxes arising out of the sale of the Drug Store Assets pursuant to this Agreement. 2.5.2 PERSONAL PROPERTY TAXES. Seller shall pay all personal property taxes attributable to the Drug Store Assets for the period up to and including the Closing Date, and Buyer shall pay all personal property taxes attributable to the Drug Store Assets for the period following the Closing Date. The parties shall, using last year's tax returns, estimate as of the Closing Date the personal property taxes anticipated to be owed on the Drug Store Assets for the current calendar year, and Seller's pro rata portion of such estimated taxes shall be withheld by Buyer from the purchase price described in Section 2.3, above. 2.6 INVENTORY EVALUATION A physical inventory of the Drug Store Assets shall be performed on the Closing Date by an independent third party inventory service. Each party shall pay one-half of the fee charged by the service company, with Seller's pro rata share of such costs to be deducted from the purchase price payable by Buyer at Closing. For purposes of calculating that portion of the purchase price attributed to inventory under Section 2, above, the marketable inventory shall be valued as follows, except as otherwise provided herein: MARKETABLE INVENTORY METHOD OF VALUATION Prescription inventory Acquisition cost or AWP less 16% except for special deal prescription items or generic items which shall be valued at acquisition cost Non-Prescription inventory Acquisition cost
In the event Seller is unable to establish the acquisition cost of any non-prescription inventory, the following formula shall be applied in valuing such inventory. CATEGORY OF MERCHANDISE METHOD OF VALUATION HBA Retail price less 25% OTC Retail price less 25% Gifts Retail price less 50% Cards Retail price less 50% Cosmetics Retail price less 33-1/3% Watches/Cameras Retail price less 33-1/3% Fragrances Retail price less 25% Candy (box) Retail price less 40% Candy (loose) Retail price less 30% Jewelry Retail price less 50% Miscellaneous Retail price less 50% Seasonal Merchandise Retail price less 50%
3 ______________ _____________ SELLER INITIAL BUYER INITIAL 3. REPRESENTATIONS AND WARRANTIES. 3.1. The Seller does hereby represent and warrant to Buyer as follows: 3.1.1 ORGANIZATION. Seller is a corporation duly organized and existing in good standing under the laws of its state of incorporation and is entitled to own and lease its properties and to carry on its business as and in the places where such properties are now owned, leased or operated and such business is conducted. 3.1.2 AUTHORITY. The execution, delivery and performance of this agreement by Seller has been duly authorized by all necessary corporate action and constitutes a legal, valid, and binding obligation on Seller enforceable in accordance with its terms. 3.1.3 TITLE TO PROPERTIES. The Seller has good and marketable title to all of the Drug Store assets, free and clear of all mortgages, liens, encumbrances, pledges, or security interests of any nature whatsoever, except for secured debts, if any, listed on Exhibit "D" attached hereto which shall be satisfied and released at or prior to closing. 3.1.4 BOOKS AND RECORDS. Seller's books and records which have been provided to Buyer for inspection are true, correct and complete, and contain no material omission with respect to Seller's business, operation or status. 3.1.5 STATEMENTS NOT MISLEADING. No representation, warranty or other information disclosed to Buyer in connection with this Agreement omits or will omit to state the material facts necessary to make such representation, warranty or information not misleading. 3.1.6 COMPLIANCE WITH APPLICABLE LAWS. Except as noted on Exhibit "E", Seller has received no notice of violation of any applicable law, regulation or requirement relating to the operation of the Drug Store, the Drug Store Assets or the Retail Location, and Seller has no knowledge of or reason to believe any such violation exists. Seller is in full compliance with all wages and hour laws, and to the best of its knowledge is not engaged in any unfair labor practice or discriminatory employment practice and no complaint of any such practice against Seller is filed or threatened to be filed with or by the National Labor Relation Board, the Equal Employment Opportunity Commission or any other administrative agency, Federal or state, that regulates labor or employment practices, nor is any grievances filed or threatened to be filed against Seller by any employee pursuant to any collective bargaining or other employment agreement to which Seller is a party. To the Seller's best knowledge it is in compliance with all applicable Federal and state laws and regulations regarding occupational safety and health standards and has received no material complaints from any Federal or state agency or regulatory body alleging violations of any such laws and regulations. The Drug Store and the use and operation thereof are currently in compliance with all applicable laws, ordinances, rules and regulations relating to public health and safety and protection of the environment. Seller has not released, generated, discharged, manufactured, treated, transported or disposed of hazardous material on, in, under or from the Drug Store or placed or stored any hazardous material on the property. To the best of Seller's knowledge, (a) no release, generation, discharge, manufacture, treatment, transportation or disposal of hazardous material has occurred on, in, under or from the Drug Store, (b) no hazardous material is or has been stored or otherwise located on, in or under the Drug Store, and (c) there are no underground storage tanks on the Drug Store premises. There are no pending or to the 4 ______________ _____________ SELLER INITIAL BUYER INITIAL best of Seller's knowledge threatened requests for information, action or proceedings from or by any governmental agency or any other person or entity regarding the condition or use of the Drug Store or the release, generation, discharge, manufacture, treatment, transportation or discharge of hazardous material on, in, under or from the Drug Store. 3.1.7 CONTRACTS. Seller is not a party to any contract, understanding or commitment Whether in the ordinary course of business or not, relating to Seller's operation of the Drug Store which extends beyond the Closing Date except those listed on Exhibit "F", which Buyer agrees to assume. 3.1.8 EMPLOYMENT CONTRACTS. Seller is not a party to any oral or written contract of employment between Seller and any officer or other employee, and the employment of each of Seller's officers and all the Drug Store's employees is terminable at will without any penalty or severance obligation of any kind. 3.1.9 LITIGATION. Seller is not a party to and has no knowledge of any suit, action, proceeding, investigation, claim, complaint or accusation pending or threatened against or affecting Seller or the Drug Store Assets, in any court or before any arbitration panel of any kind or before or by any Federal, state, local, foreign or other government agency, department, commission, board, bureau, instrumentality or body, and to the best knowledge and belief of Seller, there is no basis for any such suit, action, litigation, proceeding, investigation, claim, complaint or accusation. There is no outstanding order, writ, injunction, decree, judgment or award by any court, arbitration panel or government body against or affecting Seller, Drug Store, the Drug Store Assets or the Retail Location. 