AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
AMONG
AMERICAN DENTAL PARTNERS, INC.,
INNOVATIVE PRACTICE CONCEPTS, INC.,
CIGNA DENTAL HEALTH, INC.,
AND
CIGNA HEALTHCARE OF ARIZONA, INC.
February 8, 1999
TABLE OF CONTENTS
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Page
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BACKGROUND INFORMATION............................................................. 1
ARTICLE I ASSET PURCHASE AND SALE.................................................. 1
(S)1.1 Asset Purchase and Sale.............................................. 1
(S)1.2 Excluded Assets...................................................... 2
(S)1.3 No Liabilities Assumed............................................... 4
(S)1.4 Purchase Price....................................................... 4
(S)1.5 Closing.............................................................. 5
(S)1.6 Conveyance Documents................................................. 5
(S)1.7 Possession........................................................... 6
(S)1.8. Joint Notice of Sale; No Use of CIGNA Dental Name.................... 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF BUYER................................. 6
(S)2.1 Organization and Standing............................................ 6
(S)2.2 Power and Authority.................................................. 7
(S)2.3 Conflicts; Consents and Approvals.................................... 7
(S)2.4 Litigation........................................................... 8
(S)2.5 Brokers; Finders Fees................................................ 8
(S)2.7 Compliance with Law.................................................. 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS..................... 9
(S)3.1 Organization and Standing............................................ 9
(S)3.2 Subsidiaries......................................................... 9
(S)3.3 Power and Authority; Capacity........................................ 9
(S)3.4 Consents and Approvals............................................... 10
(S)3.5 Financial Statements................................................. 10
(S)3.6 Undisclosed Liabilities.............................................. 10
(S)3.7 Absence of Certain Changes........................................... 10
(S)3.8 Taxes................................................................ 12
(S)3.9 Compliance with Law.................................................. 12
(S)3.10 [Intentionally Omitted].............................................. 13
(S)3.11 Restrictive Documents or Laws........................................ 13
(S)3.12 Insurance............................................................ 13
(S)3.13 Title to and Condition of Properties................................. 14
(S)3.14 Brokers; Finders..................................................... 15
(S)3.15 Legal Proceedings, Etc............................................... 15
(S)3.16 ERISA................................................................ 15
(S)3.17 Contracts............................................................ 16
(S)3.18 No Conflict or Default............................................... 17
(S)3.19 Books of Account; Records............................................ 17
(S)3.20 Compensation......................................................... 17
(S)3.21 Labor Relations...................................................... 18
(S)3.22 Suppliers............................................................ 18
(S)3.23 Medicare and Medicaid................................................ 18
(S)3.24 Disciplinary Actions................................................. 18
(S)3.25 Seller's Dental Business............................................. 18
(S)3.26 Complete Disclosure.................................................. 19
ARTICLE IV COVENANTS OF THE PARTIES................................................ 19
(S)4.1 Mutual Covenants..................................................... 19
(a) General.............................................................. 19
i
(b) Governmental Matters................................................. 19
(c) Parties' Employees................................................... 19
(d) Employment Matters................................................... 20
(e) Costs of Failure to Obtain Certain Consents.......................... 22
(f) Transition Services.................................................. 23
(g) Post-Closing Cooperation............................................. 23
(S)4.2 Covenants of Seller.................................................. 25
(a) Conduct of Business.................................................. 25
(b) Y2K Compliance and Remediation....................................... 26
(c) Exclusive Rights..................................................... 26
(d) Access to Records and Other Due Diligence............................ 27
(e) Disclosures.......................................................... 27
(f) Employee Retention................................................... 27
(g) Notices of Certain Events............................................ 27
(h) [Intentionally omitted].............................................. 28
(i) Noncompetition....................................................... 28
(j) Injunctive Relief.................................................... 29
(k) [Intentionally Omitted].............................................. 29
(l) Leases for Seller Facilities......................................... 29
(m) Patient Records...................................................... 29
(n) Dental Benefit Plans................................................. 29
(S)4.3 Covenants of Buyer................................................... 29
(a) Representations and Warranties....................................... 29
(b) Notices of Certain Events............................................ 29
(c) Leases for Seller Facilities......................................... 30
(d) Injunctive Relief.................................................... 30
(e) Non-Competition...................................................... 30
(f) Y2K Compliance and Remediation....................................... 30
ARTICLE V CONDITIONS............................................................... 31
(S)5.1 Mutual Conditions.................................................... 31
(a) Legal Prohibition.................................................... 31
(b) Governmental Approvals............................................... 31
(S)5.2 Conditions to Obligations of Seller.................................. 32
(a) Representations and Warranties....................................... 32
(b) Performance of Agreement............................................. 32
(c) Certificate.......................................................... 32
(d) Opinion of Counsel................................................... 32
(e) Authority............................................................ 32
(f) PPO and Provider Agreements.......................................... 32
(g) Patient Records...................................................... 32
(h) Employment Agreements................................................ 32
(S)5.3 Conditions to Obligations of Buyer................................... 33
(a) Representations and Warranties....................................... 33
(b) Performance of Agreement............................................. 33
(c) Certificate.......................................................... 33
(d) Opinion of Counsel................................................... 33
(e) Authority............................................................ 33
(f) Professional Personnel............................................... 33
(g) Existing Employment and Deferred Compensation Agreements............. 33
(h) Third Party Consents................................................. 33
(i) Material Adverse Change.............................................. 33
(j) Books and Records.................................................... 33
ii
ARTICLE VI TERMINATION AND AMENDMENT............................................... 34
(S)6.1 Termination.......................................................... 34
(a) Termination by Seller................................................ 34
(b) Termination by Buyer................................................. 34
(S)6.2 Amendment............................................................ 35
(S)6.3 Extension; Waiver.................................................... 35
ARTICLE VII INDEMNIFICATION........................................................ 35
(S)7.1 Survival of Representations, Warranties and Agreements............... 35
(S)7.2 Indemnification...................................................... 35
(S)7.3 Limitations on Indemnification....................................... 36
(S)7.5 Procedure For Indemnification with Respect to Non-Third Party Claims. 38
(S)7.6 Right of Setoff...................................................... 38
(S)7.7 Indemnification of Seller............................................ 38
(S)7.8 Insurance Proceeds................................................... 39
ARTICLE VIII MISCELLANEOUS........................................................ 39
(S)8.1 Notices.............................................................. 39
(S)8.2 Non-Waiver........................................................... 40
(S)8.3 Genders and Numbers.................................................. 40
(S)8.4 Headings............................................................. 40
(S)8.5 Counterparts......................................................... 40
(S)8.6 Entire Agreement..................................................... 41
(S)8.7 No Third Party Beneficiaries......................................... 41
(S)8.8 Governing Law........................................................ 41
(S)8.9 Successors; Assignment............................................... 41
(S)8.10 Remedies............................................................. 41
(S)8.11 Expenses............................................................. 42
(S)8.12 Announcements........................................................ 42
(S)8.13 Severability......................................................... 42
iii
DEFINED TERMS LOCATOR LIST
--------------------------
Term Section
---- -------
Accounts 4.1(d)(vi)
Acquisition Proposal 4.2(c)
Additional Documents 7.1(a)
ADP Introduction
Affiliate 3.16 (for (S)3.16 only);
4.2(a) for rest of Agreement)
Agreement Introduction
Applicable Laws 3.9
Asset Purchase Background Information
Assets 1.1
Assignment of Contracts 1.6(c)
Assignment and Assumption Agreement 4.2(m)
Associated 1.1(c)
Assumed Contracts 1.1(d)
Assumed Liabilities 1.3
Assumption Agreement 1.4(b)
Benefit Arrangement 3.16(b)
Buyer Background Information
Cash Consideration Background Information
CDHI Introduction
CDHP of Arizona Background Information
iv
CGLIC 5.2(f)
CHA Introduction
CIGNA Marks 1.8
Closing 1.5
Closing Date 1.5
Code 1.4
Completion Certificate 4.1(h)
Continuing Dentist 4.1(d)(vi)
Continuing Employee 4.1(d)(iv)
Current Patient Records 1.2(a)
Damages 7.2(a)
Deemed Pre-Closing Tax Period 1.3
Deer Valley Facility 4.2(h)
Dental Benefit Plans 3.17
Dental Practice Management Company 4.2(i)(i)(B)
Dental Staff Practice 4.2(i)(i)(A)
Dentist 5.2(g)
Employee Plan 3.16(a)
Employment Transfer Date 4.1(d)(iv)
Entity 3.2
Environmental Laws 3.9
Equipment 1.1(a)
ERISA 3.16(a)
v
Excluded Assets 1.2
Excluded Liabilities 7.2(b)
Financial Statements 3.5
Governmental Programs 3.23
Governmental Reimbursement Laws 3.23
Incidental Acquisition 4.2(i)
Incorporated Documents 8.7
Indemnifiable Claims 7.2(b)
Indemnified Party 7.4(a)
Indemnifying Party 7.4(a)
IPC Introduction
Leases 1.1(e)
Material Adverse Effect 3.7(a)
One-Year Employment Agreement 5.3(g)
Parties Background Information
Permits 3.9
Pre-Closing Period 4.2(b)
Pre-Closing Tax Period 1.3
Proprietary Rights 1.2(m)
Purchase Price 1.4
Response Period 7.4(a)
Restricted Period 4.2(i)
Restricted Territory 4.2(i)
vi
Seller Introduction
Seller Facilities Background Information
Seller Schedules Article III, first paragraph
Seller's Dental Business Background Information
Seller's 401(k) Plan 4.1(d)(vi)
Seller's Indemnifiable Claim 7.4(a)
Service Agreement 1.1(c)
Software Upgrade Project 4.1(h)
Staff Model Employees 4.1(d)(ii)
Stay Bonuses 4.1(d)(iv)
Supplies 1.1(b)
Third-Party Claim 7.4(a)
To the best of Seller's knowledge 3.26
Transition Services Agreement 4.1(f)
vii
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
---------------------------------------------
This Amended and Restated Asset Purchase Agreement (this "Agreement") is
made effective February 8, 1999, among American Dental Partners, Inc., a
Delaware corporation ("ADP"), Innovative Practice Concepts, Inc., an Arizona
corporation ("IPC"), and the following parties (collectively, "Seller"): CIGNA
Dental Health, Inc., a Florida corporation ("CDHI"), and CIGNA Healthcare of
Arizona, Inc., an Arizona corporation ("CHA").
