Exhibit 2.5
AFFILIATION AGREEMENT AND AGREEMENT AND PLAN OF MERGER
THIS AFFILIATION AGREEMENT AND AGREEMENT AND PLAN OF MERGER is entered
into as of the 29th day of March 1997, by and among Omega Orthodontics, Inc., a
Delaware corporation ("OMEGA"); Xxxx X. Xxxxxxx, D.D.S. ("Xx. Xxxxxxx"), who is
duly licensed to practice orthodontics in the state of Texas (the "State"); Xxxx
X. Xxxxxxx, D.D.S., M.S., Inc., a Texas professional corporation (the
"Orthodontic Entity"); and Omega Orthodontics of Austin, Inc., a Delaware
corporation to be formed and to become a wholly owned subsidiary of OMEGA
("Acquisition" and sometimes referred to herein as the "Surviving Entity") (and
which shall have joined herein by subsequently executing this Agreement).
RECITALS
A. OMEGA provides professional management and marketing services to
orthodontic practices in the United States, which services include providing
practice management systems, office space, equipment, furnishings and active
administrative personnel necessary for the operation of orthodontic practices,
and which services are provided directly or indirectly through management
service organizations.
B. The Orthodontic Entity owns and operates an orthodontic practice with
offices located at 0000 Xxxxxxxxx Xxxxxxx Xxxx, Xxxxxx, Xxxxx 00000 (the
"Orthodontic Offices") and furnishes orthodontic care to the general public
through the services of Xx. Xxxxxxx affiliated with the Orthodontic Entity.
C. Xx. Xxxxxxx presently holds 100% of the issued and outstanding
capital stock of the Orthodontic Entity (the issued and outstanding capital
stock is hereafter referred to herein as the "Interests").
D. Xx. Xxxxxxx owns all of the Interests, and desires to convert the
status of the Orthodontic Entity from a professional entity to a general
purpose entity and to form a new professional corporation or entity to
continue his orthodontic practice at the Orthodontic Offices.
E. OMEGA has conducted a review of the Orthodontic Entity, and has
reviewed the Orthodontic Entity's unaudited financial and operations statement
provided by Xx. Xxxxxxx (the "Financial Statement"), a copy of which is attached
hereto as Exhibit A . Based on its review of the Orthodontic Entity and the
Financial Statement, OMEGA has issued the report (the "Report"), a copy of which
has been furnished to the Orthodontic Entity. The Orthodontic Entity and Xx.
Xxxxxxx have reviewed the Report and OMEGA's literature, and agree with the
Report and the concepts of OMEGA's Exceptional Practice.
F. Subject to the terms and conditions of this Agreement, OMEGA and Xx.
Xxxxxxx have determined that it is in the best interests of each to effect a
merger of the Orthodontic Entity
with and into Acquisition (the "Merger") as provided in Section 2.1 hereof.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged to the full
satisfaction of the parties hereto, the parties hereto agree as follows:
ARTICLE I. ENTITY FORMATION AND CONVERSION
1.1 At the Closing (as defined in Section 2.3 hereof), Xx. Xxxxxxx shall
cause the Orthodontic Entity's charter ("Charter") to be amended to convert the
Orthodontic Entity into a general purpose entity under the laws of the State.
1.2 Xx. Xxxxxxx shall form a new professional entity (the "New PC") under
the laws of the State and, in accordance with the terms of this Agreement,
commence the practice of orthodontics through the New PC.
1.3 OMEGA shall form Acquisition and shall cause Acquisition to join in
this Agreement by subsequently executing this Agreement where indicated below.
ARTICLE II. MERGER
2.1 Merger; Consideration and Payment.
(a) At the Effective Time (as hereinafter defined) and subject to the
terms and conditions hereinafter set forth, the parties hereto agree to cause
the Merger to be consummated by filing with the Delaware Secretary of State and
the State Secretary of State (if required) a Certificate of Merger (the
"Certificate of Merger") in the form required by applicable law, duly executed
and acknowledged by the Surviving Entity, and taking all such further actions as
may be required by law to make the Merger effective. The Merger shall become
effective upon the filing of the Certificate of Merger with the Delaware
Secretary of State and the State Secretary of State (if required) (the
"Effective Time"), and Acquisition will be the surviving entity.
(b) At the Effective Time, the Interests of Orthodontic Entity outstanding
immediately prior to the Effective Time shall, on such date, by virtue of the
Merger and upon surrender to OMEGA of the certificates therefor, duly endorsed
and transferable, free and clear of any liens, encumbrances, restrictions or
claims of any kind (other than those liens, encumbrances, restrictions and
claims expressly disclosed to OMEGA and affirmatively accepted by OMEGA prior to
the Effective Time), without any further action on the part of any holder
thereof, be converted into the right to receive an aggregate consideration (the
"Consideration") of:
(i) Five Hundred Thousand Dollars ($500,000.00) in cash (the "Cash
Component"); and
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(iii) Five Hundred Thousand Dollars ($500,000.00) to be represented
by issuance to Xx. Xxxxxxx of an option to purchase shares of OMEGA common
stock ("OMEGA Stock") at any time within five years of the IPO Closing (as
defined below in Section 2.3), based on a value per share equal to 100% of
the IPO Price (as defined below in Section 2.3) (the "Option Component"),
if the option is exercised, the OMEGA Stock shall thereupon be issued to
Xx. Xxxxxxx, fully paid and nonassessable.
(c) At the Effective Time, each share of stock of Acquisition outstanding
immediately prior to the Effective Time shall, on such date, by virtue of the
Merger and without any action on the part of any holder thereof, continue and
shall be held by OMEGA.
