EXHBIT 2.10
CONTRIBUTION AGREEMENT
DATED AS OF February 11, 1997
BY AND AMONG
APPLE ORTHODONTIX, INC.,
WESTERN NEW YORK ORTHODONTIC CARE, P.C.
AND
THE OWNERS NAMED HEREIN
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.................................................... 1
Section 1.01 CERTAIN DEFINED TERMS................................... 1
ARTICLE II THE ACQUISITION, CONTRIBUTION AND DELIVERY; OBLIGATIONS
ASSUMED........................................................ 5
Section 2.01 ACQUIRED ASSETS AND EXCLUDED ASSETS..................... 5
Section 2.02 THE CLOSING............................................. 6
Section 2.04 ACQUISITION PRICE....................................... 6
Section 2.05 ALLOCATION REPORTING.................................... 6
Section 2.06 FRACTIONAL SHARES....................................... 6
Section 2.07 ACCOUNTS RECEIVABLE..................................... 6
Section 2.08 MAIL RECEIVED AFTER CLOSING............................. 7
Section 2.09 OBLIGATIONS ASSUMED..................................... 7
Section 2.10 LIABILITIES AND OBLIGATIONS NOT ASSUMED................. 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH OWNER................... 8
Section 3.01 BY EACH OWNER........................................... 8
ARTICLE IV FURTHER REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND THE OWNERS.......................................... 8
Section 4.01 BY THE SELLER AND EACH OWNER............................ 8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF APPLE ....................... 10
Section 5.01 BY APPLE................................................ 10
ARTICLE VI COVENANTS EXTENDING TO THE IPO CLOSING DATE.................... 10
Section 6.01 OF EACH PARTY........................................... 10
ARTICLE VII THE CLOSING AND CONDITIONS TO CLOSING AND
CONSUMMATION ............................................. 10
Section 7.01 THE CLOSING AND CERTAIN CONDITIONS...................... 10
ARTICLE VIII COVENANTS FOLLOWING THE IPO CLOSING DATE...................... 11
Section 8.01 OF EACH PARTY OTHER THAN THE SELLER..................... 11
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ARTICLE IX INDEMNIFICATION................................................ 12
Section 9.01 INDEMNIFICATION RIGHTS AND OBLIGATIONS.................. 12
ARTICLE X LIMITATIONS ON COMPETITION..................................... 12
Section 10.01 PROHIBITED ACTIVITIES.................................. 12
Section 10.02 DAMAGES................................................ 13
Section 10.03 REASONABLE RESTRAINT................................... 13
Section 10.04 SEVERABILITY; REFORMATION.............................. 13
Section 10.05 [INTENTIONALLY DELETED]................................ 13
Section 10.06 MATERIALITY............................................ 13
ARTICLE XI GENERAL PROVISIONS............................................. 13
Section 11.01 TREATMENT OF CONFIDENTIAL INFORMATION.................. 13
Section 11.02 RESTRICTIONS ON TRANSFER OF APPLE COMMON STOCK......... 14
Section 11.03 BROKERS AND AGENTS..................................... 15
Section 11.04 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES............... 15
Section 11.05 ENTIRE AGREEMENT; AMENDMENT; WAIVERS................... 15
Section 11.06 COUNTERPARTS........................................... 16
Section 11.07 EXPENSES............................................... 16
Section 11.08 NOTICES................................................ 16
Section 11.09 GOVERNING LAW.......................................... 17
Section 11.10 EXERCISE OF RIGHTS AND REMEDIES........................ 17
Section 11.11 TIME................................................... 18
Section 11.12 REFORMATION AND SEVERABILITY........................... 18
Section 11.13 REMEDIES CUMULATIVE.................................... 18
Section 11.14 RESPECTING THE IPO..................................... 18
ARTICLE XII TERMINATION................................................... 18
Section 12.01 TERMINATION OF THIS AGREEMENT.......................... 18
Section 12.02 LIABILITIES IN EVENT OF TERMINATION.................... 19
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CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of
February 11, 1997, by and among Apple Orthodontix, Inc., a Delaware corporation
("Apple"), Western New York Orthodontic Care, P.C., a New York professional
corporation (the "Seller"), and the persons listed on the signature pages hereof
under the caption "Owners" (collectively, the "Owners," and each of those
persons, individually, an "Owner"). This Agreement consists of the Contribution
Agreement set forth below and a separate document of Uniform Provisions, which
shall be a part hereof for all purposes.
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a transaction pursuant to which:
(a) The Seller will sell, transfer, assign and deliver to Apple, on
the terms and subject to the conditions set forth herein, substantially
all of the tangible and intangible assets used by Seller in the business
(the "Business") of providing orthodontic services to patients (the
"Acquisition");
(b) Apple will acquire the stock, or substantially all of the
assets, of all or some of the orthodontic practices listed in the
accompanying Addendum 1 (each an "Other Founding Company" and,
collectively with the Seller, the "Founding Companies") pursuant to
agreements that are (i) similar to this Agreement and (ii) entered into
among those entities and/or their owners and Apple (collectively, the
"Other Agreements"); and
(c) Apple shall effect a public offering of shares of its common
stock and issue and sell those shares.
The board of directors of Apple and the Seller have approved and
adopted this Agreement to effect a transaction pursuant to Section 351 of the
Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings contained herein, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the meanings assigned to them below in this Section 1.01.