BACKGROUND INFORMATION
----------------------
A. Seller is in the business of providing, or arranging for the provision
of, dental services, at the facilities identified on Exhibit A attached hereto
(the "Seller Facilities"), to patients enrolled in or otherwise covered by
dental and other benefit plans of Seller and its Affiliates (as defined in
(S)4.2(a), below) within the State of Arizona. For purposes of this Agreement,
"Seller's Dental Business" means the business and operations owned and operated
by Seller as a dental care delivery system referred to as the "CIGNA Arizona
Dental Staff Model," consisting of (i) employed dentists, dental hygienists, and
others providing dental care and related services through the Seller Facilities
and (ii) related support and management functions, but specifically excluding
the dental insurance, dental health plan or medical health plan businesses of
Seller and its Affiliates in Arizona, including those conducted by CIGNA Dental
Health Plan of Arizona, Inc., an Arizona corporation ("CDHP of Arizona"). Seller
desires to sell, and ADP and IPC (collectively, "Buyer") desire to purchase,
substantially all of the assets of Seller's Dental Business (the "Asset
Purchase") for total consideration consisting of cash in the amount of
$3,090,000 (the "Cash Consideration"). Buyer and Seller (the "Parties") also
desire to consummate the other transactions contemplated by this Agreement.
B. The boards of directors of the Parties, respectively, have determined
that the Asset Purchase and the other transactions described in this Agreement
are desirable and in the best interests of their respective shareholders.
STATEMENT OF AGREEMENT
----------------------
The Parties hereby acknowledge the foregoing Background Information and
agree as follows:
ARTICLE I
ASSET PURCHASE AND SALE
-----------------------
(S)1.1. Asset Purchase and Sale. On the Closing Date, and on the terms
-----------------------
and subject to (S)1.2, below, and the other conditions described in this
Agreement, Seller shall sell, assign, transfer, convey, and deliver to Buyer,
and Buyer shall purchase from Seller, substantially all of the assets, rights,
and business operations of Seller's Dental Business (the "Assets"), including
without limitation the following:
(a) All furniture, fixtures, and equipment used in Seller's Dental
Business and located at the Seller Facilities, including without limitation
(i) the personal computers in the Seller Facilities (except the personal
computers of Xxxxxx Xxxx and Xxxxxxxxx Xxxxxxxxxx, which personal computers
shall constitute Excluded Assets) and related software applications, (ii)
the Xxxxx Practice Management System and database and related AS400
computer system and all computer hardware and software supporting the Xxxxx
Practice Management System, and (iii) any other computer hardware and
software located at the Seller Facilities (collectively, the "Equipment");
(b) All office and dental supplies used in Seller's Dental Business
and located at the Seller Facilities (collectively, the "Supplies");
(c) The goodwill value of Seller's Dental Business operations as a
going concern, determined by the excess of the Cash Consideration over the
book value of the Assets being purchased by Buyer, provided that the
Parties acknowledge that IPC shall not acquire, nor shall it operate, the
dental practice of Seller, which shall be operated by Associated Dental
Care Providers, P.C., an Arizona professional corporation ("Associated"),
pursuant to the Service Agreement dated January 1, 1998, between IPC and
Associated (the "Service Agreement");
(d) All rights under the agreements set forth on Schedule 1.1(d) (the
"Assumed Contracts"); and
(e) All rights under the leases for Seller Facilities as indicated on
Exhibit A (collectively, the "Leases").
(S)1.2. Excluded Assets. Notwithstanding any other provision of this
---------------
Agreement to the contrary, the following items (the "Excluded Assets") shall be
excluded from the Assets:
(a) All patient records of Seller's Dental Business; provided that,
to the extent permitted by applicable law, records of current patients of
Seller's Dental Business located at the Seller Facilities (the "Current
Patient Records") shall be assigned to and assumed by Associated and
records of non-current patients of Seller's Dental Business shall be kept
available by Seller for Buyer and Associated, upon a commercially
reasonable basis, but only to the extent consistent with the requirements
of applicable law;
(b) All accounts receivable and notes receivable of Seller;
(c) Seller's fee simple interest, if any, in any Seller Facility;
(d) Restricted and unrestricted cash and cash equivalents, including
investments in marketable securities, certificates of deposit, bank
accounts and promissory notes;
2
(e) Subject to (S)1.2(a), any records which by law Seller is required
to retain in its possession;
(f) To the extent permitted by (S)4.2 hereof, all Assets disposed of
or exhausted prior to Closing in the ordinary course of business, including
inventory and prepaid expenses;
(g) Any proprietary information contained in employee or operations
manuals of Seller and its Affiliates;
(h) Any contracts, commitments or agreements other than the Assumed
Contracts and the Leases;
(i) All of Seller's insurance proceeds arising in connection with the
operation of the Assets prior to the Closing;
(j) Any claims or rights related to the Assets (including without
limitation the Assumed Contracts), contractual or otherwise, accruing or
arising prior to the Closing;
(k) All corporate organizational records (including Seller's minute
books) and stock books of Seller;
(l) All Assets which are located outside the Seller Facilities and
which are either used by Seller or its Affiliates in rendering corporate
services to Seller or the Assets or are used or operated by Seller or its
Affiliates on a company-wide or region-wide basis and not exclusively as
part of Seller's Dental Business;
(m) Except to the extent specifically included in the Assets
identified in (S)1.1(a), above, all material names, patents, inventions,
trade secrets, proprietary rights, computer software, trademarks, trade
names, service marks, logos, copyrights and franchises, and all
applications therefor, registrations thereof and licenses, sublicenses or
agreements in respect thereof which Seller owns or has the right to use or
to which Seller is a party, and all filings, registrations or issuances of
any of the foregoing with or by any federal, state, local or foreign
regulatory, administrative or governmental office or offices (all of the
foregoing items being sometimes hereinafter referred to collectively as the
"Proprietary Rights");
(n) Any other assets of Seller's Dental Business which Buyer elects
not to purchase or is prohibited from purchasing under applicable law,
provided that Buyer may require some of the Assets which Buyer does not
purchase to be assigned by Seller to Associated (and assumed by Associated)
to the extent that such assignment and assumption are permitted by
applicable law; and
(o) The assets identified on Schedule 1.2.
