FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
Exhibit 10.1
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this “Amendment”) is entered into effective
the 29th day of October, 2010, by and between Walgreen Co., an Illinois corporation
(“Buyer”), ApothecaryRx, LLC, an Oklahoma limited liability company (“Seller”), and
Graymark Healthcare, Inc., an Oklahoma corporation and the sole member of Seller
(“Parent”).
WITNESSETH:
WHEREAS, Buyer, Seller and Parent entered into the Asset Purchase Agreement dated as of
September 1, 2010 (the “Agreement”) and now wish to amend the Original Purchase Agreement
as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
agree as follows:
1. Definition of Terms. Except as otherwise defined herein, all capitalized terms will
have the same meaning herein as the terms are defined in the Agreement.
2. New Defined Terms. In the Agreement as amended by this Amendment, the following terms
have the meanings specified or referred to in this Section 2:
“▇▇▇▇▇▇ I” means ▇▇▇▇▇▇ Pharmacy & Barb’s Gifts, located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇.
“▇▇▇▇▇▇ II” means ▇▇▇▇▇▇ Pharmacy, located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇.
“▇▇▇▇▇▇ II Non-Compete Amount” means $1,500,000.
“▇▇▇▇▇▇ Parties” means ▇▇▇▇▇ ▇▇▇▇▇▇▇ Lock, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇ Pharmacy Services, LLC and ▇.▇. ▇▇▇▇▇▇▇ Pharmacy, Inc.
“Buyer’s Sterling Pharmacy” means the pharmacy owned and operated by Buyer at ▇▇▇ ▇.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
“Closing Prescription Count Certificate” means a certificate provided by Seller to
Buyer certifying the average daily prescription count at ▇▇▇▇▇▇ I excluding prescriptions filled
using Non-Continuing Services during the six (6) month period ending on the day prior to the
Applicable Closing Date for ▇▇▇▇▇▇ I.
“Compete With ▇▇▇▇▇▇” means a ▇▇▇▇▇▇ Party or an Affiliate of a ▇▇▇▇▇▇ Party takes any
action which would be in violation of Section 7.1(a), 7.1(b) or 7.1(c) of the LTC Agreement if such
action were to be taken by CJ Pharmacy Services, LLC.
“Exhibit C Services” means those services provided by Seller at ▇▇▇▇▇▇ I which are to
be identified, agreed upon and attached hereto as Exhibit C by Buyer and Seller prior to
the Applicable Closing Date for ▇▇▇▇▇▇ I.
“▇▇▇▇▇ ▇▇▇▇▇▇▇ Lock Employment Agreement” means the Employment Agreement made
effective August 27, 2007 between Seller and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Lock.
“▇▇▇▇▇▇▇ Lawsuit” means the Complaint for Injunctive Relief and Damages filed by
Seller against ▇▇▇▇▇ ▇▇▇▇▇▇▇ Lock, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇ Pharmacy Services,
LLC and ▇.▇. ▇▇▇▇▇▇▇ Pharmacy, Inc.
“LTC Agreement” means that Purchase and Sale Agreement, by and among Buyer, CJ
Pharmacy Services, LLC, ▇▇▇▇▇ ▇▇▇▇▇▇▇ Lock, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, on the form and
terms as attached hereto as Exhibit A.
“Non-Continuing Services” means those services provided by Seller at ▇▇▇▇▇▇ I which
are identified and agreed upon by Buyer and Seller prior to the Applicable Closing Date for ▇▇▇▇▇▇
I.
“Post-Closing Prescription Count Certificate” means a certificate provided by Buyer to
Seller certifying (i) the average daily prescription count at Buyer’s Sterling Pharmacy. excluding
prescriptions filled using Non-Continuing Services, during the six (6) month period following the
Applicable Closing Date; (ii) as to which of the Exhibit C Services have been performed or not
performed by Buyer at such location during such six (6) month period; and (iii) the Retention Rate.
“Retention Rate” means the percentage equal to (i) the average daily prescription
count for Buyer’s Sterling Pharmacy set forth on the Post-Closing Prescription Count Certificate
less a Buyer baseline average daily prescription count of 106 prescriptions (the “Baseline Count”),
divided by (ii) the average daily prescription count at ▇▇▇▇▇▇ I set forth on the Closing
Prescription Count Certificate, provided that if Buyer does not continue the Exhibit C Services for
six (6) months after the Applicable Closing Date for ▇▇▇▇▇▇ I, then the prescriptions included in
the Closing Prescription Count Certificate that were filled utilizing such Exhibit C Services at
▇▇▇▇▇▇ I that Buyer did not continue will be excluded from the Closing Prescription Count
Certificate and the calculation of the Retention Rate. The Retention Rate will be calculated and
seasonally adjusted as set forth in the example calculation attached as Exhibit B.