Capitalized terms used in
this Agreement and not defined below in this Section 1.01 have the respective
meanings assigned to them in the Preliminary Statement or Section 1.02 found in
the Uniform Provisions.
"Accounts Receivable" has the meaning specified in Section 2.01.
"Acquired Assets" has the meaning specified in Section 2.01.
"Acquisition" has the meaning specified in the Preliminary Statement
of this Agreement.
"Acquisition Consideration" has the meaning specified in Section
2.04.
"Agreed Rate" means 8.0% per annum.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Addenda, Annexes and Exhibits,
as each of the same may be amended, modified or supplemented from time to
time pursuant to the provisions hereof or thereof.
"Apple" means Apple Orthodontix, Inc., a Delaware corporation.
"Apple Acquisition Candidate" means any Entity engaged in any of the
businesses of providing orthodontic services to patients (i) which was
called on by any Owner, Seller, Apple or the Subsidiaries of the Seller or
Apple in connection with the possible acquisition by any of them of that
Entity or (ii) of which any of them has made an acquisition analysis.
"Business" has the meaning specified in the Preliminary Statement of
this Agreement.
"Closing" has the meaning specified in Section 7.01.
"Closing Memorandum" means the form of closing memorandum to be
prepared by Apple for the Closing under this Agreement in which are
included the forms of certificates of officers, the opinions of counsel
and certain other documents to be delivered at the Closing as provided in
Article VII.
"Contracts" has the meaning specified in Section 2.01(d).
"Counsel for Apple" means Xxxxxxx & Xxxxxx, L.L.P.
"Counsel for the Seller and the Owners" means Xxxxxx Xxxxxx, Esq.
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"Current Balance Sheet" means the unaudited balance sheet of the
Business as at the Current Balance Sheet Date.
"Current Balance Sheet Date" means September 30, 1996.
"Disclosure Statement" means the written statement attached to and
made a part of this Agreement in which (a) exceptions are taken to certain
of the representations and warranties made by the Seller and the Owners
herein, (b) it is confirmed that no exception is taken to that
representation and warranty or (c) additional information is provided with
respect to a particular provision herein or in the Uniform Provisions.
"Excluded Assets" has the meaning specified in Section 2.01.
"Fixed Assets" has the meaning specified in Section 2.01.
"Founding Companies" has the meaning specified in the Preliminary
Statement of this Agreement.
"Initial Financial Statements" means (a) the consolidated balance
sheet of the Seller as at September 30, 1996 and the related consolidated
statements of income (operations), cash flows and stockholders' equity for
the Seller's nine-month period ended September 30, 1996 and (b) the
Current Balance Sheet and the related unaudited consolidated statements of
income (operations), cash flows and stockholders' equity for the
nine-month period ended on the Current Balance Sheet Date.
"Inventory" has the meaning specified in Section 2.01.
"Leases" has the meaning specified in Section 2.01.
"Orthodontic Entity" means the New York professional corporation or
association to be formed pursuant to Section 6.06.
"Orthodontic Entity Common Stock" has the meaning specified in
Section 4.01.
"OSHA" has the meaning specified in Section 2.10.
"Other Agreements" has the meaning specified in the Preliminary
Statement of this Agreement.
"Other Founding Company" has the meaning specified in the
Preliminary Statement of this Agreement.
"Owner" has the meaning specified in the preamble of this Agreement.
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"Owner Employment Agreement" means the Employment Agreement to be
entered into as of the IPO Closing Date between the Orthodontic Entity and
each Owner.
"Purchase and Sales Contracts" has the meaning specified in Section
2.01.
"Pro Rata Share" means for each Owner (a) if Seller is a
corporation, the fraction expressed as a percentage (i) the numerator of
which is the number of shares of outstanding Seller Common Stock owned by
that Person, as set forth in Section 3.02 of the Disclosure Statement, and
(ii) the denominator of which is the total number of shares of outstanding
Seller Common Stock owned by all Owners, as set forth in Section 3.02 of
the Disclosure Statement, or (b) if Seller is a partnership, the fraction
expressed as a percentage (i) the numerator of which is the number of
partnership interests owned by that person, as set forth in Section 3.02
of the Disclosure Statement, and (ii) the denominator of which is the
total number of outstanding partnership interests owned by all Owners, as
set forth in Section 3.02 of the Disclosure Statement.
"Purchaser Representative" means a "purchaser representative" as
defined in Securities Act Rule 501(h).
"Retained Receivables" has the meaning specified in Section 2.07.
"Restricted Period" has the meaning specified in Section 11.02.
"Scheduled Agreements" means the agreements described in Section
4.11 of the Disclosure Statement.
"Seller" means Western New York Orthodontic Care, P.C.
"Seller Common Stock" means, if Seller is a corporation, the common
stock, par value $___ per share, of the Seller.
"Service Agreement" means the Service Agreement to be entered into
as of the IPO Closing Date among Apple, the Owners and the Orthodontic
Entity.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Transaction Value.
"Transaction Value" means an amount equal to the Seller's revenues
(less bad debts) for the 12-month period ended December 31, 1996,
multiplied by 1.2.
"Transfer Taxes" has the meaning specified in Section 11.07.
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"Uniform Provisions" means the Uniform Provisions for the
Acquisition of Founding Companies attached hereto as Annex 1.