3.1.10 EMPLOYEE BENEFITS. All sums due for employee compensation and benefits and all vacation time owing to any employees of Seller have been duly and adequately accrued and reflected in the accounting records of Seller. Seller shall be responsible for all employee benefits, including but not limited to payment for accrued vacation, to the Closing Date. To the Seller's best knowledge, all employees of Seller are either United States citizens or resident aliens specifically authorized to engage in employment in the United States in accordance with all applicable laws. 3.1.11 TAXES. (a) Seller has filed all required Federal, state, local, foreign and other tax returns, notices and reports (including, but not limited to, income, property, sales, use, franchise, capital, stock, excise, added value, employee's income withholding, social security and unemployment tax returns) heretofore due; and to Seller's best knowledge all such returns, notices, and reports are correct, accurate, and complete. (b) Seller has made all deposits required to be made in connection with any tax including but not limited to, estimated income, franchise, sales, use, and employee withholding taxes. 3.1.12 INVESTMENT PURPOSE. Seller is acquiring the HORIZON Common Stock for investment, and not with a view to the sale or distribution thereof. Seller understands and acknowledges that the transfer of the HORIZON Stock issuable hereunder will be restricted and that Seller may not sell or otherwise dispose of such shares unless and until a registration statement under the Security Act of 1933, as amended (the "Securities Act"), is in effect with respect thereto and Seller has fully complied with the Securities Act and all applicable regulations thereunder, or Seller has received an 5 ______________ _____________ SELLER INITIAL BUYER INITIAL opinion from Buyer's counsel that the contemplated sale or other disposition of the HORIZON Common Stock will not require registration under the Security Act. 3.1.13 INSURANCE. All inventories, buildings and fixed assets owned or leased by Seller are and will be adequately insured against fire to the Closing Date, valid policies therefor are and will be outstanding and in force, and the premiums will be paid before the Closing Date. 3.1.14 NO CHANGES. Until the Closing Date, Seller will not, except with Buyer's prior written consent: (i) conduct its business except in the regular and ordinary course; (ii) increase the amount of compensation currently being paid to employee or agent, or make any bonus arrangement with any employee or agent; (iii) enter into any transaction other than in the ordinary course of business; or (iv) pay out of assets being sold to Buyer any debt, obligation or liability which Buyer has not agreed to assume under the terms of this Agreement. 3.2 Buyer does hereby represent and warrant to Seller as follows: 3.2.1 ORGANIZATION. Buyer is a corporation duly organized and existing in good standing under the laws of Delaware, and is entitled to own or lease properties and carry on its business as and in the places where such properties are now owned, leased or operated and such business is now conducted. 3.2.2 COMMON STOCK. Buyer has authorized 14,000,000 shares of HORIZON Common Stock of which approximately 5,400,000 shares are currently issued and outstanding, and 1,000,000 share of preferred stock, par value $0.01 per share, none of which are currently issued and outstanding. 4. CONDITIONS TO CLOSING. 4.1. BUYER'S CONDITIONS TO CLOSING. All obligations of Buyer under this Agreement are subject to the fulfillment, prior to or at Closing, of each of the following conditions (unless waived in writing by Buyer). 4.1.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Seller contained in this Agreement shall be true and complete at the Closing Date as if they were made at such time. 4.1.2 COMPLIANCE. Seller shall have performed and complied with all terms and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date. 4.1.3 CONSENTS. All necessary consents to the transfer of the Drug Store Assets have been obtained from vendors and other third party, if any. 4.1.4 NO CASUALTY. The Drug Store's business and property shall not have been adversely affected in any material way as a result of any strike, lock-out, accident or other casualty or act of God or the public enemy, or any judicial, administrative or governmental proceeding. 4.1.5 LEASE OF RETAIL LOCATION. Buyer shall have executed a lease assignment covering the Retail Location. 6 ______________ _____________ SELLER INITIAL BUYER INITIAL 4.1.6 LICENSE TO OPERATE RETAIL PHARMACY. Buyer shall have obtained a valid license to operate a retail pharmacy under the HORIZON Pharmacies, Inc. name in the state of TEXAS. 4.2 SELLER'S CONDITIONS TO CLOSING. All obligations of Seller under this Agreement are subject to the fulfillment, prior to or at Closing, of each of the following conditions (unless waived in writing by Seller). 4.2.1 REPRESENTATIONS. The representations and warranties of Buyer contained in this Agreement shall be true and complete at the Closing Date as if they were made at such time. 4.2.2 COMPLIANCE. Buyer shall have performed and complied with all terms and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date. 4.2.3 INSURANCE. Buyer shall have documentation of insurance coverage. 5. LIABILITIES NOT ASSUMED BY BUYER. The parties expressly agree and acknowledge that Buyer shall not, by virtue of this Agreement, the consummation of the transactions contemplated herein or otherwise, assume any liabilities or obligations of Seller or any liabilities or obligations constituting a charge, lien, encumbrance or security interest upon the Drug Store Assets, regardless of whether such liabilities or obligations are absolute or contingent, liquidated or unliquidated or otherwise; except as provided in Section 3.1.7. 6. INDEMNIFICATION. 