3
(S)1.3. No Liabilities Assumed. As of the Closing, Buyer agrees to
----------------------
assume the future payment and performance of all obligations and liabilities
first accruing during, arising out of, or relating to the period after the
Closing under the Assumed Contracts, the Leases, and the Assets (other than the
Excluded Assets), including trade payables, purchase orders, and real estate and
employment taxes accrued or incurred after the Closing (collectively, the
"Assumed Liabilities"). Except as described in the preceding sentence, or unless
otherwise specifically provided in this Agreement, Buyer shall not assume, or in
any way be liable or responsible for, any claims, liabilities, obligations, or
debts of Seller, including without limitation any liabilities of Seller relating
to: (a) taxes payable with respect to Seller's Dental Business during the Pre-
Closing Tax Period (as defined below), including without limitation income
taxes, real estate taxes, or employment taxes; (b) any pension, profit sharing,
or employee benefit plans covering any of the employees of Seller for any period
prior to the Closing; (c) express or implied warranties; (d) any acts or
omissions of Seller or its employees prior to the Closing (including without
limitation those related directly or indirectly to any malpractice claim
asserted against Seller or any dentist or dental specialist employed or
otherwise retained by Seller or any other tort claim asserted against Seller or
any dentist or dental specialist employed or otherwise retained by Seller); (e)
claims for breach of contract; (f) accrued but unpaid compensation, severance,
or bonus obligations of Seller; and (g) other claims of any kind whatsoever, or
any other liabilities of Seller, direct or contingent. For purposes of this
Agreement, "Pre-Closing Tax Period" shall mean the taxable period or portion of
the taxable period that ends on the Closing Date, and items of income, gain,
loss, deduction, and credit for any period attributable to the period of time
before the Closing Date shall be allocated to a deemed Pre-Closing Tax Period
that ends on the Closing Date (the "Deemed Pre-Closing Tax Period") using an
interim closing-of-the-books method, assuming that the Deemed Pre-Closing Tax
Period ended as of the close of business on the Closing Date, unless another
allocation method is mutually agreed upon by Buyer and Seller.
Within 90 days after the Closing Date, Seller and Buyer shall prorate as of
the Closing Date any amounts which become due and payable after the Closing Date
with respect to the Assumed Contracts and the Assets but which relate both to
periods prior to and after the Closing, including property taxes on the Assets
and utilities servicing any of the Assets.
(S)1.4. Purchase Price. The total purchase price for the Assets (the
--------------
"Purchase Price") shall consist of the Cash Consideration and the assumption of
the Assumed Liabilities by Buyer and shall be paid at Closing as follows: (a)
Buyer shall pay the Cash Consideration to Seller by wire transfer, provided
that, if, as of the Closing, the number of Dentists (as defined in (S)5.2(g),
below) who have entered into One-Year Employment Agreements, as contemplated by
(S)5.2(g), below, is less than 20, then the Cash Consideration shall be reduced
(up to an aggregate reduction not to exceed $200,000) by the result obtained
when $40,000 is multiplied by the difference between 20 and such number of
Dentists who have entered into One-Year Employment Agreements; and (b) Buyer
shall assume the Assumed Liabilities by executing and delivering an assignment
and assumption agreement in the form agreed upon by the Parties (the "Assumption
Agreement"), which shall include the assignment and assumption of the Assumed
Contracts.
The Purchase Price shall be allocated among the Assets in accordance with
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and
the applicable regulations
4
thereunder. Seller and Buyer shall use all reasonable efforts to (1) agree upon
a preliminary allocation at or prior to the Closing, and (2) agree upon a final
allocation as soon as practicable after the Closing. The allocation of the
Purchase Price determined under this (S)1.4 shall be binding on the Parties,
shall be used for all purposes on their respective Federal, state, and local
income tax returns, and shall be supported by them in any audits or other
disputes or litigation involving any such returns.
Buyer and Seller shall timely prepare and file all required tax reports and
returns with respect to the allocation of Purchase Price under this (S)1.4, such
as Internal Revenue Service Form 8594 or any equivalent statement, and shall
furnish the other Parties with a copy of any such form or statement no later
than 10 days prior to the required filing date. The Parties shall each pay, and
shall hold the other harmless from and against, one-half of any and all taxes,
assessments, and other charges that may be due and payable, or which relate in
any way, to the transfer of the Assets by Seller to Buyer. Buyer shall
reimburse Seller for the amount of any refund or credit of taxes received by
Buyer with respect to taxes paid by Seller for any Pre-Closing Tax Period.
(S)1.5. Closing. The closing of the Asset Purchase (the "Closing") shall
-------
be held at the offices of O'Melveny & Xxxxx LLP, 000 00xx Xx., X.X., Xxxxxxxxxx,
X.X. 00000-0000, or at such other location as the Parties may mutually agree,
commencing at 10:00 a.m., local time, on February 8, 1999 or such other date as
may be reasonably designated by the Parties; provided that the Closing shall be
effective as of 12:01 a.m., local time, on February 8, 1999, unless otherwise
agreed by Seller and Buyer (the "Closing Date").
(S)1.6. Conveyance Documents. At the Closing, Seller shall convey,
--------------------
assign, and transfer the Assets (other than the Excluded Assets) to Buyer
through the execution and delivery of the following documents:
(a) A xxxx of sale of the Equipment and Supplies, in the form
agreed upon by the Parties;
(b) An assignment of the Assets constituting intangible assets,
including without limitation the goodwill but excluding the Excluded
Assets, in the form upon by the Parties;
(c) An assignment and assumption agreement for the Leases as
described in (S)5.1(c)(ii), below, together with separate assignments
of the Leases for recording purposes in form reasonably satisfactory
to Buyer and Seller and consistent with the assignment and assumption
agreement for the Leases;
(d) The Assumption Agreement; and
(e) Such other assignment or conveyance documents as may be
reasonably requested by Buyer.
5
Subject to (S)(S)3.18, 4.3(i), and 5.3(h), below, if consents or approvals
of any other parties are required for any conveyances, assignments, subleases,
or transfers contemplated by this Agreement, Seller shall exercise all
commercially reasonable efforts (including preparation or review (or both) of
consent and assignment documents by Seller's counsel and the payment of legal
fees incurred by Seller in connection with such preparation or review or related
activities) to cause those consents or approvals to be obtained prior to the
Closing; provided that Seller's obligation to make payments to any third party
in connection with obtaining such third party's consent or approval shall be
limited to reasonable administrative fees required by such third party in an
amount not to exceed $200 per consent or approval. Seller shall begin the
process of obtaining such consents or approvals at 9:00 a.m. on Monday, January
18, 1999; provided that Seller shall have no obligation to contact directly (by
letter, phone call, or otherwise) any third party from whom consent or approval
may need to be obtained until Tuesday, January 19, 1999 after Seller has made
its scheduled announcement to Continuing Dentists and Continuing Employees (each
as defined in (S)4.1(d), below) regarding the transactions contemplated by this
Agreement.
(S)1.7. Possession. Buyer shall be entitled to exclusive possession of
----------
the Assets as of the Closing.
(S)1.8. Joint Notice of Sale; Use of CIGNA Dental Name. After the
----------------------------------------------
Closing, Seller and Buyer shall cooperate in the preparation of a written notice
to the current patients of the Seller Facilities of the Asset Purchase and
distribute such notice to all such patients. Seller and Buyer shall share
equally all costs and expenses incurred in connection with the fulfillment of
the obligation described in the preceding sentence. For up to one month after
the date of the notice distribution described in this (S)1.8, Buyer may retain
existing signage at the Seller Facilities bearing the name "CIGNA Dental" or any
related marks and logos (the "CIGNA Marks"); provided that, during such one-
month period, Buyer shall use commercially reasonable efforts to install new or
different signage which does not use the CIGNA Marks. Buyer shall have no right
to use the CIGNA Marks (a) for any purpose whatsoever after such one-month
period or (b) other than as provided in this Section 1.8 during such one-month
period. Buyer acknowledges Seller's exclusive right, title, and interest in and
to the CIGNA Marks and will not, at any time, do or cause to be done any act or
thing contesting or in any way impairing or tending to impair any part of such
right, title, and interest (except as specifically permitted under this (S)1.8).