ARTICLE II
THE ACQUISITION, CONTRIBUTION AND DELIVERY; OBLIGATIONS ASSUMED
Section 2.01 ACQUIRED ASSETS AND EXCLUDED ASSETS. Subject to the
terms and conditions of this Agreement, and on the basis of the representations
and warranties hereinafter set forth, at the Closing, Seller is transferring,
conveying, assigning and delivering to Apple, and Apple is acquiring from
Seller, all of the tangible and intangible assets used by the Seller in the
Business (whether or not included below), including the following assets,
properties and rights of Seller (collectively, the "Acquired Assets"):
(a) all inventories of finished products, work in process, raw
materials, supplies and packing and shipping material (collectively, the
"Inventory");
(b) all accounts receivable of the Seller immediately prior to the
IPO Closing Date (the "Accounts Receivable"), except as described in
Section 2.07;
(c) all tools, equipment, machinery, dies, furniture, fixtures,
store equipment, service equipment, computer equipment and leasehold
improvements (the "Fixed Assets");
(d) all contracts and agreements listed in Section 2.01 of the
Disclosure Statement under the heading "Contracts" (the "Contracts");
(e) all of the Seller's rights accruing from and after the IPO
Closing Date to each purchase or sales order or other contract, agreement
or commitment for the purchase or sale of Inventory that (i) was entered
into in the ordinary course of business and is unfilled as of the IPO
Closing Date and (ii) is listed in Section 2.01 of the Disclosure
Statement under the heading "Purchase and Sales Contracts" ("Purchase and
Sales Contracts");
(f) all rights of Seller under express or implied warranties, if
any, from the suppliers of the Seller, manufacturers or others with
respect to the Acquired Assets;
(g) all intellectual property, including patents, trademarks, trade
names, service marks, franchises, copyrights, blueprints, drawings,
computer software and similar items, together with all goodwill associated
therewith or with the Business, including, but not limited to, the
Seller's logo and all corporate, assumed and other names of the Seller,
and all rights of action on account of past, present, and future
unauthorized use or infringement thereof;
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(h) the leases of real property listed in Section 2.01 of the
Disclosure Statement under the heading "Leases" (the "Leases");
(i) except as set forth below, deposits and other current assets, a
listing of which appears under the heading "Deposits and Current Assets"
in Section 2.01 of the Disclosure Statement; and
(j) all books, operating and financial records, correspondence,
files, customer and vendor lists and other data used in or relating to the
Business.
Notwithstanding the foregoing, the Acquired Assets shall not include, and Apple
will not acquire, any minute books and stock records of the Seller, any advances
to employees, the Accounts Receivable specified in Section 2.07, or any other
assets listed in Section 2.01 of the Disclosure Statement under the heading
"Excluded Assets" (the "Excluded Assets").
Section 2.02 THE CLOSING. The Closing of the Acquisition will be at
8:00 a.m., eastern daylight or standard time, on the IPO Closing Date.
Section 2.03 INTENTIONALLY DELETED.
Section 2.04 ACQUISITION PRICE. The acquisition price being paid by
Apple at the Closing for the Acquired Assets (the "Acquisition Consideration")
is the amount of cash and the number of whole shares of Apple Common Stock
determined as provided in Section 2.04 of the Disclosure Statement.
Section 2.05 ALLOCATION REPORTING. Apple and Seller agree to report
the allocation of the Acquisition Consideration among the Acquired Assets, the
Service Agreement and the covenant not to compete contained in Section 10.01 as
Apple and Seller shall mutually determine. Apple shall advise Seller of such
determination on or before December 31, 1997.
Section 2.06 FRACTIONAL SHARES. Notwithstanding any other provision
herein, no fractional shares of Apple Common Stock will be issued, and any Owner
entitled hereunder to receive a fractional share of Apple Common Stock but for
this Section 2.06 will have the cash portion of the Acquisition Consideration
hereunder reduced in an amount sufficient to enable the issuance of an
additional whole share of Apple Common Stock multiplied by the IPO Price.
Section 2.07 ACCOUNTS RECEIVABLE. Seller agrees that on and after
the Closing, Apple shall have the right and authority to collect all Accounts
Receivable except those specified in Section 2.07 of the Disclosure Statement,
and, if necessary, to endorse with the name of the Seller any checks received on
account of any such receivables or other items. Seller will transfer to Apple
any cash or other property which Seller may receive in respect of such
receivables or other items. As set forth in Section 2.07 of the Disclosure
Statement, certain Accounts Receivable are being retained by Seller (the
"Retained Receivables"), and the balance of the Accounts Receivable are being
acquired by Apple.
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Section 2.08 MAIL RECEIVED AFTER CLOSING. Following the Closing,
Apple may receive and open all mail addressed to the Seller that Apple believes
relates to the Business and, to the extent that such mail and the contents
thereof relate to the Business or the Acquired Assets, deal with the contents
thereof in its discretion, and to the extent that it does not relate thereto,
shall promptly deliver same to Seller.
Section 2.09 OBLIGATIONS ASSUMED. As part of the consideration for
the Acquired Assets, and subject to Section 2.10, Apple shall assume Seller's
obligations that accrue after the IPO Closing Date under the Contracts and
Purchase and Sale Contracts listed on Section 2.01 of the Disclosure Statement
and under the Leases and such other obligations listed in Section 2.09 of the
Disclosure Statement, in each case if but only if they are assigned or
transferred to Apple.