2.2 Adjustment and Audit.
(a) The Consideration is based on the value of the Interests as determined
by OMEGA from the information set forth in the Financial Statement. At OMEGA's
option, OMEGA will cause an audit (the "Audit") of the Financial Statement and
the books and records of the Orthodontic Entity to be completed prior to Closing
to confirm the accuracy and completeness of the information in the Financial
Statement.
(b) The Consideration shall be subject to adjustments at Closing for: (i)
prepaid and underpaid rent and other lease obligations, if the leases are to be
continued after Closing, as well as for other agreed normal and customary
prepaid and underpaid expenses; (ii) any accrued but unpaid salaries, bonuses
and other compensation, fringe and health insurance benefits, employment or
payroll taxes and related employment obligations and (iii) any accounts payable
of the Orthodontic Entity which have accrued prior to the Effective Time and
which remain unpaid as of such time (the "Accounts Payable") in excess of an
amount equal to one-half (1/2) of one "Average" month of gross income from the
Orthodontic Entity. As used herein, Average shall mean an average of the
Accounts Payable of the Orthodontic Entity using the last twelve months prior to
the end of the month immediately preceding the Effective Time.
(c) The adjustments to the Consideration, if any, shall be applied in the
following order of priority; first to the Cash Component, and the balance, if
any, to the Option Component.
2.3 Time and Place of Closing. The closing of the transactions
contemplated hereby (herein called the "Closing") shall be held immediately
before the Effective Time at the offices of Xxxxxxxx & Xxxx, Xxx Xxxxxx Xxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000 on the date of the closing of OMEGA's initial public
offering of its securities (the "IPO Closing") pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") ("IPO"), or at such other place, date or time as may be fixed
by mutual agreement of the parties; provided, however, that in no event shall
the Closing date be extended beyond June 30, 1997. On or before the IPO Closing,
OMEGA will notify the Orthodontic Entity of the projected IPO Closing Date
determined by OMEGA, in its sole discretion. As used herein "IPO Price" shall
mean the initial offering price to the public of OMEGA Stock as reflected on the
cover page of its Prospectus under the Securities Act for the IPO.
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2.4 Filing Certificate of Merger. Contemporaneous with the Closing, the
duly executed Certificate(s) of Merger shall be filed with the Delaware
Secretary of State and the State Secretary of State (if required).
2.5 Delivery of Records, Contracts, Interests. At the Closing Xx. Xxxxxxx
shall deliver or cause to be delivered to OMEGA:
(a) all of the Orthodontic Entity's minute books, stock records and other
company books and records and the Orthodontic Entity's leases, contracts,
employment agreements, non-compete agreements, commitments and rights, with such
consents to the Merger as are necessary to assure Acquisition and OMEGA of the
full benefit of the same.
(b) Evidence of malpractice insurance coverage for the current and five
(5) prior years, and if applicable, evidence of so-called "tail" insurance for
such period naming the Orthodontic Entity (and any successor by merger) as a
co-insured or otherwise assigning to the Orthodontic Entity and its successor by
merger the full benefits thereof.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Representations and Warranties of Xx. Xxxxxxx and the Orthodontic
Entity in the attached Schedule 1 are hereby incorporated as if fully set forth
herein. The Representations and Warranties of OMEGA and Acquisition in the
attached Schedule 2 are hereby incorporated as if fully set forth herein.
Capitalized words and expressions used in this Agreement and which are defined
in said Schedules 1 and 2 shall have the same meaning as they are given therein.
ARTICLE IV. COVENANTS OF XX. XXXXXXX
AND THE ORTHODONTIC ENTITY
Xx. Xxxxxxx and the Orthodontic Entity hereby covenant and agree with
OMEGA and Acquisition as follows:
4.1 Conduct of Business. Between the date of this Agreement and the
Closing, they will do the following unless OMEGA shall otherwise consent in
writing:
(a) conduct its business only in the ordinary course, and refrain from
changing or introducing any method of management or operations except in the
ordinary course of business and consistent with prior practices;
(b) refrain from making any purchase, sale or disposition of any asset or
property other than in the ordinary course of business, from purchasing any
capital asset costing more than $1,000 and from mortgaging, pledging, subjecting
to a lien or otherwise encumbering any of the Interests, the Property or other
assets of the Orthodontic Entity;
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(c) refrain from incurring any contingent or fixed obligations or
liabilities except those that are usual and normal in the ordinary course of
business;
(d) refrain from making any change or incurring any obligation to make a
change in its Charter or By-laws (certified copies of which are attached hereto
as Exhibit C) or authorized or issued capital stock, except as contemplated by
this Agreement;
(e) refrain from declaring, setting aside or paying any dividend or making
any other distribution in respect of capital stock, or making any direct or
indirect redemption, purchase or other acquisition of capital stock, of the
Orthodontic Entity;
(f) use its best efforts to keep intact its business organization, to keep
available its present officers, agents and employees and to preserve the
goodwill of all patients, suppliers, and others having business relations with
it;
(g) not commit or fail to commit any act which would cause Xx. Xxxxxxx or
the Orthodontic Entity to suffer the revocation, suspension or limitation of Xx.
Xxxxxxx'x or the Orthodontic Entity's license.
(h) permit OMEGA or Acquisition and its authorized representatives to have
full access to all its properties, assets, records, tax returns, company
records, contracts and documents and furnish to OMEGA or its authorized
representatives such financial and other Information with respect to its
business or properties as OMEGA may from time to time reasonably request.