6.1 SELLER'S INDEMNIFICATION OF BUYER. Seller and David Devido shall indemnify and hold harmless Buyer against and in respect of any and all liabilities concerning or otherwise connected to the conduct or operation of the Drug Store as of or prior to the Closing Date, and with the exception of liabilities expressly assumed by Buyer, all liabilities and obligations of the Seller, of every kind and description, regardless of whether such liabilities or obligations are absolute or contingent, liquidated or unliquidated, accrued or otherwise, and regardless of how and when the same may have arisen, which are asserted against Buyer as a result of this Agreement or the consummation of the transactions contemplated herein. Seller and David Devido also indemnify, defend, and hold harmless Buyer against and in respect of any cost, damage, expense, liability or loss incurred or suffered by Buyer resulting from or arising out of the breach, inaccuracy, misrepresentation or untruth of any representation or warranty which survives the Closing, or the nonfulfillment of the post-closing agreements of Seller, including without limitation the agreements of Seller set forth in Section 8.5 regarding access to records in order for Buyer to conduct an audit of the last two (2) fiscal years and unaudited financial data up to the Closing Date. The foregoing indemnifications shall be joint and several, and indemnified costs and expenses shall include reasonable attorney's fees and related expenses. The right of indemnification shall be in addition to and shall not operate as a limitation on any other right or remedy pursuant to this agreement or any document or instrument executed in connection with the consummation of the sale and purchase of the Drug Store. The provisions of this paragraph shall survive the closing of this transaction for a period of one (1) year. 7 ______________ _____________ SELLER INITIAL BUYER INITIAL 6.2 BUYER'S INDEMNIFICATION OF SELLER. Buyer shall indemnify and hold harmless Seller against and in respect of any and all liabilities concerning or otherwise connected to the conduct or operation of the Drug Store following the Closing Date, or arising out of any misrepresentation or breach of any of the provisions contained herein. The provisions of this paragraph shall survive the closing of this transaction for a period of one (1) year; except that Buyer shall indemnify and hold harmless Seller and David DeVido, individually, ("DeVido") against and in respect to all suits, actions, losses, damages, claims, or liability, including all expenses of litigation, court costs, and attorney's fees arising out of Buyer's failure to perform all of its obligations as Assignee under that certain Lease Agreement (Sublease Agreement) between Carlen Corporation, a Texas corporation ("Tenant"), Rice Food Markets ("Landlord"), and David DeVido ("Guarantor") dated September 12, 1989, as amended, for the lease premises located at 6435 San Felipe, Houston, Texas 77057. This indemnity shall remain in full force and effect until termination of the lease on February 28, 2006. 7. CLOSING. 7.1 CLOSING DATE. The closing shall take place at the Retail Location on or before July 25, 1998 (the "Closing Date") but in no event later than August 8, 1998 unless otherwise agreed by the parties in writing. 7.2 SELLER'S OBLIGATIONS AT CLOSING. Seller shall deliver to Buyer at closing of this Agreement a Bill of Sale effective to vest in Buyer good and marketable title to the Drug Store Assets, free and clear of all mortgages, security interest, liens, encumbrances, pledges and hypothecation of every nature and description and all other instruments and documents that are necessary or appropriate to the sale and delivery of the Drug Store Assets. 7.3 BUYER'S OBLIGATIONS AT CLOSING. Buyer shall deliver to Seller at closing: (i) a check for the cash portion of the purchase price provided for in Section 2.3 made payable to Seller and Seller's secured lender; (ii) the Note and security Agreement provided for in Section 2.3 with David DeVido named as the secured party; and (iii) evidence that the shares of Common Stock provided for in Section 2.3 shall be promptly delivered. 8. MISCELLANEOUS. 8.1 SURVIVAL OF REPRESENTATION, WARRANTIES AND INDEMNIFICATIONS. All of the representations, warranties and indemnifications of the parties set forth in this Agreement shall survive the Closing hereof. The provisions of this paragraph shall survive the closing of this transaction for a period of one (1) year. 8.2 RISK OF LOSS. The risk of loss of damages of Drug Store Assets shall be upon Seller until the closing hereof. 8.3 COVENANT NOT TO COMPETE. Except as otherwise provided herein, David Devido shall not, for a period of six (6) years after the Closing Date, directly or indirectly own an equity interest in, operate, manage or assist any person or entity other than Buyer in operating or managing, any business which includes a retail pharmacy, nursing home or home health care company, or which offers for sale or lease durable medical equipment within a five (5) miles radius of store location, excluding Shan-La, Inc. d/b/a Park Plaza Pharmacy, located at 1213 Hermann Drive, Suite 140, Houston, Texas 77004. The parties expressly agree that David Devido may serve no more 8 ______________ _____________ SELLER INITIAL BUYER INITIAL than one (1) day per week as a relief pharmacist at retail pharmacies not owned or operated by Buyer. The parties acknowledge that the territorial and time limitations contained in the paragraph are reasonable and properly required for the adequate protection of the business to be conducted by Buyer with the assets and properties to be transferred hereunder and can not be changed except by written permission of Buyer. 8.4 RIGHT TO ENJOIN BREACH. The parties agree that in the event of a breach by Seller of any provision of this paragraph, monetary damages alone would be inadequate and Buyer shall, in addition to all other legal remedies, be entitled to obtain an order enjoining Seller from violating the covenants set forth herein. 8.5 ACCESS TO RECORDS. Seller shall give Buyer, its counsel, accountants and representatives, reasonable access during normal business hours to all of Seller's books, contracts, commitments and records and furnish Buyer with all information which Buyer reasonably may request to conduct a financial audit of the last two (2) fiscal years and unaudited financial data up to Closing Date at Buyer's expense. The Buyer's audit will be conducted after the Closing Date. Seller and David Devido agree and certify that they are aware that the post-Closing audit by Buyer is required in order to satisfy Buyer's regulatory reporting and disclosure requirements and for Buyer's general business purposes, that their prompt and complete cooperation and compliance with the provisions of this Section are required in order for such audit to be completed on a thorough and timely basis and that their failure to cooperate and comply could subject them to a claim to be indemnified, defended and held harmless or for other remedies available under this agreement or pursuant to applicable law or regulation. 8.6 SELLER'S COLLECTION OF ACCOUNTS RECEIVABLE. Buyer acknowledges and agrees that Seller will need assistance from Drug Store employees to properly direct collections on account and to properly allocate between Buyer and Seller based upon the invoice date referenced by the payment. 8.6 GOVERNING LAW. This agreement shall be governed and construed in accordance with the laws of the state of Texas. 