Section 2.10 LIABILITIES AND OBLIGATIONS NOT ASSUMED. Other than as
specifically set forth in Section 2.09 above, Apple assumes no obligation
whatsoever of Seller or any Owner, under or in connection with any contract
between Seller or any Owner and any third party or otherwise. Furthermore,
except as specifically set forth in Section 2.09 above, Apple expressly
disclaims the assumption of any liability of any type whatsoever of Seller or
any Owner or in connection with any of Seller's or any Owner's assets or
business operations, including without limitation (i) any and all Tax
liabilities accruing on or before the Closing in connection with any Acquired
Assets or otherwise, (ii) any and all liabilities arising from or under any
Environmental Laws, (iii) any and all liabilities in connection with any claim
by any Person claiming to have suffered any environmental damage or harm of any
type, including any actual or alleged damage or harm to groundwater, surface
water, well water, ground, soil, or the atmosphere, or otherwise relating to any
Hazardous Substance, (iv) any and all employment or personnel-related
liabilities whatsoever of Seller or any Owner, including, but not limited to,
any liability under any employment contract, liability for wages or salary,
liability for bonuses or commissions, liability for severance (including without
limitation as a result of this transaction), Title I, Part 6 of ERISA liability,
Occupational Safety and Health Act of 1972, as amended ("OSHA") liability,
liability for disabled individuals, workers' compensation liability, ERISA
plans, or ERISA plan obligations or liability, Federal Workers Adjustment and
Retraining Notification Act liability, sick pay, vacation accruals, or similar
matters, any profit sharing plan or any liability thereunder, any pension plan
or liability thereunder, any welfare benefit plan or any liability thereunder,
or liability for any claims alleging illegal discrimination of any type, (v) any
indebtedness of Seller or any Owner, and (vi) any liability or obligation
(contingent or otherwise) of Seller or any Owner arising out of any claim,
litigation or proceeding threatened or pending on or before the IPO Pricing Date
or out of any claim, litigation or proceeding threatened or initiated after the
IPO Pricing Date to the extent based on or caused by any act or omission
occurring, or condition or circumstances existing, prior to the IPO Pricing
Date, or any condition caused by any act or omission occurring prior to the IPO
Pricing Date, or any product sold or manufactured by the Seller or any Owner or
any service provided by Seller or any Owner (including all product liability and
warranty claims and product returns with respect thereto).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH OWNER
Section 3.01 BY EACH OWNER. Each Owner represents and warrants to
Apple that, as applied solely to himself, all the following representations and
warranties in this Article III are as of the date of this Agreement, and will
be, as amended or supplemented pursuant to Section 6.08, on the date of the
Closing and the IPO Closing Date, true and correct:
(a) the representations and warranties contained in Article III of
the Uniform Provisions (the text of which Article hereby is incorporated
herein by this reference) are true and correct as applied solely to
himself, and his agreements set forth in that Article hereby are agreed
to.
ARTICLE IV
FURTHER
REPRESENTATIONS AND WARRANTIES
OF
THE SELLER AND THE OWNERS
Section 4.01 BY THE SELLER AND EACH OWNER. The Seller and each
Owner, jointly and severally represent and warrant to, and agree with, Apple
that, except as set forth in Section 4.01 of the Disclosure Statement all the
following representations and warranties in this Article IV are as of the date
of this Agreement, and will be, as amended or supplemented pursuant to Section
6.08, on the date of the Closing and the IPO Closing Date, true and correct:
(a) the Organization State of each of the Seller and the Seller
Subsidiaries is the State of New York, and each of the Seller and the
Seller Subsidiaries (i) is either (A) a corporation duly organized,
validly existing and in good standing, or (B) a partnership duly formed
and validly existing, under the laws of that State, (ii) has all requisite
corporate or partnership power and authority under those laws and its
Charter Documents to own or lease and to operate its properties and to
carry on its business as now conducted and (iii) is duly qualified and in
good standing as a foreign corporation or partnership in all jurisdictions
(other than the State of New York) in which it owns or leases property or
in which the carrying on of its business as now conducted so requires
except where the failure to be so qualified, singly or in the aggregate,
would not have a Material Adverse Effect;
(b) (i)(A) if Seller is a corporation, the authorized Capital Stock
of the Seller is comprised of 200 shares of Seller Common Stock, of which
50 shares have been issued and are now outstanding and no shares are held
by the Seller as treasury shares or (B) if Seller is a partnership, all of
the partnership interests authorized to be issued
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in the Charter Documents are listed in Section 3.02 of the Disclosure
Statement, and (ii) no outstanding Derivative Securities of the Seller
exist;
(c) (i) the terms and conditions of each of the Scheduled Agreements
are no less favorable to the Seller than the Seller reasonably could have
expected to obtain in an arm's-length transaction with a Person other than
an Affiliate of the Seller, (ii) the rentals provided for in the Scheduled
Agreements constituting leases do not and will not exceed fair market
rentals of the properties being rented or leased under those Scheduled
Agreements and (iii) the payments provided to be made in the other
Scheduled Agreement do not exceed the fair market value of the services
performed;
(d) Intentionally Left Blank;
(e) the representations and warranties contained in Article IV of
the Uniform Provisions (the text of which Article hereby is incorporated
herein by this reference) are true and correct, and the agreements set
forth in that Article hereby are agreed to;
(f) (i) the capitalization of the Orthodontic Entity shall be