4.2 Authorization from Others. Prior to the Closing, they will have
obtained all assignments, authorizations, consents and permits of others
required to permit the consummation by Xx. Xxxxxxx and the Orthodontic Entity of
the transactions contemplated by this Agreement.
4.3 Breach of Representations and Warranties. Promptly upon becoming aware
of the actual, impending or threatened occurrence of any event which would cause
or constitute a breach, or would have caused or constituted a breach had such
event occurred or been known to them prior to the date hereof, of any of their
representations and warranties contained in or referred to in this Agreement,
they shall give detailed written notice thereof to OMEGA and Acquisition and
shall use their best efforts to prevent or promptly remedy the same.
4.4 Consummation of Agreement. Each shall use his or its best efforts to
perform and fulfill all conditions and obligations on his or its part to be
performed and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be fully carried out.
ARTICLE V. COVENANTS OF OMEGA AND ACQUISITION.
OMEGA and Acquisition each hereby covenants and agrees with Xx. Xxxxxxx
and the
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Orthodontic Entity as follows:
5.1 Authorization from Others. Prior to the Closing, each will have
obtained all authorizations, consents and permits of others required to permit
the consummation by it of the transactions contemplated by this Agreement.
5.2 Consummation of Agreement. Each shall use its best efforts to perform
and fulfill all conditions and obligations on its part to be performed or
fulfilled under this Agreement, to the end that the transactions contemplated by
this Agreement shall be fully carried out.
ARTICLE VI. CONDITIONS TO OBLIGATIONS OF OMEGA AND ACQUISITION
The obligations of OMEGA and Acquisition to consummate this Agreement and
the transactions contemplated hereby are subject to the condition that on or
before the Closing the actions required by this Article 6 will have been
accomplished.
6.1 Representations; Warranties; Covenants. Each of the representations
and warranties of the Orthodontic Entity and Xx. Xxxxxxx contained in Schedule 1
shall be true and correct as though made on and as of the Closing, and Xx.
Xxxxxxx and the Orthodontic Entity shall have performed all of his or its
obligations hereunder which by the terms hereof are to be performed on or before
the Closing.
6.2 New PC. Xx. Xxxxxxx shall have formed the New PC under the laws of the
State in order to commence the practice of orthodontics through the New PC. Xx.
Xxxxxxx shall have furnished (i) a certificate of the State Secretary of State
as to the legal existence and professional corporation good standing of New PC;
and (ii) a copy of the resolutions adopted by the board of directors and
stockholders of New PC authorizing and approving the Management Services
Agreement and the Stock Put/Call Option and Successor Designation Agreement.
6.3 Other Agreements. Xx. Xxxxxxx shall have executed and delivered,
or shall have caused the New PC to execute and deliver, to Acquisition a
Management Services Agreement and a Stock Put/Call Option and Successor
Designation Agreement, each having substantially the terms and conditions of
the forms hereof collectively attached hereto as Exhibit D.
6.4 Initial Public Offering. OMEGA shall have completed the IPO.
6.5 Absence of Certain Litigation. There shall not be any injunction,
restraining order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided, or suit, action
or other proceeding which in the reasonable opinion of counsel for OMEGA or
Acquisition is likely to result in the restraint or prohibition of the
consummation of any material transaction contemplated hereby.
6.6 Notices. The Orthodontic Entity shall, at Acquisition's expense,
notify all patients
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and obligors of accounts receivable, and third party payors and others
designated by OMEGA of the Merger and the other transactions contemplated
hereunder pursuant to notices substantially in the form collectively attached
hereto as Exhibit B.
6.7 Financial Condition. The financial condition of the Orthodontic Entity
shall not be materially adversely different from the Financial Statement, as
determined by OMEGA and Acquisition. During the period from the date of the
Financial Statement to the Closing, there shall not have been any material
adverse change in the financial condition, results of operations, business or
prospects of the Orthodontic Entity, nor any material loss or damage to its
assets, whether or not insured, which materially affects the ability of
Orthodontic Entity to conduct its business. The Orthodontic Entity shall have
delivered to OMEGA a certificate, dated the date of Closing, to the foregoing
effect, and further to the effect that there are no Accounts Payable or other
liabilities as of the date of Closing that are not reflected on the Financial
Statement other than those which have been disclosed in writing to and accepted
in writing by OMEGA and Acquisition and which incurred since the date of the
Financial Statement in the ordinary course of business.
6.8 Due Diligence. OMEGA, acting in good faith and in its sole discretion,
shall be reasonably satisfied with the results of its "Due Diligence" on Xx.
Xxxxxxx and the Orthodontic Entity as not reflecting any data or information
which individually or in the aggregate, if previously disclosed, would have
indicated that there was a material adverse change in the business of the
Orthodontic Entity or in the condition or prospects (financial or otherwise) of
the assets, properties, operations, patients, employees or equipment of the
business of the Orthodontic Entity from the information provided prior to the
date hereof. As used herein, Due Diligence shall mean, without limitation, the
results of the Audit of the Financial Statement and of all other matters
(financial or otherwise) related to, or otherwise deemed material by OMEGA or
Acquisition, regarding Xx. Xxxxxxx and the Orthodontic Entity, including
location of the Orthodontic Offices and its demographics, the leases, the
Equipment, insurance, licensing, malpractice issues, liabilities, compliance
with laws and regulations and health surveys.
ARTICLE VII. CONDITIONS TO OBLIGATIONS OF THE
ORTHODONTIC ENTITY AND XX. XXXXXXX
The obligations of the Orthodontic Entity and Xx. Xxxxxxx to consummate
this Agreement and the transactions contemplated hereby are subject to the
condition that on or before the Closing the actions required by this Article 7
will have been accomplished.