8.7 ENTIRE AGREEMENT MODIFICATION. This agreement contains the entire agreement between the parties, and no representations, warranties or promises, unless contained herein, shall be binding upon the parties hereto, their successors and assigns. This Agreement may not be amended or terminated except by an instrument executed by both parties. 8.8 ASSIGNMENT. This agreement may not be assigned by Buyer without written consent of Seller, which consent will not be unreasonably withheld. 8.9 TIME OF THE ESSENCE. Time is of the essence of this Agreement. 9 ______________ _____________ SELLER INITIAL BUYER INITIAL IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written. BUYER: HORIZON Pharmacies, Inc. Witness: - ----------------------- --------------------------- Rick McCord, President SELLER: Carlen Corporation Witness: - ----------------------- --------------------------- David DeVido, President 10 ______________ _____________ SELLER INITIAL BUYER INITIAL EX-2.3 4 EXHIBIT 2.3 PURCHASE AGREEMENT AGREEMENT made the 26th day of July, 1998 between Stirniminn, Inc., a Texas corporation ("Seller"), and HORIZON Pharmacies, Inc., a Delaware Corporation ("Buyer"). W I T N E S S E T H WHEREAS, Seller operates a retail pharmacy doing business as Kirkwood Pharmacy, (the Drug Store") located at 11637 Katy Freeway, Houston, Texas 77079 (the "Retail Location"). WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase certain assets utilized in connection with and as part of Seller's operation of the Drug Store upon the terms and conditions stated herein: NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. SALE OF ASSETS. 1.1 ASSETS TO BE PURCHASED Seller hereby agrees to convey, transfer, assign, and deliver to Buyer on a going concern basis, and Buyer hereby agrees to purchase from Seller all of Seller's assets located at or used in connection with Seller's operation of the Drug Store including but not limited to: A. MARKETABLE INVENTORY. All marketable pharmaceutical and retail inventory of Seller held for retail sale by the Drug Store, a summary of which is attached as Exhibit "C". B. PRESCRIPTION FILES AND PATIENT PROFILES. All prescription files, patient profiles and customer list and telephone numbers. C. FURNITURE, FIXTURES AND EQUIPMENT. Supplies and all furniture, fixtures, equipment described in Exhibit "A" attached hereto and made a part hereof, including but not limited to computers, peripherals, cash registers, refrigerators, typewriters, microfiche, fax machines, copiers, sound system, alarm system, telephone equipment, shelving, counters, bottles, vials, ointment jars and other usable supplies. D. COPYRIGHTS, TRADE NAMES, AND TRADEMARKS. All copyrights, trade names and trademarks associated with the Pharmacy Location (s) including, but not limited to Kirkwood Pharmacy and all variations thereof. 1.2 ASSETS NOT PURCHASED BY BUYER Unless otherwise agreed by the parties in writing, Buyer shall not purchase the following: (I) consigned merchandise; (ii) merchandise held in layaway; (iii) merchandise which is damaged; (iv) merchandise which is unsalable because its expiration date has expired; or (v) prescription merchandise expiring within 30 days or prescription merchandise or over-the-counter drugs which are (a) in a partially filled container with a date which will expire within 30 days of the closing date; or (b) in a full, sealed container with a date which is expired; (vi) all accounts receivable for services rendered on or before closing, including, but not limited to, third party insurance receivables, individual charge account receivables, and Worker's Compensation receivables; and Seller's full interest in a 1 ______________ _____________ Seller Initial Buyer Initial class action lawsuit brought against certain pharmaceutical companies based on claims of anti-trust and other legal violations, which lawsuit is currently pending. 1.3 TELEPHONE NUMBERS. Seller agrees to use all reasonable efforts and take all action necessary to assure that all telephone numbers used at the Drug Store shall be transferred without interruption to Buyer. 1.4 POST OFFICE AND LOTTERY. Buyer acknowledges that a portion of the premises is being used as Post Office and that the Seller sells Lottery tickets. Additionally, Buyer acknowledges that Buyer is responsible for making the necessary arrangements to continue both services. 2. PURCHASE PRICE. 2.1 COMPUTATION. The purchase price to be paid by the Buyer for the Drug Stores Assets shall be computed as follows: (i) $100,000 for prescription files, patient profiles, furniture, fixtures, equipment, and goodwill; plus (ii) the discounted fair market value of all inventory constituting a part of the Drug Store Assets determined in accordance with Section 2.6, below; 2.2 ALLOCATION. The total purchase price described in Section 2.1, above, shall be allocated as set forth in Exhibit "B" attached hereto and made a part hereof. 2.3 PAYMENT OF THE PURCHASE PRICE. Buyer shall cause the purchase price to be paid to Seller as follows: (a) $150,000 on the Closing Date by Company, certified or cashier's check (less the Earnest Money Deposit as such term is defined in Section 2.4, below); (b) Shares of Buyer's common stock, par value $ .01 per share (the "HORIZON Common Stock"), equivalent to $ 257,259.00 based upon the average closing price for the HORIZON common stock as reported in the Wall Street Journal for the ten (10) business days immediately preceding the Closing Date, as such term is defined in Section 7.1, below. The dollar amount will be equal to the actual valuation of the store inventory, plus or minus any adjustments pursuant with 2.3(c) and 2.3(d). (c) Buyer shall deduct from the purchase price payable at Closing an amount equal to the sum of (i) Seller's pro rata share of personal property taxes as described in Section 2.5.2, below, and (ii) one half of the fee charged by the third party inventory service. (d) Additionally, Buyer and Seller shall prorate rent and utilities for the month of July upon presentation of invoices by Buyer (which may occur after closing) and Buyer shall purchase petty cash and register cash from Seller at closing and reimburse Seller for any security deposit on deposit with the landlord of the retail location. (e) Adjustments to the total purchase price, up or down, based on the actual inventory shall be made in the number of shares of Buyer's common stock given as consideration. 2.4 EARNEST MONEY DEPOSIT. Buyer herewith deposits with ___________ _________ (the "Escrow Agent"), the sum of $5,000 (the "Earnest Money Deposit")) , which sum shall be applied to the cash portion of the purchase price at Closing. In the event Seller fails to perform each and every covenant and condition required hereunder, Buyer may terminate this Agreement by giving Seller written notice and Seller shall return the Earnest Money to Buyer within three (3) days of Seller's receipt of such notice. In the event Buyer fails to perform each and every obligation hereunder, Seller may terminate this Agreement and retain the 2 ______________ _____________ Seller Initial Buyer Initial Earnest Money as liquidated damages. The remedies provided in this Section shall be the exclusive remedies for a breach of this Section. 