incompliance with the requirements of the applicable regulations of the
Organization State, and no shares of capital stock of the Orthodontic
Entity (the "Orthodontic Entity Common Stock"), are, or will be, held in
treasury; (ii) except as set forth in Section 4.01 of the Disclosure
Statement, the Owners own, or will own, all of the issued and outstanding
shares of Orthodontic Entity Common Stock, free and clear of all security
interests, liens, adverse claims, encumbrances, equities, proxies and
shareholders' agreements; (iii) each outstanding share of Orthodontic
Entity Common Stock has been legally and validly issued and is, or will
be, fully paid and nonassessable; (iv) there exist no options, warrants,
subscriptions or other rights to purchase, or securities convertible into
or exchangeable for, any of the authorized or outstanding securities of
the Orthodontic Entity; and (v) no shares of capital sock of the
Orthodontic Entity have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Orthodontic Entity's stockholders; and
(g) (i) each Owner will be acquiring the shares of Apple Common
Stock to be issued pursuant to Section 2.04 to him solely for his account,
for investment purposes only and with no current intention or plan to
distribute, sell or otherwise dispose of any of those shares in connection
with any distribution; (ii) each Owner is not a party to any agreement or
other arrangement for the disposition of any shares of Apple Common Stock
other than this Agreement and the Registration Rights Agreement; (iii)
each Owner is either an "accredited investor" as defined in Securities Act
Rule 501(a) or, if such Owner is not such an investor, Section 4.01(e) of
the Disclosure Statement sets forth the name and address of his Purchaser
Representative; (iv) such Owner (A) is able to bear the economic risk of
an investment in the Apple Common Stock acquired pursuant to this
Agreement, (B) can afford to sustain a total loss of that investment, and
(C) either (1) has such knowledge and experience in financial and business
matters that such Owner is
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capable of evaluating the merits and risks of the proposed investment in
the Apple Common Stock, or (2) such Owner's Purchaser Representative has
had an adequate opportunity to ask questions and receive answers from the
officers of Apple concerning any and all matters relating to the
transactions contemplated hereby, including the background and experience
of the current and proposed officers and directors of Apple, the plans for
the operations of the business of Apple, the business, operations and
financial condition of the Other Founding Companies and any plans of Apple
for additional acquisitions or such Owner's Purchaser Representative has
asked all questions of the nature described in the immediately preceding
clause, and all those questions have been answered to his satisfaction and
the satisfaction of his Purchaser Representative.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF APPLE
Section 5.01 BY APPLE. Apple represents and warrants to the Seller
and each Owner that all the following representations and warranties in this
Article V are as of the date of this Agreement, and will be on the date of the
Closing and the IPO Closing Date, true and correct: the representations and
warranties contained in Article V of the Uniform Provisions (the text of which
Article hereby is incorporated herein by this reference) are true and correct.
ARTICLE VI
COVENANTS EXTENDING TO THE IPO CLOSING DATE
Section 6.01 OF EACH PARTY. Until the IPO Closing Date, subject to
the waiver provisions of Section 11.05, each party hereto will comply with each
covenant for which provision is made in Article VI of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01 THE CLOSING AND CERTAIN CONDITIONS. (a) THE CLOSING. On
or before the IPO Pricing Date, the parties hereto will take all actions
necessary to (i) effect the Acquisition and satisfy the document delivery
requirements to which the obligations of the parties to effect the Acquisition
and the other transactions contemplated hereby are conditioned by the provisions
of this Article VII (all those actions collectively being the "Closing"). The
Closing will take place at the offices of Xxxxxxx & Xxxxxx, L.L.P., 42nd Floor,
0000 Xxxxxxxxx, Xxxxxxx, Xxxxx at 10:00 a.m., Houston time, or at such later
time on the IPO Pricing Date as Apple shall specify by written notice to Xxxxxx
X. Xxxxxxxx. The actions taken at the Closing
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will not include the completion of either the Acquisition or the delivery of a
xxxx of sale or the Acquisition Consideration pursuant to Section 2.04. Instead,
on the IPO Closing Date, all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the surrender
of a xxxx of sale in exchange for the Acquisition Consideration (including a
certified check or checks in an amount equal to the cash portion of the
Acquisition Consideration) will be closed or completed, as the case may be.
During the period from the Closing to the IPO Closing Date, this Agreement may
be terminated by the parties only pursuant to Section 12.01(b)(i).
(b) CERTAIN CONDITIONS TO THE OBLIGATIONS OF THE SELLER AND
EACH OWNER. The obligations of the Seller and each Owner, with respect to the
actions to be taken by them at or before the Closing are subject to the
satisfaction on or before the date of the Closing, or waiver by such Seller and
such Owner pursuant to Section 11.05, of all the conditions set forth in
Sections 7.02(a) and 7.03. The obligations of the Seller and each Owner with
respect to the actions to be taken on the IPO Closing Date are subject to the
satisfaction on that date of all the conditions set forth in Section 7.02(b) and
7.03.
(c) CERTAIN CONDITIONS TO THE OBLIGATIONS OF APPLE. The
obligations of Apple with respect to actions to be taken at or before the
Closing are subject to the satisfaction on or before the date of the Closing, or
waiver by them pursuant to Section 11.05, of the following conditions: (i) the
Seller shall have delivered to Apple copies of the articles of formation, each
as amended to the date of the Closing and certified by the Secretary of State of
the State of New York as of a Current Date, of the Seller and each Seller
Subsidiary; and (ii) any of the conditions set forth herein.