3. Amendments to Definitions. The definitions of the following terms in the Agreement are
hereby amended to state as follows:
“First File-Transfer Locations” means the following File-Transfer Locations: Hapeth
(33rd St.), Corner Medical (Red Wing, MN), Newt’s (Guthrie, OK), ▇▇▇ (Park ▇▇▇▇, OK) and
Professional Discount (Oklahoma City, OK).
“Subsequent File-Transfer Locations” means (a) Parkway Drugs, located at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, (b) ▇▇▇▇▇▇ I and (c) ▇▇▇▇▇▇ II.
4. Amendment to Section 3.2(a). The following paragraphs are added as subsections (iii)
and (iv) of Section 3.2(a):
“(iii) Notwithstanding subsection (ii) of this Section 3.2(a), if the transactions
contemplated by the LTC Agreement are not consummated, on terms substantially
similar to, and no less favorable to Buyer than, those specified therein,
concurrently with the Applicable Closing with respect to ▇▇▇▇▇▇ I and ▇▇▇▇▇▇ II and
Buyer notifies Seller in writing prior to completion of the Applicable Closing of
such failure (an “LTC Agreement Failure”), then the aggregate Closing Date
Payment with respect to ▇▇▇▇▇▇ I and ▇▇▇▇▇▇ II shall be reduced by the ▇▇▇▇▇▇ II
Non-Compete Amount; and |
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(iv) If an LTC Agreement Failure occurs, on the Applicable Closing Date with respect
to ▇▇▇▇▇▇ I and ▇▇▇▇▇▇ II, Buyer shall deposit the ▇▇▇▇▇▇ II Non-Compete Amount into
an indemnity escrow account (the “LTC Escrow Account”) pursuant to the terms
of the Indemnity Escrow Agreement.” |
5. Amendment to Section 3.2(c). Section 3.2(c) is hereby deleted and the following is
substituted therefor:
“(c) All payments made by Buyer hereunder shall be by wire transfer of immediately
available funds to an account specified by Seller or, in the case of the funds in
the Indemnity Escrow Account or the LTC Escrow Account, by the Indemnity Agent.” |
6. Amendment to Section 3.4. Section 3.4 is hereby deleted and the following is
substituted therefor:
“3.4 Indemnity Fund. Notwithstanding anything to the contrary in this Agreement,
each Applicable Indemnity Amount, and the ▇▇▇▇▇▇ II Non-Compete Amount, if applicable, shall
be deposited by Buyer on the Applicable Closing Dates with ▇.▇. ▇▇▇▇▇▇ Chase Bank, as
indemnity escrow agent (the “Indemnity Agent”). The Applicable Indemnity Amount and
▇▇▇▇▇▇ II Non-Compete Amount, if applicable, so deposited with the Indemnity Agent shall
initially constitute the indemnity escrow fund (the “Indemnity Fund”) to be held and
released in accordance with the provisions of Section 3.7 and Article VIII
and the Indemnity Escrow Agreement. Pursuant to the terms and conditions of the Indemnity
Escrow Agreement, all interest, dividends and proceeds received on the Indemnity Amount
shall be retained by the Indemnity Agent as part of the Indemnity Fund. The Indemnity Fund
shall be governed by the terms set forth herein and in the Indemnity Escrow Agreement. The
Indemnity Fund shall be available to indemnify the Buyer Group Members from any Loss or
Expense pursuant to the terms of Article VIII. All fees and expenses of the
Indemnity Agent shall be shared equally by Buyer and Seller as provided in Section
11.7.” |
7. ▇▇▇▇▇▇ Matters. The following is added as new Section 3.7 to the Agreement:
“3.7 ▇▇▇▇▇▇ Matters. |
(a) On the six (6) month anniversary of the Applicable Closing Date for ▇▇▇▇▇▇
I and ▇▇▇▇▇▇ II, if the Retention Rate, as certified in the Post-Closing
Prescription Count Certificate, is within the range of percentages set forth below,
the following amount of funds from the Indemnity Escrow Account shall be distributed
to Buyer:
| Funds Paid | ||||
| % Range | to Buyer | |||
Equal to or less than 45% |
$ | 1,000,000 | ||
Greater than 45% but less than 50% |
$ | 800,000 | ||
Equal to or greater than 50% but less than 55% |