2.5 TAXES 2.5.1 SALES, USE, AND TRANSFER TAXES Buyer shall pay any and all sales, use, and transfer taxes arising out of the sale of the Drug Store Assets pursuant to this Agreement. 2.5.2 PERSONAL PROPERTY TAXES. Seller shall pay all personal property taxes attributable to the Drug Store Assets for the period up to and including the Closing Date, and Buyer shall pay all personal property taxes attributable to the Drug Store Assets for the period following the Closing Date. The parties shall, using last year's tax returns, estimate as of the Closing Date the personal property taxes anticipated to be owed on the Drug Store Assets for the current calendar year, and Seller's pro rata portion of such estimated taxes shall be withheld by Buyer from the purchase price described in Section 2.3, above. 2.6 INVENTORY EVALUATION A physical inventory of the Drug Store Assets shall be performed on the Closing Date by an independent third party inventory service. Each party shall pay one-half of the fee charged by the service company, with Seller's pro rata share of such costs to be deducted from the purchase price payable by Buyer at Closing. For purposes of calculating that portion of the purchase price attributed to inventory under Section 2, above, the marketable inventory shall be valued as follows, except as otherwise provided herein: Marketable Inventory Method of Valuation -------------------- ------------------- Prescription inventory Acquisition cost or AWP less 16% except for special deal prescription items or generic items which shall be valued at acquisition cost Non-Prescription inventory Acquisition cost
In the event Seller is unable to establish the acquisition cost of any non-prescription inventory, the following formula shall be applied in valuing such inventory. Category of Merchandise Method of Valuation ----------------------- ------------------- HBA Retail price less 25% OTC Retail price less 25% Gifts Retail price less 50% Cards Retail price less 50% Cosmetics Retail price less 33 1/3% Watches/Cameras Retail price less 33 1/3% Fragrances Retail price less 25% Candy (box) Retail price less 40% Candy (loose) Retail price less 30% Jewelry Retail price less 50% Miscellaneous Retail price less 50% Seasonal Merchandise Retail price less 50%
3. REPRESENTATIONS AND WARRANTIES. 3 ______________ _____________ Seller Initial Buyer Initial 3.1. The Seller does hereby represent and warrant to Buyer as follows: 3.1.1 ORGANIZATION. Seller is a corporation duly organized and existing in good standing under the laws of its state of incorporation and is entitled to own and lease its properties and to carry on its business as and in the places where such properties are now owned, leased or operated and such business is conducted. 3.1.2 AUTHORITY. The execution, delivery and performance of this agreement by Seller has been duly authorized by all necessary corporate action and constitutes a legal, valid, and binding obligation on Seller enforceable in accordance with its terms. 3.1.3 TITLE TO PROPERTIES. The Seller has good and marketable title to all of the Drug Store assets, free and clear of all mortgages, liens, encumbrances, pledges, or security interests of any nature whatsoever, except for secured debts, if any, listed on Exhibit "D" attached hereto which shall be satisfied and released at or prior to closing. 3.1.4 BOOKS AND RECORDS. Seller's books and records which have been provided to Buyer for inspection are true, correct and complete, and contain no material omission with respect to Seller's business, operation or status. 3.1.5 STATEMENTS NOT MISLEADING. No representation, warranty or other information disclosed to Buyer in connection with this Agreement omits or will omit to state the material facts necessary to make such representation, warranty or information not misleading. 3.1.6 COMPLIANCE WITH APPLICABLE LAWS. Seller has received no notice of violation of any applicable law, regulation or requirement relating to the operation of the Drug Store, the Drug Store Assets or the Retail Location, and Seller has no knowledge of or reason to believe any such violation exists. Seller is in full compliance with all wages and hour laws, and to the best of its knowledge is not engaged in any unfair labor practice or discriminatory employment practice and no complaint of any such practice against Seller is filed or threatened to be filed with or by the National Labor Relation Board, the Equal Employment Opportunity Commission or any other administrative agency, Federal or state, that regulates labor or employment practices, nor is any grievances filed or threatened to be filed against Seller by any employee pursuant to any collective bargaining or other employment agreement to which Seller is a party. To the Seller's best knowledge it is in compliance with all applicable Federal and state laws and regulations regarding occupational safety and health standards and has received no material complaints from any Federal or state agency or regulatory body alleging violations of any such laws and regulations. The Drug Store and the use and operation thereof are currently in compliance with all applicable laws, ordinances, rules and regulations relating to public health and safety and protection of the environment. Seller has not released, generated, discharged, manufactured, treated, transported or disposed of hazardous material on, in, under or from the Drug Store or placed or stored any hazardous material on the property. To the best of Seller's knowledge, (a) no release, generation, discharge, manufacture, treatment, transportation or disposal of hazardous material has occurred on, in, under or from the Drug Store, (b) no hazardous material is or has been stored or otherwise located on, in or under the Drug Store, and (c) there are no underground storage tanks on the Drug Store premises. There are no pending or to the best of Seller's knowledge threatened requests for information, action or proceedings from or by any governmental agency or any other person or entity regarding the condition or use of the 4 ______________ _____________ Seller Initial Buyer Initial Drug Store or the release, generation, discharge, manufacture, treatment, transportation or discharge of hazardous material on, in, under or from the Drug Store. 3.1.7 CONTRACTS. Seller is not a party to any contract, understanding or commitment whether in the ordinary course of business or not, relating to Seller's operation of the Drug Store which extends beyond the Closing Date except those listed on Exhibit "F", which Buyer agrees to assume. 