Seller retains the right to use the CIGNA Marks in the manner or style in which
Seller has done so prior to the date of this Agreement and in any other lawful
manner.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
In order to induce Seller to enter into this Agreement, Buyer hereby
jointly and severally represents and warrants to Seller as follows:
(S)2.1. Organization and Standing. IPC is a corporation duly organized,
-------------------------
validly existing, and in good standing under the laws of the State of Arizona.
IPC has full corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where
6
now owned, leased, used, operated and conducted and is duly qualified or
licensed as a foreign corporation and is in good standing in each jurisdiction
in which the character or location of the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified or licensed would not
have a material adverse effect on IPC. ADP is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
ADP has full corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted and is duly qualified or licensed as a foreign
corporation and is in good standing in each jurisdiction in which the character
or location of the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified or licensed would not have a material adverse effect
on ADP.
(S)2.2 Power and Authority. IPC has all requisite corporate power and
-------------------
authority to enter into this Agreement and to perform its obligations under this
Agreement. This Agreement and the transactions contemplated by this Agreement
have been duly and validly authorized by all necessary corporate action on the
part of IPC. This Agreement has been duly executed and delivered by IPC and
constitutes the legal, valid and binding obligation of IPC, enforceable against
IPC in accordance with its terms. ADP has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations under this
Agreement. This Agreement and the transactions contemplated by this Agreement
have been duly and validly authorized by all necessary corporate action on the
part of ADP. This Agreement has been duly executed and delivered by ADP and
constitutes the legal, valid and binding obligation of ADP, enforceable against
ADP in accordance with its terms except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally.
(S)2.3 Conflicts; Consents and Approvals. The execution and delivery
---------------------------------
of this Agreement by Buyer and the consummation by Buyer of the transactions
contemplated in this Agreement will not:
(a) Violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with the
giving of notice, the passage of time or otherwise, would constitute a
default) under, or entitle any third party (with the giving of notice,
the passage of time or otherwise) to terminate, accelerate or call a
default under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets
of ADP or IPC under any of the terms, conditions or provisions of the
certificate or articles of incorporation or bylaws, each as amended to
date, of ADP and IPC, respectively, or any note, bond, mortgage,
indenture, deed of trust, license, contract, undertaking, agreement,
lease or other instrument or obligation to which ADP or IPC is a party
and which is material to ADP or IPC;
(b) Violate any order, writ, injunction, decree, statute, rule
or regulation, applicable to ADP or IPC or their respective properties
or assets; or
7
(c) Require any action or consent or approval of, or review by,
or registration with any third party, court or governmental body or
other agency, instrumentality or authority, other than such actions,
if any, taken in respect of federal and state securities laws as may
be contemplated by this Agreement.
(S)2.4 Litigation. There is no suit, claim, action, proceeding
----------
or investigation pending or, to the best knowledge of Buyer, threatened against
ADP or IPC which, individually or in the aggregate, is reasonably likely to have
a material adverse effect on ADP, IPC and ADP's subsidiaries, taken as a whole,
or a material adverse effect on the ability of ADP or IPC to consummate the
transactions contemplated in this Agreement. Neither ADP or IPC is subject to
any outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, individually or in the aggregate, would have a material
adverse effect on it or a material adverse effect on the ability of ADP or IPC
to consummate the transactions contemplated by this Agreement.
(S)2.5 Brokers; Finders Fees. The transactions contemplated by
---------------------
this Agreement were not submitted to Buyer or any of its Affiliates by any
broker or other person entitled to a commission, finders fee or like payment
thereon, and were not, with the consent of Buyer or any of its Affiliates,
submitted to Seller or any of its Affiliates by any broker or other person, and
none of the actions of Buyer or any of its Affiliates has given rise to any
claim by any person for a commission, finder's fee or like payment against any
of the Parties.
(S)2.6 Financial Condition.
-------------------
(a) IPC is a wholly-owned subsidiary of ADP.
(b) Each of IPC and ADP is able to pay its debts as they
mature, has capital sufficient to carry on its business as it is now
being operated, and has assets which exceed its liabilities
(determined in accordance with generally accepted accounting
principles).
(c) Neither IPC nor ADP intends to incur debts beyond its
ability to pay them as they mature.
(d) Neither IPC nor ADP has filed or contemplates filing a
petition commencing a voluntary case under any chapter of the Federal
bankruptcy laws, and no involuntary petition seeking recognition,
arrangement, adjustment, or composition of IPC or ADP has been filed
by any person and not dismissed prior to the date of this Agreement.
(e) Buyer has, and will have at the Closing, through its
credit facility with its lender or otherwise, immediately available
funds in cash which are sufficient to pay the Cash Consideration and
any other amounts payable by Buyer pursuant to this Agreement and
otherwise to consummate the transactions contemplated by this
Agreement.
(S)2.7 Compliance with Law. Buyer has complied and is in
-------------------
compliance in all material respects with all applicable laws, statutes, orders,
rules, regulations, policies and guidelines
8
promulgated, and all judgments, decisions and others entered, by any federal,
state, local or foreign court or governmental authority, agency, or
instrumentality relating to Buyer or its business or properties, except where
the failure to comply, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
---------
In order to induce Buyer to enter into this Agreement, Seller hereby
jointly and severally represents and warrants to Buyer as follows (the Schedules
referred to in this Article and delivered by Seller to Buyer pursuant to this
Agreement are referred to collectively as the "Seller Schedules").
(S)3.1. Organization and Standing. CDHI is a corporation duly organized,
-------------------------
validly existing, and in good standing under the laws of the State of Florida
with full corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. CHA is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Arizona with full corporate
power and authority to own, lease, use and operate its properties and to conduct
its business as and where now owned, leased, used, operated and conducted. CHA
is licensed by the Arizona Department of Insurance as a Health Care Services
Organization. Seller is duly qualified to conduct Seller's Dental Business in
each jurisdiction in which the character or location of the property currently
leased or operated by it or the nature of the business conducted by it makes
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect.
(S)3.2. Subsidiaries. Except as described on Schedule 3.2, Seller owns
------------
no subsidiary corporations which are involved, directly or indirectly, in
Seller's Dental Business, nor does Seller own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise (hereinafter, simply "entity") which is
involved, directly or indirectly, in Seller's Dental Business.
(S)3.3. Power and Authority; Capacity. Seller has all requisite
-----------------------------
corporate power and authority to enter into this Agreement and to perform its
obligations under this Agreement. This Agreement and the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary corporate action on the part of Seller. This Agreement has been duly
executed and delivered by Seller and constitutes the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors' rights generally. No other action or
proceeding by or in respect of Seller is or was necessary to authorize this
Agreement or the consummation of the transactions contemplated by this
Agreement. None of Seller's Affiliates is required to be a party to this
Agreement in order for the transactions contemplated hereby to be consummated as
described herein.
9
(S)3.4. Consents and Approvals. Except for the consents described in
----------------------
Schedule 3.4, neither the execution and delivery of this Agreement by Seller nor
the consummation by Seller of the transactions contemplated by this Agreement
require or will require any action, consent, or approval of, or review by, or
registration with, any court or governmental body or other agency,
instrumentality or authority.
(S)3.5. Financial Statements. Set forth on Schedule 3.5 are the pro
--------------------
forma financial statements for Seller's Dental Business as of the dates
indicated thereon (collectively, the "Financial Statements"). The Financial
Statements: (a) consist of solely an operating statement (no balance sheet is
included), (b) are unaudited, have been prepared by management from, and are
consistent with, the books and records of Seller's Dental Business, but have not
been prepared in accordance with generally accepted accounting principles, and
(c) fairly present, in all material respects, the results of operations of
Seller's Dental Business for the periods indicated on the Financial Statements.
Schedule 3.5 also contains a fixed asset listing as of the date hereof.
(S)3.6. Undisclosed Liabilities. Except as set forth in Schedule 3.6 or
-----------------------
as otherwise contemplated by this Agreement, Seller's Dental Business has no
material liability or obligation of any nature (whether liquidated,
unliquidated, accrued, absolute, contingent or otherwise and whether due or to
become due) except:
(a) Those arising under agreements or other commitments specifically
identified in Schedules 3.17-1 and 3.17-2;
(b) Trade payables and other current liabilities incurred in
transactions in the ordinary course of business consistent with past
practices which are or will be properly reflected on the books and records
of Seller's Dental Business (to the extent required by Seller's usual
business practices to be so reflected) and are not inconsistent with the
other representations, warranties and agreements of Seller set forth in
this Agreement; and
(c) Assumed Liabilities.