7.1 Representations; Warranties; Covenants. Each of the representations
and warranties of OMEGA contained in Schedule 2 shall be true and correct as
though made on and as of the Closing and each of OMEGA and Acquisition shall
have performed all of its obligations hereunder which by the terms hereof are to
be performed on or before the Closing. Each of the representations and
warranties of Acquisition contained in Schedule 2 shall be true and correct on
the day Acquisition joins in this Agreement and as though made on and as of the
Closing
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7.2 Acquisition. OMEGA shall have formed Acquisition and shall have caused
Acquisition to join in this Agreement.
7.3 Other Agreements. OMEGA and Acquisition shall have executed and
delivered to Xx. Xxxxxxx and New PC a Management Services Agreement and a Stock
Put/Call Option and Successor Designation Agreement, each having substantially
the terms and conditions of the forms hereof collectively attached hereto as
Exhibit D.
7.4 Initial Public Offering. OMEGA shall have completed the IPO.
7.5 Absence of Certain Litigation. There shall not be any injunction,
restraining order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided, or suit, action
or other proceeding which in the reasonable opinion of counsel for Xx. Xxxxxxx
is likely to result in the restraint or prohibition of the consummation of any
material transaction contemplated hereby.
ARTICLE VIII. OBLIGATIONS AFTER CLOSING.
8.1 OMEGA Exceptional Practice and the Report Suggestions.
On and after the Closing, Xx. Xxxxxxx agrees to cause the New PC to implement
the suggestions in the Report and the concepts of OMEGA's Exceptional Practice.
8.2 Books and Records. OMEGA and Acquisition shall permit Xx. Xxxxxxx, his
accountants and attorneys, reasonable access to such books and records for the
purpose of preparing such tax returns of Xx. Xxxxxxx as may be required after
the Closing and for other proper purposes approved by OMEGA and Acquisition.
8.3 License. Xx. Xxxxxxx shall maintain all licenses necessary to practice
orthodontics in the State. Xx. Xxxxxxx shall not commit or fail to commit any
act which would cause Xx. Xxxxxxx or the New PC to suffer the revocation,
suspension or limitation of Xx. Xxxxxxx'x or the New PC's license.
ARTICLE IX. INDEMNIFICATION.
9.1 Indemnification By Xx. Xxxxxxx. Subject to the limitations set forth
in Section 9.3, Xx. Xxxxxxx agrees to defend, indemnify and hold each of OMEGA
and Acquisition harmless from and against any damages, liabilities, losses and
expenses (including reasonable counsel fees) of any kind or nature whatsoever
which may be sustained or suffered by OMEGA or Acquisition based upon a breach
of any representation, warranty or covenant made by the Orthodontic Entity or
Xx. Xxxxxxx in this Agreement or in any exhibit, certificate, schedule or
financial statement delivered hereunder, or by reason of any claim, action or
proceeding asserted or instituted growing out of any matter or thing covered by
such representations, warranties or covenants.
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9.2 Indemnification By OMEGA and Acquisition. Subject to the limitations
set forth in Section 9.3, OMEGA and Acquisition, jointly and severally, each
agrees to defend, indemnify and hold Xx. Xxxxxxx harmless from and against any
damages, liabilities, losses and expenses (including reasonable counsel fees) of
any kind or nature whatsoever which may be sustained or suffered by Xx. Xxxxxxx
based upon a breach of any representation, warranty or covenant made by OMEGA or
Acquisition in this Agreement or in any exhibit, certificate, schedule or
financial statement delivered hereunder, or by reason of any claim, action or
proceeding asserted or instituted growing out of any matter or thing covered by
such representations, warranties or covenants.
9.3 Exclusions. Notwithstanding Sections 9.1 and 9.2:
(a) no indemnification shall be payable to the extent any claim is covered
by insurance; and
(b) no indemnification shall be payable with respect to claims asserted
more than five (5) years after the Closing.
9.4 Notice: Defense of Claims. Prompt written notice of each claim for
indemnification hereunder shall be given to the other party, specifying the
amount and nature of the claim, and of any matter which in the opinion of the
claimant is likely to give rise to an indemnification claim. The indemnifying
party shall have the right to participate at its own expense in the defense of
any such matter or its settlement. If, in the opinion of the indemnified party,
its financial condition or business would not be impaired thereby, such party
may authorize the indemnifying party to take over the defense of such matter so
long as such defense is expeditious. Failure to give notice of a matter which
may give rise to an indemnification claim shall not affect the rights of any
party to collect such claim from the other party or its transferees in
liquidation.
9.5 Payment of Claims; Alternative Dispute Resolution. (a) Any
indemnification claims shall be paid or otherwise satisfied by Xx. Xxxxxxx, or
Xx. Xxxxxxx'x transferees in liquidation, within 30 days after notice thereof is
given by OMEGA or Acquisition. In the event Xx. Xxxxxxx indicates in a writing
delivered to OMEGA and Acquisition that he disputes the nature or amount of the
claim, in which event the dispute upon the election of any party hereto after
said 30-day period shall be handled in accordance with this Section.
(b) If a dispute arises under this Agreement which cannot be resolved
informally by the parties, any party may invoke the procedures set forth in
Exhibit D hereto and the parties agree to use these procedures, except paragraph
(c) of this Section 9.5, prior to any party pursuing other available remedies.
The parties will meet and attempt in good faith to resolve any controversy or
claim arising out of or relating to this Agreement.