(d) The obligations of Apple with respect to the actions to be
taken on the IPO Closing Date are subject to the satisfaction on that date, or
waiver by Apple pursuant to Section 11.05, of the following conditions: (i) each
Owner Employment Agreement and the Service Agreement in substantially the form
attached hereto as Exhibit 7.01(d), then shall be in full force and effect; (ii)
any of the conditions set forth herein; and (iii) delivery to Apple of a xxxx of
sale and deeds, assignments and any other necessary instruments, satisfactory in
form and content and approved prior to Closing by Apple, conveying all the
Purchased Assets to Apple;
(e) The text of Article VII of the Uniform Provisions hereby
is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE IPO CLOSING DATE
Section 8.01 OF EACH PARTY OTHER THAN THE SELLER. From and after the
IPO Closing Date, subject to the waiver provisions of Section 11.05, each party
hereto (other than the Seller) will comply with each covenant for which
provision is made in Article VIII of the
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Uniform Provisions (the text of which Article hereby is incorporated herein by
this reference) to be performed or observed by that party.
ARTICLE IX
INDEMNIFICATION
Section 9.01 INDEMNIFICATION RIGHTS AND OBLIGATIONS. The text of
Article IX of the Uniform Provisions hereby is incorporated herein by this
reference. For purposes of Section 9.07(a), the Pro Rata Share of the
Transaction Value is 100% for Xxxxxxx X. Xxxxxx, D.D.S.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01 PROHIBITED ACTIVITIES. Seller and each Owner agree,
severally and not jointly with any other Person, that he will not, during the
period beginning on the date hereof and ending on the fifth anniversary of the
date hereof, directly or indirectly, for any reason, for his own account or on
behalf of or together with any other Person:
(a) directly or indirectly establish, operate or provide
orthodontist services at any orthodontic office, clinic or other facility
providing services similar to those provided by the Orthodontic Entity or
engage or participate in or finance any business which engages in direct
competition with the business being conducted by Apple, in either case,
anywhere within a radius of 25 miles of each location in which any of the
Seller or the Seller Subsidiaries was engaged in business on the date
hereof or immediately prior to the IPO Closing Date (those locations
collectively being the "Territory");
(b) call on any natural person who is at that time employed by the
Seller, any Seller Subsidiary or Apple with the purpose or intent of
attracting that person from the employ of the Seller, any Seller
Subsidiary or Apple, provided that each Owner may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is a customer of the
Seller, any Seller Subsidiary or Apple within the Territory, (i) for the
purpose of soliciting or selling any product or service in competition
with the Seller, any Seller Subsidiary or Apple within the Territory and
(ii) with the knowledge of that customer relationship; or
(d) call on any Apple Acquisition Candidate, with the knowledge of
that Person's status as an Apple Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than Apple.
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Notwithstanding the foregoing, Seller or any Owner may own and hold as a passive
investment up to 1% of the outstanding Capital Stock of a competing Entity if
that class of Capital Stock is listed on the New York Stock Exchange or included
in the Nasdaq National Market. For purposes hereof and the respective Tax
reporting positions of the parties hereto, each party hereto agrees that the
percentage of the cash portion of the Acquisition Consideration to be received
by each Owner pursuant to Section 2.04 which equals 1% of that Partner's Pro
Rata Share of the Transaction Value will represent, and be received as,
consideration for that Owner's agreement to observe the covenants in this
Section 10.01.
Section 10.02 DAMAGES. Because of the difficulty of measuring
economic losses to Apple as a result of any breach by an Owner of his covenants
in Section 10.01, and because of the immediate and irreparable damage that could
be caused to Apple for which it would have no other adequate remedy, each Owner
agrees that Apple may enforce the provisions of Section 10.01 by injunctions and
restraining orders against such Owner if he breaches any of those provisions.
Section 10.03 REASONABLE RESTRAINT. The parties hereto each agree
that Sections 10.01 and 10.02 impose a reasonable restraint on the Owners in
light of the activities and business of Apple on the date hereof, the current
business plans of Apple and the investment by each Owner in Apple as a result of
the Acquisition.
Section 10.04 SEVERABILITY; REFORMATION. The covenants in this
Article X are severable and separate, and the unenforceability of any specific
covenant in this Article X is not intended by any party hereto to, and shall
not, affect the provisions of any other covenant in this Article X. If any court
of competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth in Section 10.01 are unreasonable as applied to any
Owner, the parties hereto, including that Owner, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Owner and any other Owner similarly situated.
Section 10.05 [INTENTIONALLY DELETED].
Section 10.06 MATERIALITY. The Seller and each Owner, severally and
not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated hereby.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01 TREATMENT OF CONFIDENTIAL INFORMATION. Each party
hereto will comply with each covenant for which provision is made in Section
11.15 of the Uniform
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Provisions (the text of which Section hereby is incorporated herein by this
reference) to be performed or observed by that party.