3.1.8 EMPLOYMENT CONTRACTS. Seller is not a party to any oral or written contract of employment between Seller and any officer or other employee, and the employment of each of Seller's officers and all the Drug Store's employees is terminable at will without any penalty or severance obligation of any kind. 3.1.9 LITIGATION. Seller is not a party to and has no knowledge of any suit, action, proceeding, investigation, claim, complaint or accusation pending or threatened against or affecting Seller or the Drug Store Assets, in any court or before any arbitration panel of any kind or before or by any Federal, state, local, foreign or other government agency, department, commission, board, bureau, instrumentality or body, and to the best knowledge and belief of Seller, there is no basis for any such suit, action, litigation, proceeding, investigation, claim, complaint or accusation. There is no outstanding order, writ, injunction, decree, judgment or award by any court, arbitration panel or government body against or affecting Seller, Drug Store, the Drug Store Assets or the Retail Location. 3.1.10 EMPLOYEE BENEFITS. All sums due for employee compensation and benefits and all vacation time owing to any employees of Seller have been duly and adequately accrued and reflected in the accounting records of Seller. Seller shall be responsible for all employee benefits, including but not limited to payment for accrued vacation, to the Closing Date. To the Seller's best knowledge, all employees of Seller are either United States citizens or resident aliens specifically authorized to engage in employment in the United States in accordance with all applicable laws. 3.1.11 TAXES. (a) Seller has filed all required Federal, state, local, foreign and other tax returns, notices and reports (including, but not limited to, income, property, sales, use, franchise, capital, stock, excise, added value, employee's income withholding, social security and unemployment tax returns) heretofore due; and to Seller's best knowledge all such returns, notices, and reports are correct, accurate, and complete. (b) Seller has made all deposits required to be made in connection with any tax including but not limited to, estimated income, franchise, sales, use, and employee withholding taxes. 3.1.12 INVESTMENT PURPOSE. Seller is acquiring the HORIZON Common Stock for investment, and not with a view to the sale or distribution thereof. Seller understands and acknowledges that the transfer of the HORIZON Stock issuable hereunder will be restricted and that Seller may not sell or otherwise dispose of such shares unless and until a registration statement under the Security Act of 1933, as amended (the "Securities Act"), is in effect with respect thereto and Seller has fully complied with the Securities Act and all applicable regulations thereunder, or Seller has received an 5 ______________ _____________ Seller Initial Buyer Initial opinion from Buyer's counsel that the contemplated sale or other disposition of the HORIZON Common Stock will not require registration under the Security Act. 3.1.13 INSURANCE. All inventories, buildings and fixed assets owned or leased by Seller are and will be adequately insured against fire to the Closing Date, valid policies therefor are and will be outstanding and in force, and the premiums will be paid before the Closing Date. 3.1.14 NO CHANGES. Until the Closing Date, Seller will not, except with Buyer's prior written consent: (i) conduct its business except in the regular and ordinary course; (ii) increase the amount of compensation currently being paid to employee or agent, or make any bonus arrangement with any employee or agent; (iii) enter into any transaction other than in the ordinary course of business; or (iv) pay out of assets being sold to Buyer any debt, obligation or liability which Buyer has not agreed to assume under the terms of this Agreement. 3.2 Buyer does hereby represent and warrant to Seller as follows: 3.2.1 ORGANIZATION. Buyer is a corporation duly organized and existing in good standing under the laws of Delaware, and is entitled to own or lease properties and carry on its business as and in the places where such properties are now owned, leased or operated and such business is now conducted. 3.2.2 COMMON STOCK. Buyer has authorized 14,000,000 shares of HORIZON Common Stock of which approximately 5,400,000 shares are currently issued and outstanding, and 1,000,000 share of preferred stock, par value $0.01 per share, none of which are currently issued and outstanding. 4. CONDITIONS TO CLOSING. 4.1. BUYER'S CONDITIONS TO CLOSING. All obligations of Buyer under this Agreement are subject to the fulfillment, prior to or at Closing, of each of the following conditions (unless waived in writing by Buyer). 4.1.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Seller contained in this Agreement shall be true and complete at the Closing Date as if they were made at such time. 4.1.2 COMPLIANCE. Seller shall have performed and complied with all terms and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date. 4.1.3 CONSENTS. All necessary consents to the transfer of the Drug Store Assets have been obtained from vendors and other third party, if any. 4.1.4 NO CASUALTY. The Drug Store's business and property shall not have been adversely affected in any material way as a result of any strike, lock-out, accident or other casualty or act of God or the public enemy, or any judicial, administrative or governmental proceeding. 6 ______________ _____________ Seller Initial Buyer Initial 4.1.5 LEASE OF RETAIL LOCATION. Buyer shall have executed a lease covering the Retail Location. 4.1.6 LICENSE TO OPERATE RETAIL PHARMACY. Buyer shall have obtained a valid license to operate a retail pharmacy under the HORIZON Pharmacies, Inc. name in the state of TEXAS. 4.2 SELLER'S CONDITIONS TO CLOSING. All obligations of Seller under this Agreement are subject to the fulfillment, prior to or at Closing, of each of the following conditions (unless waived in writing by Seller). 4.2.1 REPRESENTATIONS. The representations and warranties of Buyer contained in this Agreement shall be true and complete at the Closing Date as if they were made at such time. 4.2.2 COMPLIANCE. Buyer shall have performed and complied with all terms and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date. 4.2.3 INSURANCE. Buyer shall have documentation of insurance coverage. 5. LIABILITIES NOT ASSUMED BY BUYER. The parties expressly agree and acknowledge that Buyer shall not, by virtue of this Agreement, the consummation of the transactions contemplated herein or otherwise, assume any liabilities or obligations of Seller or any liabilities or obligations constituting a charge, lien, encumbrance or security interest upon the Drug Store Assets, regardless of whether such liabilities or obligations are absolute or contingent, liquidated or unliquidated or otherwise; except as provided in Section 3.1.7. 6. INDEMNIFICATION. 