(S)3.7. Absence of Certain Changes. Except as set forth in Schedule 3.7
--------------------------
or as otherwise contemplated by this Agreement, since November 30, 1998, there
has not been:
(a) Any material adverse change in or effect on the business,
operations, assets, properties, prospects, rights or condition (financial
or otherwise) of Seller's Dental Business, taken as a whole, or the ability
of Seller to consummate the transactions contemplated by this Agreement,
or, to the best of Seller's knowledge, any occurrence, circumstance, or
combination thereof which reasonably would be expected to result in any
such material adverse change or effect (a "Material Adverse Effect");
(b) Any transaction entered into or carried out by Seller in the
operation of Seller's Dental Business other than in the ordinary and usual
course of Seller's Dental Business;
10
(c) Any borrowing or agreement to borrow funds by Seller in
connection with Seller's Dental Business (except from Affiliates of Seller
in the ordinary course of Seller's Dental Business consistent with past
practices), any incurring by Seller of any other obligation or liability
(contingent or otherwise) in the operation of Seller's Dental Business,
except current liabilities incurred in the usual and ordinary course of
business (consistent with past practices), or any endorsement, assumption
or guarantee of payment or performance of any loan or obligation of any
other individual, firm, corporation or other entity by as part of Seller's
Dental Business;
(d) Any material change in Seller's method of conducting Seller's
Dental Business or any material change in Seller's accounting principles or
practices or its method of application of such principles or practices in
connection with Seller's Dental Business;
(e) Any mortgage, pledge, lien, security interest, hypothecation,
charge or other encumbrance imposed or agreed to be imposed on or with
respect to the property or assets of Seller which are used in the operation
of Seller's Dental Business;
(f) Any sale, lease or other disposition of, or any agreement to
sell, lease or otherwise dispose of any of the properties or assets of
Seller which are used in the operation of Seller's Dental Business, other
than in the usual and ordinary course of business consistent with past
practices;
(g) Any purchase of or any agreement to purchase assets for use in
Seller's Dental Business (other than inventory purchased in the ordinary
course of business consistent with past practices) for an amount in excess
of $10,000 for any one purchase made by Seller or $25,000 for all such
purchases made by Seller or any lease or any agreement to lease, as lessee,
any capital assets for use in Seller's Dental Business with payments over
the term thereof to be made by Seller exceeding an aggregate of $10,000;
(h) Any loan or advance made by Seller to any individual, firm,
corporation or other entity in the operation of Seller's Dental Business;
(i) Any modification, waiver, change, amendment, release, rescission
or termination of, or accord and satisfaction with respect to, any material
term, condition or provision of any material contract, agreement, license
or other instrument to which Seller is a party and which is directly
related to the operation of Seller's Dental Business, other than any
satisfaction by performance in accordance with the terms thereof in the
usual and ordinary course of business;
(j) Any labor dispute or disturbance materially adversely affecting
the business operations or condition (financial or otherwise) of Seller's
Dental Business, including without limitation the filing of any petition or
charge of unfair labor practice with any governmental or regulatory
authority, efforts to effect a union representation election, actual or
threatened employee strike, work stoppage or slow down; or
11
(k) Any disciplinary or other similar action, proceeding, or, to the
best of Seller's knowledge, investigation taken by the Arizona Board of
Dentistry, Arizona Department of Insurance, or other governmental or
accrediting board, agency, or authority against or with respect to Seller's
Dental Business or any employee or, to the best of Seller's knowledge,
independent contractor (who is a practicing dentist or hygienist) of Seller
who is involved in Seller's Dental Business.
(S)3.8. Taxes. Except where failure to do so would not have a Material
-----
Adverse Effect, Seller has duly, properly, and timely filed all federal, state,
local and foreign tax returns and tax reports required to be filed by it with
respect to the Assets and Seller's Dental Business prior to the date of this
Agreement. All such returns and reports are true, correct and complete in all
material respects.
(S)3.9. Compliance with Law. Except as set forth in Schedule 3.9-1, in
-------------------
the operation of Seller's Dental Business, Seller has complied and is in
compliance in all material respects with all applicable laws, statutes, orders,
rules, regulations, policies and guidelines promulgated, and all judgments,
decisions and orders entered, by any federal, state, local or foreign court or
governmental authority, agency, or instrumentality relating to Seller's Dental
Business or its properties used in connection therewith, including without
limitation all zoning, fire, safety, building, and asbestos laws, ordinances,
regulations and requirements; Environmental Laws (defined below); Governmental
Reimbursement Laws (defined in (S)3.23); Title VII of the Civil Rights Act of
1964, as amended; the Fair Labor Standards Act, as amended, the Occupational
Safety and Health Act of 1970, as amended, the Americans with Disabilities Act
of 1990; all applicable federal, state and local laws, rules and regulations
relating to employment, and all applicable laws, rules and regulations governing
payment of minimum wages and overtime rates, and the withholding and payment of
taxes from compensation of employees; all laws, rules, and regulations relating
to the licensing or credentialing of dentists, endodontists, periodontists,
prosthodontists, pediatric dentists, orthodontists, oral surgeons, certified
registered dental assistants, hygienists, and other dental care professionals
involved with Seller's Dental Business; all federal or state laws and
regulations relating to fraud and abuse; and all related laws, ordinances,
regulations and requirements (collectively, the "Applicable Laws"), except where
the failure so to comply, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect. Except as set forth in Schedule
3.9-1, Seller has not been given written notice of any violation of any of the
Applicable Laws in connection with the operation of Seller's Dental Business
which violation has not been remedied in full (without any remaining liability
of Seller).
Schedule 3.9-2 includes a list of all franchises, licenses, permits,
consents, authorizations, approvals and certificates necessary for Seller to
carry on Seller's Dental Business as presently conducted (collectively, the
"Permits"), each of which currently is owned by Seller or one of its Affiliates
and is valid and in full force and effect, except where failure to be so owned
or to be valid or in full force or effect would not reasonably be expected to
have a Material Adverse Effect. Except as set forth in Schedule 3.9-3, Seller is
not in material violation of any of the Permits, and there are no pending or, to
the best of Seller's knowledge, threatened proceedings
12
which would reasonably be expected to result in the revocation, cancellation or
inability of Seller to renew any Permit.
Except as set forth on Schedule 3.9-3, in the operation of Seller's Dental
Business (a) Seller has not in the past five years disposed of, or contracted
for the disposal of, hazardous wastes, hazardous substances, infectious or
medical waste, radioactive waste or sewage sludge, and (b) to the best of
Seller's knowledge, no such wastes, substances, or sludge generated by Seller
have finally come to be located on any site which is or has been (including as a
potential or suspect site) included in any published federal, state, or local
"superfund" or other list of hazardous or toxic waste sites.
For purposes of this Agreement, "Environmental Laws" shall mean all
federal, state, and local environmental laws, statutes, ordinances, and codes
relating to the protection of public health or the environment (including
without limitation any water, land, subsurface, air, fish, wildlife, and other
natural resources) or governing the use, storage, treatment, generation,
transportation, processing, handling, management, production, or disposal of
solid wastes, medical wastes, toxic substances, hazardous wastes, hazardous
substances, petroleum, petroleum-based products, radio-nuclides, or other
radioactive materials and the rules, regulations, policies, guidelines,
interpretations, decisions, orders, and directives of federal, state, and local
government agencies and authorities with respect thereto.
(S)3.10. [Intentionally Omitted].
---------------------
(S)3.11. Restrictive Documents or Laws. With the exception of the matters
-----------------------------
listed in Schedule 3.11, Seller is not a party to or bound under any mortgage,
lien, lease, agreement, contract, instrument, law, order, judgment or decree, or
any similar restriction not of general application, which materially and
adversely affects, or reasonably would be expected so to affect: (a) the
condition of Seller's Dental Business (financial or otherwise); or (b) the
continued operation of Seller's Dental Business after the Closing on
substantially the same basis as it is currently operated.