(c) Notwithstanding anything in this Section 9.5 to the contrary, nothing
in this Section 9.5 shall preclude any party from seeking a preliminary
injunction or other provisional relief, either prior to or during the proceeding
provided for in this section, if in its judgment such
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action is necessary to avoid irreparable damage or to preserve the status quo.
ARTICLE X. MISCELLANEOUS.
10.1 Termination.
(a) At any time prior to the Closing, this Agreement may be terminated (i)
by mutual consent of the parties with the approval of their respective board of
directors or members, (ii) by either if there has been a material
misrepresentation, breach of warranty or breach of covenant by the other party
in its representations, warranties and covenants set forth herein, (iii) by
OMEGA or Acquisition if the conditions stated in Article VI have not been
satisfied at or prior to the Closing, or (iv) by Xx. Xxxxxxx if the conditions
stated in Article VII have not been satisfied at or prior to the Closing.
(b) If the IPO is not successfully completed within six (6) months of this
Agreement, this Agreement may be terminated by OMEGA or Xx. Xxxxxxx upon written
notice to the other party, and if so terminated, all obligations of the parties
hereunder shall terminate without any further liability of either party to the
other, except that each party shall remain obligated in respect of the
provisions of Section 10.3 and 10.7 which shall survive any such termination.
10.2 Survival of Warranties and Other Obligations. All representations,
warranties, agreements, covenants and obligations herein or in any schedule,
exhibit, certificate or financial statement delivered by either party to the
other party incident to the transactions contemplated hereby are material, shall
be deemed to have been relied upon by the other party and shall survive the
Closing regardless of any investigation and shall not merge in the performance
of any obligation by either party hereto.
10.3 Fees and Expenses. Each of the parties will bear its or his own
expenses in connection with the negotiation and the consummation of the
transactions contemplated by this Agreement.
10.4 Notices. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram or facsimile transmission) addressed as provided below and if either
(a) actually delivered at said address, or (b) in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mail, postage prepaid and registered or certified, return receipt
requested, or sent by reputable overnight courier:
If to Xx. Xxxxxxx and the Orthodontic Entity, to:
Xxxx X. Xxxxxxx, D.D.S.
0000 Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
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If to the OMEGA or Acquisition, to:
Omega Orthodontics, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of
delivery thereof.
10.5 Entire Agreement. This Agreement (including all exhibits or schedules
appended to this Agreement and all documents delivered pursuant to the
provisions of this Agreement, all of which are hereby incorporated herein by
reference) together with the Management Services Agreement and the Stock
Put/Call Option and Successor Designation Agreement (including all exhibits and
schedules thereto), taken together, constitute the entire agreement between the
parties, and all promises, representations, understandings, warranties and
agreements with reference to the subject matter hereof and inducements to the
making of this Agreement relied upon by my party hereto, have been expressed
herein or therein.
10.6 Binding Agreement, Successors. This Agreement shall be binding upon,
and shall be enforceable by and inure to the benefit of, the parties named
herein and their respective successors and assigns; provided, however, that this
Agreement may not be assigned by any of the parties without the prior written
consent of all the other parties.
10.7 Confidentiality. As used herein, "Confidential Information" means any
information or data that a party has acquired from another party that is
confidential or not otherwise available to the public, whether oral or written,
including without limitation any analyses, computations, studies or other
documents prepared from such information or data by or for the directors,
officers, employees, agents or representatives of such party (collectively, the
"Representatives"), but excluding information or data which (i) became available
to the public other than as a result of such party's violation of this
Agreement, (ii) became available to such party from a source other than the
other party if that source was not bound by a confidentiality agreement with
such other party and such source lawfully obtained such information or data, or
(iii) is required to be disclosed by applicable law, provided that promptly
after being compelled to disclose any such information or data, the party being
so compelled shall provide prompt notice thereof to the other party so that such
other party may seek a protective order or other appropriate remedy. Each party
covenants and agrees that it and its Representatives shall keep confidential and
shall not disclose all Confidential Information, except to its Representatives
and lenders who need to know such information and agree to keep it confidential.
Each party shall be responsible for any breach of this provision by its
Representatives. In the event that the Closing does not occur, each party will
promptly return to the other all copies of such other party's Confidential
Information.
10.8 Governing Law; Severability. This Agreement shall be deemed a
contract made under the laws of the State of Delaware and, together with the
rights and obligations of the
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parties hereunder, shall be construed under and governed by the laws of such
state. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision hereof.
10.9 Referrals. Nothing in this Agreement shall be construed as an offer
or payment to the other party or any affiliate of the other party of any cash or
other remuneration whether directly or indirectly, overtly or covertly,
specifically for patient referrals or for recommending or arranging the
purchase, lease or order of any item or service. The Consideration to be
received upon consummation of the Merger represents the fair market value of the
Orthodontic Entity and is not in any way related to or dependent upon referrals
by and between OMEGA, Acquisition and Xx. Xxxxxxx.
10.10 Further Assurances. Following the execution of this Agreement, Xx.
Xxxxxxx, the Orthodontic Entity, OMEGA and Acquisition each agrees:
(a) to deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement, and the transactions contemplated herein;
(b) to confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally or in writing of any
change or event resulting in or which, insofar as can reasonably be foreseen
could result in, a material adverse effect on such party or which would cause or
constitute a material breach of any of the representations, warranties or
covenants of such party contained herein; and
(c) to provide the other (or its counsel) promptly with copies of all
filings made by such party with any state or federal governmental entity in
connection with this Agreement or the transactions contemplated hereby.