6.1 SELLER'S INDEMNIFICATION OF BUYER. Seller and DAVID DEVIDO shall indemnify and hold harmless Buyer against and in respect of any and all liabilities concerning or otherwise connected to the conduct or operation of the Drug Store as of or prior to the Closing Date, and with the exception of liabilities expressly assumed by Buyer, all liabilities and obligations of the Seller, of every kind and description, regardless of whether such liabilities or obligations are absolute or contingent, liquidated or unliquidated, accrued or otherwise, and regardless of how and when the same may have arisen, which are asserted against Buyer as a result of this Agreement or the consummation of the transactions contemplated herein. Seller and David DeVido also indemnify, defend, and hold harmless Buyer against and in respect of any cost, damage, expense, liability or loss incurred or suffered by Buyer resulting from or arising out of the breach, inaccuracy, misrepresentation or untruth of any representation or warranty which survives the Closing, or the nonfulfillment of the post-closing agreements of Seller, including without limitation the agreements of Seller set forth in Section 8.5 regarding access to records in order for Buyer to conduct an audit of the last two (2) fiscal years and unaudited financial data up to the Closing Date. The foregoing indemnifications shall be joint and several, and indemnified costs and expenses shall include reasonable attorney's fees and related expenses. The right of indemnification shall be in addition to and shall not operate as a limitation on any other right or remedy pursuant to this agreement or any document or instrument executed in connection with the consummation of the sale and 7 ______________ _____________ Seller Initial Buyer Initial purchase of the Drug Store. The provisions of this paragraph shall survive the closing of this transaction for a period of one (1) year. 6.2 BUYER'S INDEMNIFICATION OF SELLER. Buyer shall indemnify and hold harmless Seller against and in respect of any and all liabilities concerning or otherwise connected to the conduct or operation of the Drug Store following the Closing Date, or arising out of any misrepresentation or breach of any of the provisions contained herein. The provisions of this paragraph shall survive the closing of this transaction for a period of one (1) year. 7. CLOSING. 7.1 CLOSING DATE. The closing shall take place at the Retail Location on or before JULY 26, 1998 (the "Closing Date") but in no event later than AUGUST 8, 1998 unless otherwise agreed by the parties in writing. 7.2 SELLER'S OBLIGATIONS AT CLOSING. Seller shall deliver to Buyer at closing of this Agreement a Bill of Sale effective to vest in Buyer good and marketable title to the Drug Store Assets, free and clear of all mortgages, security interest, liens, encumbrances, pledges and hypothecation of every nature and description and all other instruments and documents that are necessary or appropriate to the sale and delivery of the Drug Store Assets. 7.3 BUYER'S OBLIGATIONS AT CLOSING. Buyer shall deliver to Seller at closing: (i) a check for the cash portion of the purchase price provided for in Section 2.3 made payable to Seller and Seller's secured lender; and (ii) evidence that the shares of Common Stock provided for in Section 2.3.(b) shall be promptly delivered. 8. MISCELLANEOUS. 8.1 SURVIVAL OF REPRESENTATION, WARRANTIES AND INDEMNIFICATIONS. All of the representations, warranties and indemnifications of the parties set forth in this Agreement shall survive the Closing hereof. The provisions of this paragraph shall survive the closing of this transaction for a period of one (1) year. 8.2 RISK OF LOSS. The risk of loss of damages of Drug Store Assets shall be upon Seller until the closing hereof. 8.3 COVENANT NOT TO COMPETE. Except as otherwise provided herein, David DeVido shall not, for a period of six (6) years after the Closing Date, directly or indirectly own an equity interest in, operate, manage or assist any person or entity other than Buyer in operating or managing, any business which includes a retail pharmacy, nursing home or home health care company, or which offers for sale or lease durable medical equipment within a five (5) miles radius of store location, excluding Shan-La, inc. d/b/a Park Plaza Pharmacy, located at 1213 Hermann Drive, Suite 140, Houston, Texas 77004. The parties expressly agree that David DeVido may serve no more than one (1) day per week as a relief pharmacist at retail pharmacies not owned or 8 ______________ _____________ Seller Initial Buyer Initial operated by Buyer. The parties acknowledge that the territorial and time limitations contained in the paragraph are reasonable and properly required for the adequate protection of the business to be conducted by Buyer with the assets and properties to be transferred hereunder and can not be changed except by written permission of Buyer. 8.4 RIGHT TO ENJOIN BREACH. The parties agree that in the event of a breach by Seller of any provision of this paragraph, monetary damages alone would be inadequate and Buyer shall, in addition to all other legal remedies, be entitled to obtain an order enjoining Seller from violating the covenants set forth herein. 8.5 ACCESS TO RECORDS. Seller shall give Buyer, its counsel, accountants and representatives, reasonable access during normal business hours to all of Seller's books, contracts, commitments and records and furnish Buyer with all information which Buyer reasonably may request to conduct a financial audit of the last two (2) fiscal years and unaudited financial data up to Closing Date at Buyer's expense. The Buyer's audit will be conducted after the Closing Date. Seller and David DeVido agree and certify that they are aware that the post-Closing audit by Buyer is required in order to satisfy Buyer's regulatory reporting and disclosure requirements and for Buyer's general business purposes, that their prompt and complete cooperation and compliance with the provisions of this Section are required in order for such audit to be completed on a thorough and timely basis and that their failure to cooperate and comply could subject them to a claim to be indemnified, defended and held harmless or for other remedies available under this agreement or pursuant to applicable law or regulation. 8.6 SELLER'S COLLECTION OF ACCOUNTS RECEIVABLE. Buyer acknowledges and agrees that Seller will need assistance from Drug Store employees to properly direct collections on account and to properly allocate between Buyer and Seller based upon the invoice date referenced by the payment. 8.7 GOVERNING LAW. This agreement shall be governed and construed in accordance with the laws of the state of TEXAS. 8.8 ENTIRE AGREEMENT MODIFICATION. This agreement contains the entire agreement between the parties, and no representations, warranties or promises, unless contained herein, shall be binding upon the parties hereto, their successors and assigns. This Agreement may not be amended or terminated except by an instrument executed by both parties. 8.9 ASSIGNMENT. This agreement may not be assigned by Buyer without written consent of Seller, which consent will not be unreasonably withheld. 