Section 11.02 RESTRICTIONS ON TRANSFER OF APPLE COMMON STOCK. (a)
During the two-year period ending on the second anniversary of the IPO Closing
Date (the "Restricted Period") (or if the two-year "holding" period for
restricted securities under Rule 144 under the Securities Act is reduced by the
SEC, the Restricted Period will be correspondingly reduced), each Owner will not
voluntarily, except pursuant to and in accordance with the applicable provisions
of the Registration Rights Agreement: (i) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (A) any shares of
Apple Common Stock received in the Acquisition or (B) any interest in (including
any option to buy or sell) any of those shares of Apple Common Stock, in whole
or in part, and Apple will have no obligation to, and shall not, treat any such
attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of Apple Common Stock or
any interest therein, the intent or effect of which is to reduce the risk of
owning the shares of Apple Common Stock acquired pursuant to Section 2.04
(including, for example engaging in put, call, short-sale, straddle or similar
market transactions); provided, however, that this Section 11.02 shall not
restrict any transfer of Apple Common Stock acquired by Owner pursuant to
Section 2.04 to any of that Owner's Related Persons or employees who agree in
writing to be bound by the provisions of Section 11.01 and this Section 11.02.
The certificates evidencing the Apple Common Stock delivered to each Owner
pursuant to Section 2.05 will bear a legend substantially in the form set forth
below and containing such other information as Apple may deem necessary or
appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE CONTRIBUTION AGREEMENT AMONG THE
ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE OTHER PARTIES THERETO, THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED
TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION OF ANY OF THOSE SHARES, DURING THE TWO-YEAR PERIOD ENDING ON
__________ DATE THAT IS THE SECOND ANNIVERSARY OF THE IPO CLOSING DATE
(THE "RESTRICTED PERIOD") (OR IF THE TWO YEAR "HOLDING" PERIOD FOR
RESTRICTED SECURITIES UNDER RULE 144 UNDER THE SECURITIES ACT OF 1933 IS
REDUCED BY THE SECURITIES AND EXCHANGE COMMISSION, THE RESTRICTED PERIOD
WILL BE CORRESPONDINGLY REDUCED). ON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
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(b) Each Owner (i) acknowledges that the shares of Apple Common
Stock to be delivered to Seller pursuant to Section 2.04 have not been
and, except pursuant to the Registration Rights Agreement, if applicable,
will not be registered under the Securities Act and therefore may not be
resold without compliance with the Securities Act and (ii) covenants that
none of the shares of Apple Common Stock issued to Seller pursuant to
Section 2.04 will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all
the applicable provisions of the Securities Act and the rules and
regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of Apple Common Stock
issued pursuant to Section 2.04 will bear the following legend in addition
to the legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF
THE HOLDER HEREOF COMPLIES WITH THAT LAW AND OTHER APPLICABLE SECURITIES
LAWS.
In addition, certificates evidencing shares of Apple Common Stock issued
pursuant to Section 2.04 to each Owner will bear any legend required by the
securities or blue sky laws of the state in which that Owner resides.
Section 11.03 BROKERS AND AGENTS. Except as disclosed in the Private
Placement Memorandum or in Section 11.03 of the Disclosure Statement, each Owner
represents and warrants to Apple that such Owner has not directly or indirectly
employed or become obligated to pay any broker or similar agent in connection
with the transactions contemplated hereby and agree, without regard to the
Threshold Amount limitations set forth in Article IX, to indemnify Apple against
all Damage Claims arising out of claims for any and all fees and commissions of
brokers or similar agents employed or promised payment by such Owner.
Section 11.04 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES . This
Agreement and the rights of the parties hereunder may not be assigned (except by
operation of law) and shall be binding on and inure to the benefit of the
parties hereto, the successors of Apple, and the heirs and legal representatives
of the Seller. Neither this Agreement nor any other Transaction Document is
intended, or shall be construed, deemed or interpreted, to confer on any Person
not a party hereto or thereto any rights or remedies hereunder or thereunder,
except as provided expressly herein.
Section 11.05 ENTIRE AGREEMENT; AMENDMENT; WAIVERS. This Agreement
and the documents delivered pursuant hereto constitute the entire agreement and
understanding among each Owner, the Seller and Apple and supersede all prior
agreements and understandings, both written and oral, relating to the subject
matter of this Agreement. This Agreement may be amended, modified or
supplemented, and any right hereunder may be waived, if, but only if, that
amendment, modification, supplement or waiver is in writing and signed by the
Seller and Apple; provided, however, that no such amendment, modification,
supplement or waiver will
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be effective unless it is signed by each Owner affected thereby to the extent
that it (a) changes the several nature of that Owner's representations and
warranties (to the extent they are not already joint and several as provided in
Sections 4.01 and 11.03), (b) waives the consummation of the IPO as a condition
to consummation of the Acquisition or (c) amends or waives this sentence. The
waiver of any of the terms and conditions hereof shall not be construed or
interpreted as, or deemed to be, a waiver of any other term or condition hereof.
Section 11.06 COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which will be an original, but all of which
together will constitute one and the same instrument.
Section 11.07 EXPENSES. Whether or not the transactions contemplated
hereby are consummated, (a) Apple and the Seller, respectively, will each pay
their, and their Representatives' fees, expenses and disbursements incurred in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by Apple under this Agreement, including the
costs of preparing the Registration Statement, and (b) the Seller will pay all
sales, use, transfer and other similar Taxes and fees (collectively, "Transfer
Taxes") incurred by the Seller or Apple in connection with the transactions
contemplated hereby, and the fees, expenses and disbursements of Counsel for the
Seller and each Owner incurred in connection with the subject matter of this
Agreement and the Registration Statement on or before the IPO Closing Date;
provided, however, if the Seller terminates this Agreement otherwise than as
permitted by Article XII, the Seller will, no later than 10 Houston, Texas
business days after Apple makes a written request therefor, reimburse Apple in
the amount equal to the aggregate fees, costs and other expenses invoiced to
Apple by Xxxxxx Xxxxxxxx LLP in connection with its audit of the Seller's
financial statements at December 31, 1996 and for the 12-month period then
ended; provided further, however, that neither the Seller nor any Owner shall be
required to reimburse Apple for such fees, costs and expenses in the event such
termination follows the death of an Owner. The Seller will file all necessary
documentation and Returns with respect to all Transfer Taxes. In addition,
Seller will pay all Taxes due upon receipt of the consideration payable to
Seller pursuant to Article II.