10.11 Counterparts; Section Headings; Gender. This Agreement may be
executed, accepted and delivered in any number of counterparts, but all
counterparts shall together constitute but one and the same instrument. The
underlined section headings are inserted for convenience of reference only and
are not to be construed as part of this Agreement. The use of the masculine or
neuter gender includes each of the other genders.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
/s/ Xxxx X. Xxxxxxx D.D.S.
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Printed Name: Xxxx X. Xxxxxxx, D.D.S.
Xxxx X. Xxxxxxx, D.D.S., M.S., Inc.
By: /s/ Xxxx X. Xxxxxxx D.D.S.
------------------------------
Xxxx X. Xxxxxxx, D.D.S.
Its
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Duly Authorized
OMEGA ORTHODONTICS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Printed Name: Xxxxxx X. Xxxxxxxx
Its President and Chief Executive Officer
Duly Authorized
JOINDER
Omega Orthodontics of Austin, Inc. hereby joins in this Agreement as if
an original signator hereto.
Omega Orthodontics of Austin, Inc.
By:
------------------------------------
Printed Name:
----------------------
Its
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Duly Authorized
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Exhibit A
Financial Statement
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Exhibit B
Notices
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Exhibit C
Orthodontic Entity's Charter and
By-Laws
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Exhibit D
Draft Management Services Agreement and
Stock Put/Call Option and Successor Designation Agreement
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Exhibit E
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
A. Method of Invoking ADR Procedures
1. These procedures may be invoked by any party to an agreement which
incorporates these procedures by giving written notice to the other of the
dispute and designating a person with decision-making authority (the
"representative") to act on behalf of the disputing party regarding the dispute.
The other party shall be required to respond to the disputing party's notice
within five (5) business days by designating in writing its own representative.
A party may choose more than one person to represent it. If a party appoints
only one representative, one or more of its officers may nonetheless attend such
meetings.
2. The parties, each acting through its representative, shall meet at a
mutually acceptable time and place within five business days after the
non-disputing party designates its representative to the other. At that meeting,
the parties shall attempt in good faith to negotiate a resolution of the
dispute, or failing that, to agree on a method for resolving the claim or
dispute.
3. If, within ten (10) business days after the first meeting or within
such longer period of time as the parties may mutually agree, the parties have
not succeeded in negotiating a resolution of the claim or dispute or agreeing on
a dispute resolution mechanism, they shall submit the dispute to mediation in
accordance with the procedures set forth herein.
4. The parties will jointly appoint a mutually acceptable mediator to
mediate the dispute. If the parties are unable to agree on a mutually acceptable
mediator within five (5) days after the conclusion of the negotiations described
in paragraph 3 above, then the parties shall select a neutral third party from
either the Center for Public Resources, New York, New York ("CPR") Panels of
Neutrals, the American Arbitration Association ("AAA") or the Association of
Attorney Neutrals ("AAN"), with the assistance of such organization, unless the
parties agree otherwise in finding a mutually acceptable mediator.
5. Acquisition shall bear 50% and the New PC and Xx. Xxxxxxx shall bear
50% of the fees and costs of the mediator and any fees and costs of CPR, AAA or
AAN.
6. The parties agree to participate in good faith in the mediation and
negotiations related thereto for a period of thirty (30) days from appointment
of a mediator by any of the parties or the CPR, AAA or AAN.
B. Mediation procedures
1. The mediator shall be neutral and impartial.
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2. The mediator shall control the procedural aspects of the mediation. The
parties will cooperate fully with the mediator.
(a) The mediator is free to meet and communicate separately with each
party.
(b) The mediator will decide when to hold joint meetings with the
parties and when to hold separate meetings. There shall be no
stenographic record of any meeting. Formal rules of evidence will
not apply.
(c) The mediator may request that there be no direct communication
between the parties or between their attorneys without the
concurrence of the mediator.
3. Each party may be represented by more than one person, e.g., one or
more of its officers and an attorney. Each party will have a representative
fully authorized to negotiate a settlement of the dispute present.
4. The process will be conducted expeditiously.
5. The mediator will not transmit information received from any party to
another party or any third person unless authorized to do so by the party
transmitting the information.
6. The entire process is confidential. The parties and the mediator will
not disclose information regarding the process, including settlement terms, to
third persons, unless the parties otherwise agree. The process shall be treated
as a compromise negotiation for purposes of the Federal Rules of Evidence and
state rules of evidence.
7. The parties will refrain from pursuing administrative and/or judicial
remedies during the mediation process, except as otherwise expressly provided in
the agreement which incorporates these procedures.
8. Unless all parties and the mediator otherwise agree in writing,
(a) The mediator will be disqualified as a witness, consultant or expert
in any pending or future investigation, action or proceeding
relating to the subject matter of the mediation (including any
investigation, action or proceeding which involves persons not party
to this mediation); and
(b) The mediator and any documents and information in the mediator's
possession will not be subpoenaed in any such investigation, action
or proceeding, and all parties will oppose any effort to have the
mediator and documents subpoenaed.
9. If the dispute goes into arbitration, the mediator shall not serve as
an arbitrator,
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unless the parties and the mediator otherwise agree in writing.
10. The mediator, if a lawyer, may freely express views to the parties on
the legal issues of the dispute.
11. The mediator shall not be liable for any act or omission in connection
with the mediation.
12. The mediator may withdraw at any time by written notice to the parties
(i) for overriding personal reasons, (ii) if the mediator believes that a party
is not acting in good faith, or (iii) if the mediator concludes that further
mediation efforts would not be useful.