8.10 TIME OF THE ESSENCE. Time is of the essence of this Agreement. IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written. BUYER: HORIZON Pharmacies, Inc. Witness: ---------------------- --------------------------- 9 ______________ _____________ Seller Initial Buyer Initial Rick McCord, President SELLER: Stirniminn, Inc. Witness: ---------------------- --------------------------- David DeVido, President 10 ______________ _____________ Seller Initial Buyer Initial EX-2.4 5 EXHIBIT 2.4 EXHIBIT 2.4 AMENDMENT NO. 1 TO THE PURCHASE AGREEMENT DATED JULY 24, 1998 THIS AMENDMENT NO. 1 (the "Amendment"), dated effective the 24th day of July, 1998, to the Purchase Agreement dated July 24, 1998, (the "Agreement"), by and among Martin Drug Corporation d/b/a Interurban Pharmacy, a Texas corporation ("Seller"), and HORIZON Pharmacies, Inc. a Texas corporation ("Buyer"). Unless otherwise defined herein, capitalized terms used but not defined herein shall have the meaning set forth in the Agreement and the Agreement shall be amended to incorporate any additional definitions provided for in this Amendment. WHEREAS, pursuant to the Agreement, the Buyer previously agreed to purchase the Property from Seller; AND WHEREAS, the parties desire to amend the consideration payable by the Buyer under the Agreement; NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter set forth, the parties hereby agree as follows: 1. AMENDMENT TO SECTION 2.3. Section 2.3 of the Agreement is hereby amended to read in its entirety as follows: 2.3 PAYMENT OF THE PURCHASE PRICE. Buyer shall cause the purchase price to be paid to Seller as follows: (a) $500,000.00 cash payable by the Buyer at Closing by certified or cashier's check (less the Earnest Money Deposit as such term is defined in Section 2.4, below); (b) Shares of Buyer's common stock, par value $.01 per share (the "HORIZON Common Stock"), equivalent to $162,203.00 based upon the average closing price of the HORIZON Common Stock as reported in the Wall Street Journal for the ten (10) business days immediately preceding the Closing Date, as such term is defined in Section 7.1 below. The dollar amount will equal the actual evaluation of the store inventory plus or minus any adjustments per Sections 2.3(c) and 2.3(d) below; (c) Buyer shall deduct from the purchase price payable at Closing an amount equal to the sum of (i) Seller's pro rata share of personal property taxes as described in Section 2.5.2, below, and (ii) one half of the fee charged by the third party inventory service; (d) Additionally, Buyer and Seller shall prorate rent and utilities for the month of July upon presentation of invoices by Buyer (which may occur after the closing) and Buyer shall purchase petty cash and register cash from Seller at closing and reimburse Seller for any security deposit on deposit with the landlord of the retail location; and (e) Adjustments to the total purchase price, up or down, based on the actual inventory, shall be made in the number of shares of Buyer's common stock given as consideration, summating the Closing. 2. EXTENT OF AMENDMENT. Except as amended hereby, all provisions of the Agreement shall remain in full force and effect. 3. COUNTERPARTS. This Amendment may be executed in a number of identical counterparts, each of which for all purposes is to be deemed an original. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. BUYER: HORIZON PHARMACIES, INC. By: --------------------------------- Ricky D. McCord, President SELLER: MARTIN DRUG CORPORATION d/b/a INTERURBAN PHARMACY ------------------------------------- David DeVido, President 2 EX-2.5 6 EXHIBIT 2.5 EXHIBIT 2.5 AMENDMENT NO. 1 TO THE PURCHASE AGREEMENT DATED JULY 25, 1998 THIS AMENDMENT NO. 1 (the "Amendment"), dated effective the 25th day of July, 1998, to the Purchase Agreement dated July 25, 1998, (the "Agreement"), by and among Carlen Corporation d/b/a Briargrove Pharmacy, a Texas corporation ("Seller"), and HORIZON Pharmacies, Inc., a Texas corporation ("Buyer"). Unless otherwise defined herein, capitalized terms used but not defined herein shall have the meaning set forth in the Agreement and the Agreement shall be amended to incorporate any additional definitions provided for in this Amendment. WHEREAS, pursuant to the Agreement, the Buyer previously agreed to purchase the Property from Seller; AND WHEREAS, the parties desire to amend the consideration payable by the Buyer under the Agreement; NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties hereby agree as follows: 1. AMENDMENT TO SECTION 2.3 Section 2.3 of the Agreement is hereby amended to read in its entirety as follows: 2.3 PAYMENT OF THE PURCHASE PRICE. Buyer shall cause the purchase price to be paid to Seller as follows: (a) $465,000.00 cash payable by the Buyer at Closing by certified or cashier's check (less the Earnest Money Deposit as such term is defined in Section 2.4, below); (b) Shares of Buyer's common stock, par value $.01 per share (the "HORIZON Common Stock"), equivalent to $787,986.00 based upon the average closing price of the HORIZON Common Stock as reported in the Wall Street Journal for the ten (10) business days immediately preceding the Closing Date, as such term is defined in Section 7.1, below. The dollar amount will equal the actual evaluation of the store inventory less $135,000, and plus or minus any adjustments per Sections 2.3(d) and 2.3(e) below; (c) Pursuant to Section 8.3, a negotiable promissory note for $100,000.00, payable to David DeVido in two equal installments due six (6) months and twelve (12) months from the date of purchase in the form attached as Exhibit "C" attached hereto secured by the inventory of the Drug Store in an amount sufficient to cover the outstanding principal plus accrued interest due thereon; (d) Buyer shall deduct from the purchase price payable at Closing an amount equal to the sum of (i) Seller's pro rata share of personal property taxes as described in Section 2.5.2, below, and (ii) one half of the fee charged by the third party inventory service; (e) Additionally, Buyer and Seller shall prorate rent and utilities for the month of July upon presentation of invoices by Buyer (which may occur after the closing) and Buyer shall purchase petty cash and register cash from Seller at closing and reimburse Seller for any security deposit on deposit with the landlord of the retail location; and (f) Adjustments to the total purchase price, up or down, based on the actual inventory, shall be made in the number of shares of Buyer's common stock given as consideration, summating the Closing. 2. EXTENT OF AMENDMENT. Except as amended hereby, all provisions of the Agreement shall remain in full force and effect. 3. COUNTERPARTS. This Amendment may be executed in a number of identical counterparts, each of which for all purposes is to be deemed an original IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. BUYER: HORIZON PHARMACIES, INC. By: ------------------------------ Ricky D. McCord, President SELLER: CARLEN CORPORATION d/b/a/ BRIARGROVE PHARMACY ---------------------------------- David DeVido, President 2 -----END PRIVACY-ENHANCED MESSAGE-----