$ | 600,000 | ||
Equal to or greater than 55% but less than 60% |
$ | 400,000 | ||
Equal to or greater than 60% but less than 65% |
$ | 200,000 | ||
Equal to or greater than 65% |
$ | 0.00 | ||
(b) If an LTC Agreement Failure occurs:
(i) if the ▇▇▇▇▇▇ Parties do not Compete With ▇▇▇▇▇▇ between the Applicable
Closing Date with respect to ▇▇▇▇▇▇ I and ▇▇▇▇▇▇ II and the six month anniversary
thereof, $500,000 of the LTC Escrow Account shall be distributed to Seller on such
six month anniversary;
(ii) if the ▇▇▇▇▇▇ Parties do not Compete With ▇▇▇▇▇▇ between the Applicable
Closing Date with respect to ▇▇▇▇▇▇ I and ▇▇▇▇▇▇ II and the eighteen month
anniversary thereof, an additional $1,000,000 of the LTC Escrow Account shall be
distributed to Seller on such eighteen month anniversary;
(iii) if the ▇▇▇▇▇▇ Parties do Compete With ▇▇▇▇▇▇ at any time prior to the
eighteen month anniversary of the Applicable Closing Date with respect to ▇▇▇▇▇▇ I
and ▇▇▇▇▇▇ II, the remaining funds in the LTC Escrow Account shall be immediately
distributed to Buyer; and
(iv) notwithstanding anything to the contrary herein, if after the occurrence
of an LTC Agreement Failure, Buyer closes the sale of all or part of ▇▇▇▇▇▇ II, on
terms substantially similar to, and no less favorable to Buyer than, those specified
in the LTC Agreement, to any of the buyers named in the LTC Agreement and none of
the ▇▇▇▇▇▇ Parties have taken action to Compete With ▇▇▇▇▇▇, then the entire balance
of the LTC Escrow Account will be distributed to Seller and this Section 3.7(b) will
be of no further force or effect.
(c) Notwithstanding anything to the contrary in the Agreement or this Amendment, the
remedies in this Section 3.7 constitute the sole and exclusive remedy of Buyer in connection
with breaches as of the date hereof of representations, warranties or covenants, or damages
incurred with respect to ▇▇▇▇▇▇ I and ▇▇▇▇▇▇ II relating to, arising out of or in connection
with the ▇▇▇▇▇▇▇ Lawsuit and the matters described therein and all agreements executed in
connection therewith, breaches as of the date hereof by any ▇▇▇▇▇▇ Party of the Goodwill
Protection Agreement assigned to Buyer, in each case above based on facts and circumstances known
to Buyer as of the date hereof, or the lease or use of the ▇▇▇▇▇▇ II location after the
Applicable Closing Date.”
8. Amendment to Section 4.1.
| 8.1 | The phrase “the remaining three (3) First File Transfer Locations” in the
second sentence of Section 4.1(a) is hereby deleted and the phrase “the remaining two
(2) First File Transfer Locations” is hereby substituted therefor. |
||
| 8.2 | The following phrase is added before the period at the end of Section 4.1(b):
“; provided further, however, that the Applicable Closings of
▇▇▇▇▇▇ I and ▇▇▇▇▇▇ II shall occur on the same day”. |
9. ▇▇▇▇▇▇ Prescription Count. The following is added as new Section 4.6 to the Agreement:
“4.6 ▇▇▇▇▇▇ Prescription Count. |
(a) Within five (5) business days after the Applicable Closing with respect to ▇▇▇▇▇▇ I
and ▇▇▇▇▇▇ II, Seller shall deliver to Buyer the Closing Prescription Count Certificate.
Within thirty (30) days after receiving the Closing Prescription Count Certificate, Buyer
shall give written notice to Seller stating whether it disputes the prescription count set
forth on the Closing Prescription Count Certificate. If such notice of dispute is provided,
Seller and Buyer shall cooperate to agree upon a revised Closing Prescription Count
Certificate. If such an agreement is not reached within ten (10) days after receipt by
Seller of such written notice, Buyer and Seller shall submit the Closing Prescription Count
Certificate to an agreed-upon third party arbitrator and vest in such arbitrator the
authority to resolve the dispute, including the right to review Seller’s relevant records.