(S)3.12. Insurance. Seller has been and is insured with respect to the
---------
conduct of Seller's Dental Business, including without limitation Seller's
property used in connection therewith, in such amounts and against such risks as
are sufficient for compliance with Applicable Laws and as are adequate to
protect Seller's Dental Business and such property in accordance with normal
industry practice. Such insurance is and has been provided by insurers which
are, to the best of Seller's knowledge, financially sound and reputable. Set
forth in Schedule 3.12 is a true, correct and complete list of all insurance
policies and bonds, if any, in force covering Seller's Dental Business,
including without limitation Seller's property used in connection therewith, for
which Seller is named as an insured party, or for which Seller has paid any
premiums, and such lists correctly state the name of the insurer, the name of
each insured party, the type and amount of coverage, deductible amounts, if any,
and the expiration date of each such policy or bond. Except as disclosed in
Schedule 3.12, all such policies or bonds are currently in full force and effect
and no notice of cancellation or termination has been received by Seller with
respect to any such policy or bond. Seller will continue all such policies and
bonds in full force and effect
13
through the Closing. All premiums due and payable on such policies and bonds on
or before the Closing Date have been or will be paid on or before the Closing
Date.
(S)3.13. Title to and Condition of Properties. Except as set forth in
------------------------------------
Schedule 3.13-1, Seller has good, valid and marketable title to all of its owned
assets of every kind, nature and description, tangible or intangible, wherever
located, which constitute owned property now used in and necessary for the
conduct of Seller's Dental Business as presently conducted. Except as set forth
in Schedule 3.13-2, all such assets are owned free and clear of all mortgages,
pledges, liens, security interests, encumbrances and restrictions of any nature
whatsoever, including without limitation: (a) rights or claims of parties in
possession; (b) easements or claims of easements; (c) encroachments, overlaps,
boundary line or water drainage disputes or any other matters; (d) any lien or
right to a lien for services, labor or material furnished; (e) special tax or
other assessments; (f) options to purchase, leases, tenancies, or land
contracts; (g) contracts, covenants, or reservations which restrict the use of
such properties; and (h) violations of Environmental Laws and zoning, fire
safety, building, and other laws, ordinances and regulations applicable to such
properties. The current uses of all such assets are in compliance with all
private restrictions, and such uses are legal conforming uses. Except as set
forth in Schedule 3.13-3, no financing statement under the Uniform Commercial
Code or similar law naming Seller as debtor and including such assets as
collateral has been filed in any jurisdiction, and Seller is not a party to or
bound under any agreement or legal obligation authorizing any party to file any
such financing statement. Schedule 3.13-4 contains a complete and accurate legal
description of the real property on which the Seller Facilities are located,
which constitute all of the real property owned or leased by Seller and used for
the provision of dental care in the conduct of Seller's Dental Business.
Except as set forth in Schedule 3.13-5, all real property and structures
and all machinery, equipment, and other tangible personal property used by
Seller which are material to the operation of Seller's Dental Business, are
suitable for the purpose or purposes for which they are being used (including
full compliance with all Applicable Laws relating to such use), and are in good
condition and repair. To the best of Seller's knowledge, there are no material
structural defects in the exterior walls or the interior bearing walls, the
foundation or the roof of any building or other such structure used by Seller in
the operation of Seller's Dental Business, and the electrical, plumbing, heating
systems, and air conditioning systems of all such structures are in good
operating condition. No hazardous waste or toxic material has been disposed of,
discharged on, or leaked from, or has otherwise contaminated, any real property
used by Seller for the provision of dental care in the operation of Seller's
Dental Business. No hazardous waste or toxic material is stored upon or in any
real property used by Seller for the provision of dental care in the operation
of Seller's Dental Business (including without limitation any underground
storage tanks), except hazardous or infectious waste or toxic materials
generated in the ordinary course of business. Seller has not received any notice
of non-compliance or violations or threatened non-compliance or violations of
any Environmental Laws relating to any real property used by Seller for the
provision of dental care in the operation of Seller's Dental Business. Neither
Seller nor any of its agents has caused or permitted, and, to the best of
Seller's knowledge, no other party has caused or permitted, any hazardous waste
or toxic material to be disposed of or discharged or leaked from, or otherwise
contaminate any real property used by Seller for the provision of dental care in
the operation of Seller's Dental Business. The utilities
14
servicing the real properties used by Seller for the provision of dental care in
the operation of Seller's Dental Business are adequate to permit the continued
operation of Seller's Dental Business, and there are no pending or, to the best
of Seller's knowledge, threatened zoning, condemnation or eminent domain
proceedings, building, utility or other moratoria, or injunctions or court
orders which would materially affect such continued operation.
(S)3.14. Brokers; Finders. The transactions contemplated by this Agreement
----------------
were not submitted to Seller or any of its Affiliates by any broker or other
person entitled to a commission, finder's fee or like payment thereon, and were
not, with the consent of Seller, submitted to Buyer or any of its Affiliates by
any broker or other person, and none of the actions of Seller or any of its
Affiliates has given rise to any claim by any person for a commission, finder's
fee or like payment against any of the Parties.
(S)3.15. Legal Proceedings, Etc. Except as listed and described in
----------------------
Schedule 3.15, there are currently no material claims, proceedings, suits or, to
the best of Seller's knowledge, investigations pending or, to the best of
Seller's knowledge, threatened against or relating to Seller in connection with
Seller's Dental Business (or any of the current employees or independent
contractors of Seller in connection with the Seller's Dental Business), by or
before any federal, state, local or foreign court or governmental body, agency,
or authority. There are no such claims, proceedings, suits or, to the best of
Seller's knowledge, investigations pending or, to the best of Seller's
knowledge, threatened for the purpose of enjoining or preventing the
consummation of the Asset Purchase or any other transaction contemplated by this
Agreement or otherwise challenging the validity or propriety of the transactions
contemplated by this Agreement. Except as disclosed in Schedule 3.15, Seller is
not subject to any judgment, order or decree, or any governmental restriction
applicable to it, which would reasonably be expected to have a Material Adverse
Effect, or which would reasonably be expected to materially adversely affect the
ability of Seller to conduct Seller's Dental Business as it is currently being
conducted. Except as listed and described in Schedule 3.15, to the best of
Seller's knowledge, there are no facts, circumstances, or occurrences which
would reasonably be expected to give rise to any material claims, proceedings,
or suits against Seller or any of the employees or independent contractors of
Seller in connection with Seller's Dental Business.
(S)3.16. ERISA. No liability with respect to or arising in connection with
-----
or directly or indirectly from any Employee Plan (as defined below) or Benefit
Arrangement (as defined below) or the employment by Seller of any of its
employees at any time will or may be assigned or attributed to IPC in connection
with or as a result of the Asset Purchase or any other transaction contemplated
by this Agreement. For purposes of this Agreement: (a) "Employee Plan" means
each "employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA") which (i) is subject to any
provision of ERISA and (ii) is or was at any time during the last five years
maintained, administered or contributed to by Seller or any affiliate (as
defined below) and covers any employee or former employee of Seller or any
affiliate or under which Seller or any affiliate has any liability; and (b)
"Benefit Arrangement" means each employment, severance or other similar
contract, arrangement or policy and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits or for deferred
15
compensation, profit-sharing, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits which (i) is not an Employee Plan, (ii) is entered into, maintained
or contributed to, as the case may be, by Seller or any of its affiliates, and
(iii) covers any employee or former employee, any shareholder or former
shareholder of Seller or any of its affiliates. For purposes of this section,
"affiliate" of any person or entity means any other person or entity which,
together with such person or entity, would be treated as a single employer under
Section 414 of the Code or is an "affiliate," whether or not incorporated, as
defined in Section 407(d)(7) of ERISA, of such person or entity.
(S)3.17. Contracts. Schedule 3.17-1 lists each contract, purchase order,
---------
agreement, lease, executory commitment, arrangement and understanding (written
or oral) to which Seller is a party which is related to Seller's Dental Business
and which (a)(i) involves payments or commitments in excess of $10,000 (in the
aggregate) for any purchase order or $10,000 (in the aggregate) for any other
contract, agreement, lease, commitment, arrangement, or understanding, or (ii)
extends beyond one year (or both), or is otherwise material to the condition or
operation of Seller's Dental Business, unless cancelable on 60 or fewer days'
notice without any liability, penalty or premium, (b) is with any present or
former shareholder, employee, agent or independent contractor of Seller, or any
person related by blood or marriage to any such person, or any person or entity
controlling, controlled by, or under common control with any such person, and is
not terminable at will, (c) provides for the future purchase by Seller of any
materials, equipment, services or supplies and either continues for a period of
more than 12 months (including periods covered by any option to renew by either
party), provides for a price materially in excess of current market prices, or
is in excess of normal operating requirements over its remaining term, or (d)
involves any of the following: (i) any borrowings or guarantees; (ii) any
contracts containing covenants purporting to limit the freedom of Seller to
compete in any line of business or provide any of its services in any geographic
area; (iii) any obligation or commitment which materially limits the freedom of
Seller to sell, lease, license or otherwise provide its services; (iv) any
contract or agreement the performance of which would reasonably be expected to
result in a loss to Seller; or (v) any obligation or commitment providing for
indemnification or responsibility for the obligations or losses of any person.