C. Binding Arbitration
If the parties do not resolve the dispute through mediation within the
period provided in Part A above, the parties shall submit the matter to binding
arbitration before AAA, AAN or CPR, to a qualified sole arbitrator in accordance
with the then current CPR Rules for Non-Administered Arbitration of Business
Disputes or comparable AAA or AAN rules. The sole arbitrator shall be agreed
upon by the parties within twenty (20) days after either party elects to submit
any issue to arbitration or, failing that, shall be selected by the organization
to whom the parties selected for arbitration. A qualified arbitrator is one who
is familiar with the principal subject matter of the issues to be arbitrated
such as by way of example, healthcare services industry matters, management
consulting services generally or business law/corporate matters generally.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction. The arbitrator shall not have the authority to award
multiple, punitive or consequential damages under any circumstances. If the
party initially raising the dispute to be resolved is New PC or Xx. Xxxxxxx, the
arbitration shall be held in Boston, Massachusetts, and if the party initially
raising the dispute to be resolved is the MSO or OMEGA, the arbitration shall be
held in Austin, Texas.
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Schedule 1
Representations and Warranties of
Xx. Xxxxxxx and Orthodontic Entity to OMEGA and Acquisition
Each of the Orthodontic Entity and Xx. Xxxxxxx hereby represents and
warrants to OMEGA and Acquisition as follows:
1. Organization and Qualification of the Orthodontic Entity. The
Orthodontic Entity is a duly formed and organized professional corporation under
the laws of the State. The Orthodontic Entity is a legally existing professional
corporation under the State Professional Corporation Act (the "Act") and no
event has occurred which alone or after the passage of time would result in the
dissolution of the Orthodontic Entity. The Orthodontic Entity has the full power
to conduct business as currently conducted by the Orthodontic Entity and to own
and lease the property it purports to own. The copies of any articles of
organization or incorporation and by-laws, as defined in the Act, of the
Orthodontic Entity which are currently in effect, and all amendments thereto
(collectively, the "Charter and By-Laws"), certified by Xx. Xxxxxxx, attached
hereto as Exhibit C are complete and correct.
2. Authorization of Transaction. All necessary action, company or
otherwise, has been taken by the Orthodontic Entity to authorize the execution
of the Agreement by Xx. Xxxxxxx, and the delivery and performance of this
Agreement and the transactions contemplated hereby, and the Agreement is the
valid and binding obligation of the Orthodontic Entity and Xx. Xxxxxxx,
enforceable against the Orthodontic Entity and Xx. Xxxxxxx in accordance with
its terms.
3. Present Compliance with Obligations and Laws. Except as disclosed on
Exhibit X attached to this Schedule, there is not: (a) any violation of the
Charter or By-Laws; (b) a default in the performance of any obligation,
agreement or condition of any debt instrument from Xx. Xxxxxxx or the
Orthodontic Entity which (with or without the passage of time or the giving of
notice) affords to any person the right to accelerate any material indebtedness
or terminate any right; (c) a default of or breach of (with or without the
passage of time or the giving of notice) any other contract to which Xx. Xxxxxxx
or the Orthodontic Entity is a party or by which their assets are bound; or (d)
any violation of any law, regulation, administrative order or judicial order
applicable to Xx. Xxxxxxx or the Orthodontic Entity, or their business or
assets.
4. No Conflict of Transaction With Obligations and Laws.
(a) Neither the execution, delivery and performance of this Agreement, nor
the performance of the transactions contemplated hereby, will: (i) constitute a
breach or violation of Orthodontic Entity's Charter or By-Laws; (ii) conflict
with or constitute (with or without the passage of time or the giving of notice)
a breach of, or default under, any debt instrument to which Xx. Xxxxxxx or the
Orthodontic Entity is a party, or give any person the right to accelerate any
indebtedness or terminate any right; (iii) constitute (with or without the
passage of time or giving of notice) a default under or breach of any other
agreement, instrument or obligation to which the Orthodontic Entity or Xx.
Xxxxxxx is a party or by which their assets are bound; or (iv)
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result in a violation of any law, regulation, administrative order or judicial
order applicable to the Orthodontic Entity, Xx. Xxxxxxx, their business or
assets.
(b) Except as disclosed on the attached Exhibit X to this Schedule, the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby by the Orthodontic Entity do not require the consent,
waiver, approval, authorization, exemption of or giving of notice to any
governmental authority.
5. Investigations and Licenses.
(a) The Orthodontic Entity and Xx. Xxxxxxx have all necessary licenses to
practice orthodontics in the State.
(b) Neither the Orthodontic Entity nor Xx. Xxxxxxx is subject to any
investigation, whether threatened, current or pending, under which the
Orthodontic Entity or Xx. Xxxxxxx may be required to forfeit or suffer the
revocation, suspension or limitation of Xx. Xxxxxxx'x or the Orthodontic
Entity's license to practice orthodontics and neither the Orthodontic Entity nor
Xx. Xxxxxxx is subject to any investigation, whether threatened, current or
pending by a commercial third-party payor.
6. Financial Statement. Attached as Exhibit A to the Agreement is the
Financial Statement of the Orthodontic Entity. To the best knowledge of Xx.
Xxxxxxx, the Financial Statement is complete and correct and fairly presents in
all material respects the financial position of the Orthodontic Entity as at the
date of such statement and the results of its operations for the period then
ended, in accordance with generally accepted accounting principles consistently
applied throughout the periods covered thereby for the periods covered thereby.
7. Capitalization and the Interests. The authorized capital of the
Orthodontic Entity consists of the Interests. All of the Interests have been
validly issued and are fully paid and non-assessable. There are no options,
warrants, rights or other agreements or commitments obligating the Orthodontic
Entity or Xx. Xxxxxxx to issue or sell the Interests and there are no
pre-emptive rights with respect to any Interests. Xx. Xxxxxxx is the beneficial
and record owner of the Interests. Xx. Xxxxxxx has good title to the Interests,
free and clear of any liens, encumbrances or restrictions of any kind. The
Interests are not subject to any voting or similar agreement.