(b) Within five (5) business days after the six month anniversary of the Applicable
Closing with respect to ▇▇▇▇▇▇ I and ▇▇▇▇▇▇ II, Buyer shall deliver to Seller the
Post-Closing Prescription Count Certificate and, if the Retention Rate reported therein is
less than 65%, Buyer shall deliver to Seller upon Seller’s request a prescription retention
report. Within thirty (30) days after receiving the Post-Closing Prescription Count
Certificate, Seller shall give written notice to Buyer stating whether it disputes the
prescription count set forth on the Post-Closing Prescription Count Certificate. If such
notice of dispute is provided, Seller and Buyer shall cooperate to agree upon a revised
Post-Closing Prescription Count Certificate. If such an agreement is not reached within ten
(10) days after receipt by Buyer of such written notice, Buyer and Seller shall submit the
Post-Closing Prescription Count Certificate to an agreed-upon third party arbitrator and
vest in such arbitrator the authority to resolve the dispute, including the right to review
Buyer’s prescription retention reports.”
10. Amendment to Section 7.22. The phrase “▇▇▇▇▇▇ Pharmacy, located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇” in Section 7.22(i) is hereby deleted and the phrase “▇▇▇▇▇▇ II” is
hereby substituted therefor.
11. ▇▇▇▇▇▇▇ Lawsuit. The following is added as new Section 7.25 to the Agreement:
“7.25 ▇▇▇▇▇▇▇ Lawsuit. |
(a) Seller shall use best efforts to pursue settlement of or its claims under the
▇▇▇▇▇▇▇ Lawsuit using all available rights and remedies with respect to the subject matter
thereof. Seller shall promptly provide to Buyer any court filings received by Seller.
Buyer shall have the reasonable opportunity to review and comment on any court filings made
by Seller prior to filing. Seller shall consult in good faith with Buyer on any matters or
actions with respect the ▇▇▇▇▇▇▇ Lawsuit and shall not enter into any settlement agreement
thereto without the consent of Buyer. Seller shall name Buyer as a party to the ▇▇▇▇▇▇▇
Lawsuit or grant to Buyer third party beneficiary rights with respect to the ▇▇▇▇▇▇▇
Lawsuit.
(b) Seller shall use best efforts to fully enforce any and all rights and remedies with
respect any non-solicitation and non-competition provisions in the ▇▇▇▇▇ ▇▇▇▇▇▇▇ Employment
Agreement and pursue any and all remedies for any breach thereof.”
12. Amendment to Section 8.3(a). Subsection (i) of Section 8.3(a) is hereby deleted and
the following is substituted therefor: “(i) charge the amount of any Loss and Expense against (and
be entitled to receive payment from) the Indemnity Fund until the amounts owed under this
Article VIII together with payments made under Section 3.7 hereof exceed the
Indemnity Fund,”.
13. Amendment to Section 10.1(a). The phrase “90 days after the date hereof” in subsection
(iv) of Section 10.1(a) is hereby deleted and the phrase “December 31, 2010” is hereby substituted
therefor.
14. Buyer Representations. Buyer represents and warrants to Seller that: (a) the Baseline
Count is the average number of prescriptions sold per day at Buyer’s Sterling Pharmacy over the six
(6) month period ending September 30, 2010; and (b) Buyer has received and reviewed copies of the
Complaint and Motion for Temporary Restraining Order filed in the ▇▇▇▇▇▇▇ Litigation.
15. Supersession. In all respects, except as specifically amended hereby, the Agreement
remains in full force and effect and unabated.
16. Multiple Counterparts. This First Amendment may be executed in counterparts, or
facsimiles thereof, each of which will be deemed an original document but all of which will
constitute a single document.
IN WITNESS WHEREOF, this First Amendment has been executed by the parties effective the date
first above written.
| WALGREEN CO. |
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| By: | /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Title: | Divisional Vice President | |||
| APOTHECARYRx, LLC |
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| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||
| Title: | President & CEO, ApothecaryRx, LLC | |||
| GRAYMARK HEALTHCARE, INC. |
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| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |||
| Title: | CEO | |||