All of such contracts, agreements, leases, commitments, and other arrangements
and understandings are valid and binding, in full force and effect and
enforceable in accordance with their respective provisions.
The current patient base for Seller's Dental Business consists primarily of
patients who are enrolled in or otherwise receive dental services under dental
benefit plans offered or administered by CDHI and its subsidiaries (the "Dental
Benefit Plans"). Schedule 3.17-2 lists the following, as of the January 1999
capitation, with respect to patients enrolled at Seller Facilities under Dental
Benefit Plans: (A) the number of covered persons assigned to the Seller
Facilities; (B) a list of the ten largest employer groups as determined by the
number of covered persons assigned to the Seller Facilities, including, for each
such employer group, the current patient charge schedule(s), the effective date
of the group, and the current dollar capitation per member per month; (C) a list
of each employer group that terminated its dental benefit plans with CDHI during
1998 if such termination resulted in a disenrollment of 100 or more patients
from the Seller Facilities; (D) a list of each employer group that has submitted
a written notification to cancel its dental benefit plans with CDHI and which
cancellation would be reasonably expected
16
to result in a disenrollment of 100 or more patients from the Seller Facilities;
and (E) a list of patient charge schedules (to the extent not listed under (B),
above).
Seller is not in violation of nor in default in respect of nor has there
occurred an event or condition which, with the passage of time or giving of
notice (or both), would constitute a default of any contract, agreement, lease,
commitment, arrangement or understanding of the type described in the preceding
provisions of this section.
Schedule 3.17-3 contains a correct and complete list of (1) all dentists
employed by Seller or (2) all dentists otherwise engaged by Seller since
September 30, 1998.
(S)3.18. No Conflict or Default. Except as described in Schedule 3.18,
----------------------
solely with respect to Seller's Dental Business, neither the execution and
delivery of this Agreement by Seller, nor compliance by Seller with the terms
and provisions of this Agreement, including without limitation the consummation
of the transactions contemplated by this Agreement, will violate in any material
respect any Applicable Laws or Permits or conflict with or result in the breach
of any term, condition or provision of the articles or certificate of
incorporation, by-laws, or other organizational documents of Seller or, in any
material respect, of any agreement, deed, contract, undertaking, mortgage,
indenture, writ, order, decree, restriction, legal obligation or instrument to
which Seller is a party or by which Seller, or any of Seller's assets, are or
may be bound or affected, or constitute a default (or an event which, with the
giving of notice, the passage of time, or otherwise, would constitute a default)
thereunder, or result in the creation or imposition of any lien, security
interest, charge or encumbrance, or restriction of any nature whatsoever with
respect to any Assets, or give to others any interest or rights, including
rights of termination, acceleration or cancellation, in or with respect to any
of the assets, contracts or business of Seller.
(S)3.19. Books of Account; Records. Seller has given Buyer access to the
-------------------------
books and records maintained by Seller pertaining to Seller's Dental Business,
which books and records, in reasonable detail, accurately and fairly reflect in
all material respects the activities of Seller with respect to Seller's Dental
Business.
(S)3.20. Compensation. Schedule 3.20 lists and describes the current
------------
compensation of all employees of Seller who work within Seller's Dental Business
and whose total current salary and bonus exceeds $35,000 annually and any
consultant, advisor, or independent contractor who works within Seller's Dental
Business and whose compensation exceeds $5,000 annually. Except as disclosed in
Schedule 3.20, there are no other forms of compensation paid to any employees or
independent contractors of Seller who work within Seller's Dental Business.
Except as set forth on Schedule 3.20, Seller has no agreement or understanding
with any of the employees, representatives or independent contractors of Seller
who work within Seller's Dental Business which would reasonably be expected to
influence any such person not to become associated with Buyer and Associated
from and after the Closing or from serving Buyer or Associated after the Closing
in a capacity similar to the capacity presently served. Except as set forth in
Schedule 3.20, to the best of Seller's knowledge, no employee of Seller who
works within Seller's Dental Business has notified Seller that such employee has
a present intention to leave the employ of Seller or has taken any action
indicative of leaving the employ of Seller.
17
(S)3.21. Labor Relations. Except as set forth in Schedule 3.21, no
---------------
employee of Seller who works within Seller's Dental Business is represented by
any labor union or covered under any collective bargaining agreement, and there
is no unfair labor practice complaint against Seller pending before the National
Labor Relations Board which relates to Seller's Dental Business. There is no
labor strike, dispute, slowdown or stoppage, or any union organizing campaign,
actually pending or, to the best of each Seller's knowledge, threatened against
or involving Seller and which relates to Seller's Dental Business. Except as set
forth in Schedule 3.21, no labor grievance relating to Seller's Dental Business
has been filed with Seller; no arbitration proceeding which has had or may have
such an effect has arisen out of or under a collective bargaining or other labor
agreement and is pending; and no claim therefor has been asserted. Except as set
forth in Schedule 3.21, no collective bargaining or other labor agreement
relating to Seller's Dental Business is currently being negotiated by Seller,
and no union or collective bargaining unit represents Seller's employees who
work within Seller's Dental Business. Seller has experienced no material work
stoppage or other material labor difficulty within Seller's Dental Business
during the past five years.
(S)3.22. Suppliers. Except as set forth in Schedule 3.22, no supplier of
---------
products or services to Seller's Dental Business has provided Seller with
written notice that such supplier shall stop, or decrease the rate of, or
substantially increase its fees for, supplying products or services to Seller's
Dental Business prior to, or to Buyer as the assignee of the Assets following
the consummation of, any of the transactions contemplated by this Agreement.
(S)3.23. Medicare and Medicaid. Except as set forth in Schedule 3.23,
---------------------
neither Seller nor any other dentist or other dental care professional employed
or retained by Seller is a provider of dental services through Medicare,
Medicaid, or any other governmental health care reimbursement program
(collectively, the "Governmental Programs"), nor has or does Seller or any such
dentist or other dental care professional received or expect to receive any
reimbursement under any such Governmental Programs. To the best of Seller's
knowledge, no employee or independent contractor or other agent of Seller who
works within Seller's Dental Business has violated in any material respect any
law, statute, rule, regulation, or order under or relating to any Governmental
Program, including without limitation those relating to fraud and abuse (the
"Governmental Reimbursement Laws").
(S)3.24. Disciplinary Actions. Except as set forth in Schedule 3.24,
--------------------
during the one year period ending on December 31, 1998, there have been no
disciplinary or other similar actions, proceedings, or investigations taken by
the Arizona Board of Dentistry, the Arizona Department of Insurance, or other
governmental or accrediting board, agency, or authority against or with respect
to Seller in connection with the operation of Seller's Dental Business or, to
the best of Seller's knowledge, any current employee or independent contractor
(who is a practicing dentist or hygienist) of Seller who works within Seller's
Dental Business.
(S)3.25. Seller's Dental Business. Seller's Dental Business consists of
------------------------
providing, or arranging for the provision of, dental services at the Seller
Facilities to patients enrolled in or otherwise covered by the Dental Benefit
Plans or dental benefit plans of Seller's Affiliates. Seller's Dental Business
provides services to no dental benefit plans other than the Dental
18
Benefit Plans. Seller has no current intention to cease offering Dental Benefit
Plans through Seller and its Affiliates.
(S)3.26. Knowledge Definition. Whenever used in any representation or
--------------------
warranty set forth in this Article III, the phrase "to the best of Seller's
knowledge" or similar language signifies that no information has come to the
attention of any person listed on Schedule 3.26, or upon due inquiry would have
come to the attention of any such person, which gives such person, or upon such
inquiry would have given such person, actual knowledge contrary to such
representation or warranty.
ARTICLE IV
COVENANTS OF THE PARTIES
------------------------
(S)4.1. Mutual Covenants.