Section 11.08 NOTICES. All notices required or permitted hereunder
shall be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Houston, Texas business day next following the day when placed in
the mail, postage prepaid, certified or registered, addressed to the appropriate
party or parties, at the address of such party set forth below (or at such other
address as such party may designate by written notice to all other parties in
accordance herewith):
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(i) if to Apple, addressed to it at:
Apple Orthodontix, Inc.
Xxx Xxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn.: Xxxxxx X. Xxxxxxxx, President
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Xxxxxxx & Xxxxxx, L.L.P.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.;
(ii) if to an Owner, addressed to them at their address set forth in
Section 2.04 of the Disclosure Statement; and
(iii) if to the Seller, addressed to it at:
Western New York Orthodontic Care, P.C.
0000 Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxx
with copies (which shall not constitute notice for purposes of this
Agreement) to:
XxXxx & Xxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx Xxxxxx, Esq.
Section 11.09 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
Section 11.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any party hereto as a result of any breach or default
hereunder by any other party hereto shall impair any such right, power or
remedy, nor shall it be construed, deemed or interpreted as a waiver of or
acquiescence in any such breach or default, or of any similar breach or default
occurring later;
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nor shall any waiver of any single breach or default be construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11 TIME. Time is of the essence in the performance of
this Agreement in all respects.
Section 11.12 REFORMATION AND SEVERABILITY. If any provision of this
Agreement is invalid, illegal or unenforceable, that provision shall, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties hereto as
expressed herein, and if such a modification is not possible, that provision
shall be severed from this Agreement, and in either case the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
Section 11.13 REMEDIES CUMULATIVE. No right, remedy or election
given by any term of this Agreement shall be deemed exclusive, but each shall be
cumulative with all other rights, remedies and elections available at law or in
equity.
Section 11.14 RESPECTING THE IPO. The Seller acknowledges and agrees
that: (a) no firm commitment, binding agreement or promise or other assurance of
any kind, whether express or implied, oral or written, exists at the date hereof
that the Registration Statement will become effective or that the IPO will occur
at a particular price or within a particular range of prices or occur at all;
(b) neither Apple or any of its Representatives nor any prospective underwriters
in the IPO will have any liability to the Seller, each Owner or any of their
respective Affiliates or associates for any failure of (i) the Registration
Statement to become effective (provided, however, that Apple will use its
reasonable best efforts to cause the Registration Statement to become effective
prior to December 31, 1997) or (ii) the IPO to occur at a particular price or
within a particular range of prices or to occur at all; and (c) the decision of
Seller and each Owner to enter into this Agreement has been or will be made
independent of, and without reliance on, any statements, opinions or other
communications of, or due diligence investigations that have been or will be
made or performed by, any prospective underwriter relative to Apple or the IPO.
The Underwriter shall have no obligation to Seller or with respect to any
disclosure contained in the Registration Statement.
ARTICLE XII
TERMINATION
Section 12.01 TERMINATION OF THIS AGREEMENT. (a) This Agreement may
be terminated at any time prior to the Closing solely:
(i) by the mutual written consent of Apple and the Seller;
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(ii) by the Seller, on the one hand, or by Apple, on the other hand,
if the transactions contemplated by this Agreement to take place at the
Closing shall not have been consummated by December 31, 1997, unless the
failure of such transactions to be consummated results from the willful
failure of the party seeking to terminate this Agreement to perform or
adhere to any agreement required hereby to be performed or adhered to by
it prior to or at the Closing or thereafter on the IPO Closing Date; or
(iii) by the Seller, on the one hand, or by Apple, on the other
hand, if a material breach or default shall be made by the other party in
the observance or in the due and timely performance of any of the
covenants, agreements or conditions contained herein.
(b) This Agreement may be terminated after the Closing solely:
(i) by Apple or the Seller if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 New York City business days
after the date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Acquisition will be deemed for all purposes to have been abandoned and of no
force or effect.
Section 12.02 LIABILITIES IN EVENT OF TERMINATION. If this Agreement
is terminated pursuant to Section 12.01, there shall be no liability or
obligation on the part of any party hereto except (a) as provided in Section
11.07 and (b) to the extent that such liability is based on the breach by that
party of any of its representations, warranties or covenants set forth in this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
APPLE ORTHODONTIX, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Printed Name: Xxxxxxx X. Xxxxxx
Title: Vice President and Chief
Financial Officer
SELLER:
By: /s/ Xxxxxxx X. Xxxxxx, D.D.S.
Printed Name: Xxxxxxx X. Xxxxxx, D.D.S.
Title: President
OWNER:
By: /s/ Xxxxxxx X. Xxxxxx, D.D.S.
Printed Name: Xxxxxxx X. Xxxxxx, D.D.S.
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