8. Property; Liens; Condition.
(a) Except as set forth on Exhibit X to this Schedule, the Orthodontic
Entity has good and marketable title in fee simple to all of its owned real and
personal property, including without limitation, all machinery and equipment
used or owned by the Orthodontic Entity (the "Equipment") free of liens and
encumbrances (the "Property"). All the Property owned or leased by the
Orthodontic Entity is in good repair, has been well maintained, substantially
conforms with all applicable ordinances, regulations and zoning or other laws.
The Equipment is in good working order.
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(b) No other entity or person owns any of the assets necessary for the
operation of the Orthodontic Entity. The Orthodontic Entity does not operate any
of its practice through any other entities or persons.
9. Payment of Taxes. The Orthodontic Entity has filed all federal, state
and local income, excise or franchise tax returns, real estate and personal
property tax returns, sales and use tax returns and other tax returns required
to be filed and has paid all taxes owing except taxes which have not yet accrued
or otherwise become due for which adequate provision has been made in the
Financial Statement. All transfer, excise or other taxes payable by reason of
the Merger pursuant to the Agreement shall be paid or provided for by the
Orthodontic Entity after the Closing out of the Consideration to be received
upon consummation of the Merger.
10. Absence of Undisclosed Liabilities and Changes.
(a) As of the date of the Financial Statement, the Orthodontic Entity had
no liabilities of any nature, whether accrued, absolute, contingent or otherwise
(including without limitation liabilities as guarantor or otherwise with respect
to obligations of others, or liabilities for taxes due or then accrued or to
become due), except (i) liabilities stated or adequately reserved against on the
Financial Statement, (ii) liabilities not in excess of $5,000 arising in the
ordinary course of business since the date of the Financial Statement, and (iii)
liabilities disclosed in Exhibit X to this Schedule. There is no fact which
materially adversely affects, or may in the future (so far as can now be
reasonably foreseen) materially adversely affect, the business, properties,
operations or condition of the Orthodontic Entity which has not been
specifically disclosed herein or in Exhibit X to this Schedule.
(b) Except as disclosed in Exhibit X to this Schedule, since the date of
the Financial Statement there has not been:
(i) any change in the financial condition, properties, assets,
liabilities, business or operations of the Orthodontic Entity, which
change by itself or in conjunction with all other such changes, whether or
not arising in the ordinary course of business, has been materially
adverse with respect to the Orthodontic Entity;
(ii) any mortgage, encumbrance or lien placed on any of the
Interests or the Property, or the property subject to any lease, or which
remains in existence on the date hereof or at the time of Closing; or
(iii) any obligation or liability incurred by the Orthodontic Entity
other than obligations and liabilities incurred in the ordinary course of
business and disclosed on Exhibit X attached to this Schedule.
11. Litigation. Except for matters described on Exhibit X to this
Schedule, there is no action, suit, claim, proceeding or investigation pending
or, to the knowledge of the Orthodontic Entity or Xx. Xxxxxxx, threatened
against the Orthodontic Entity or Xx. Xxxxxxx, at law or in equity, or before or
by any Federal, state, municipal or other governmental department,
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commission, board, bureau, agency or instrumentality or governmental inquiry
pending or, to the knowledge of the Orthodontic Entity or Xx. Xxxxxxx,
threatened against or involving Xx. Xxxxxxx or the Orthodontic Entity, and there
is no basis for any of the foregoing, and there are no outstanding court orders,
court decrees, or court stipulations to which the Orthodontic Entity or Xx.
Xxxxxxx is a party which question this Agreement or affect the transactions
contemplated hereby, or which will result in any materially adverse change in
the business, properties, operations, prospects, assets or in the condition,
financial or otherwise, of Xx. Xxxxxxx or the Orthodontic Entity.
12. Insurance. The Orthodontic Entity has possessed adequate occurrence
Professional liability coverage for the five (5) years prior to the date of this
Agreement protecting the Orthodontic Entity and Xx. Xxxxxxx from any
professional malpractice liability that might arise because of the Orthodontic
Entity's or Xx. Xxxxxxx'x practice activities over the preceding five (5) years.
Prior to the Closing, the New PC shall have obtained and shall continue to
maintain, at its cost, Occurrence Medical Malpractice Liability Insurance for
Xx. Xxxxxxx and the New PC. The Orthodontic Entity possesses adequate insurance
coverage for its Property.
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EXHIBIT X
Exceptions to Representations and
Warranties of Xx. Xxxxxxx and
Orthodontic Entity to OMEGA and Acquisition
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Schedule 2
Representations and Warranties of
OMEGA and Acquisition to Xx. Xxxxxxx and Orthodontic Entity
Each of OMEGA and Acquisition hereby represents and warrants to
Orthodontic Entity and Xx. Xxxxxxx as follows:
1. Organization. That it is a corporation duly organized, validly existing
and in good standing under the laws of Delaware with full corporate power to own
or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is conducted
by it.
2. Authorization of Transaction. All necessary action, corporate or
otherwise, has been taken by it to authorize the execution, delivery and
performance of this Agreement, and this Agreement is a valid and binding
obligation of it enforceable against it in accordance with its terms, subject to
laws of general application affecting creditor's rights generally.
3. Litigation. There is no litigation pending or, to its knowledge,
threatened against it which would prevent or hinder the consummation of the
transactions contemplated by this Agreement.
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