----------------
(a) General. Each Party shall use all reasonable efforts to
-------
take all actions and do all things necessary, proper or advisable to
consummate the Asset Purchase and the other transactions contemplated by
this Agreement, including without limitation using all reasonable efforts
to cause the conditions set forth in this Article and Article V for which
such Party is responsible to be satisfied as soon as reasonably practicable
and to prepare, execute, acknowledge or verify, deliver, and file such
additional documents, and take or cause to be taken such additional
actions, as any other Party may reasonably request or as may be reasonably
required to effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby. From and after the Closing, Buyer shall
provide to Seller any invoices or correspondence received by Buyer relating
to Seller's Dental Business for the period prior to the Closing Date, and
Seller shall provide to Buyer any such invoices or correspondence received
by Seller for the period from and after the Closing Date.
(b) Governmental Matters. Each Party shall use all reasonable
--------------------
efforts to take any action that may be necessary, proper or advisable in
connection with any notices to, filings with, and authorizations, consents
and approvals of any court, administrative agency or commission, or other
governmental authority or instrumentality that it may be required to give,
make or obtain.
(c) Parties' Employees. During the period beginning on the date
------------------
of this Agreement and ending on the earlier of the Closing or one year
following the termination or expiration of this Agreement pursuant to
(S)6.1, below, (i) Buyer shall not, nor shall Buyer permit any of its
Affiliates which are under its control to, employ any person who, at any
time within the one-year period immediately preceding such employment, was
employed by Seller or CDHP of Arizona, and (ii) Seller shall not, nor shall
Seller permit any of its Affiliates which are under its control to, employ
any person who, at any time within the one-year period immediately
preceding such employment, was employed by IPC, ADP, or Associated. The
foregoing shall not apply to any person hired as a result of
19
contact initiated by such person or any general solicitation of employment
by any Party or its Affiliates.
(d) Employment Matters.
------------------
(i) Assumption of Liabilities. Except as specifically provided
-------------------------
in this Agreement, Seller shall retain all, and Buyer shall not
assume, and shall not be deemed to have assumed, any liability or
responsibility for obligations or liabilities under, with respect to
or in connection with any Employee Plan or to or with respect to any
employee of Seller.
(ii) Identification of Staff Model Employees. At or prior to
---------------------------------------
the Closing, Seller shall deliver to Buyer a Schedule 4.1(d)(ii)
which will contain a complete and correct list of all employees of
Seller and its Affiliates (other than the Dentists) who work at or are
employed exclusively in connection with Seller's Dental Business,
wherever located (including those employees who, as of the Closing
Date, are on temporary leave (whether due to temporary disability or
otherwise) and who are expected to return to active employment with
Seller within six months after the Closing Date), the position held by
each such employee, and the current rate of cash compensation of each
such employee (the "Staff Model Employees"). Unless otherwise
specified on Schedule 4.1(d)(ii), each Staff Model Employee shall be
an employee at will.
(iii) Employment of Dentists. During the Pre-Closing Period,
----------------------
Buyer shall use commercially reasonable efforts to cause Associated to
employ all Dentists listed on Schedule 3.17-3 upon the terms of the
One-Year Employment Agreements. Buyer acknowledges that the terms upon
which employment is offered to each Dentist pursuant to the preceding
sentence will include an annual base salary equal to the annual base
salary currently being paid to such Dentist. The Parties acknowledge
and agree that Dentists who enter into One-Year Employment Agreements
in satisfaction of the condition described in (S)5.3(g), below, shall
receive from Buyer signing bonuses in an aggregate amount of $245,000,
of which $132,000 shall be paid at the Closing in cash and $113,000
(representing a portion of amounts to be paid by Seller) shall be
reimbursed by Buyer to Seller in cash upon receipt by Buyer from
Seller of reasonable documentation that such amount has been paid by
Seller. Buyer shall have no obligation or liability for any
performance or other bonuses payable to the Dentists for 1998 or any
other period ending on or before the Closing, and Seller shall be
responsible therefor.
(iv) Offers of Employment to Staff Model Employees. IPC shall
---------------------------------------------
offer to hire on an at-will basis all Staff Model Employees listed on
Schedule 4.1(d)(ii), effective as of the Closing Date for those Staff
Model Employees who are actively at work as of the Closing Date and,
for those who are not but who return to active employment with Seller
within six months after the Closing Date, effective as of the date
such Staff Model Employee returns to active employment
20
with Seller, on terms which provide each Staff Model Employee with a
rate of cash compensation which is comparable to such Staff Model
Employee's current rate of cash compensation, together with the
benefits package normally offered by IPC to similarly situated
employees in the ordinary course of IPC's business (subject to the
last paragraph of this (S)4.1(d)(iv), below). In addition, for each
Staff Model Employee, such employment will be in a position that is a
reasonable match with such Staff Model Employee's qualifications,
skills, and experience with Seller and will be located within a
reasonable commuting distance from such Staff Model Employee's
personal residence (which shall include, without limitation, such
Staff Model Employee's current commuting distance from his or her
current personal residence). Without in any way affecting the at-will
employment status of each Staff Model Employee who accepts employment
with IPC, IPC shall not reduce the rate of cash compensation of any
such Staff Model Employee during the first twelve months after the
Closing without the consent of such Staff Model Employee. Any Staff
Model Employee who accepts IPC's offer of employment shall be referred
to herein as a "Continuing Employee." The date on which a Staff Model
Employee becomes a Continuing Employee shall be referred to herein as
such Staff Model Employee's "Employment Transfer Date." Buyer shall
have no obligation or liability whatsoever (A) with respect to any
Staff Model Employee who does not accept employment with IPC as
described above or (B) with respect to any Staff Model Employee who is
on temporary leave (whether due to temporary disability or otherwise)
as of the Closing Date and who does not return to active employment
with Seller within six months after the Closing Date. In addition, on
July 1, 1999, Buyer shall pay a bonus (a "Stay Bonus") to each Staff
Model Employee who is a hygienist, as designated on Schedule
4.1(d)(ii), who becomes a Continuing Employee as contemplated by this
(S)4.2(d)(iv), and who remains an employee of IPC continuously from
the Closing Date through July 1, 1999; provided that the amount of the
Stay Bonuses shall not exceed $2,000 per full-time hygienist.
Notwithstanding any provision of this Agreement to the
contrary, from the Closing Date through March 31, 1999, Seller shall
continue to provide to the Continuing Employees and Continuing
Dentists the medical benefits package theretofore provided by Seller
to such persons, and, at the Closing, in addition to the Cash
Consideration, Buyer shall pay $19,800 to Seller as prepaid medical
benefits costs to be applied by Seller to its obligation under this
paragraph.
(v) Severance Pay Plan. IPC agrees to provide to each
------------------
Continuing Employee who is terminated by IPC (other than for cause)
during the one-year period following the Closing a severance payment
equal to two weeks of such Continuing Employee's base compensation for
every year of service to Seller's Dental Business and IPC (including
recognition of existing seniority as described in (S)4.1(d)(vii),
below).
(vi) Defined Contribution Plans. Each Continuing Employee
--------------------------
and each Continuing Dentist (defined below) shall cease to participate
in Seller's 401(k)
21
Plan (defined below) for periods after such Continuing Employee's
Employment Transfer Date or, with respect to any Continuing Dentist,
after the Closing Date. Effective as of the Closing Date or as soon as
practicable thereafter, Seller shall cause all contributions for
periods prior to the Closing Date to be made to the Savings and
Investment Plus Plan of CIGNA Corporation ("Seller's 401(k) Plan") and
shall cause each Dentist who becomes employed by Associated as of the
Closing Date ("Continuing Dentist") and each Continuing Employee to be
fully vested in such Continuing Employee's or Continuing Dentist's
account balances under Seller's 401(k) Plan determined as of the
Closing Date; provided, however, that in the case of a Staff Model
Employee who becomes a Continuing Employee after the Closing Date, the
foregoing provisions of this sentence shall be applied as of the Staff
Model Employee's Employment Transfer Date. Buyer shall have no
liability under, in connection with, or relating to Seller's 401(k)
Plan. Buyer shall make no contributions thereto and no employees of
Buyer shall become eligible to participate therein after the Closing
Date. Seller and Buyer may mutually agree to arrange for the transfer
of Seller's 401(k) Plan accounts (the "Accounts") of the Continuing
Employees and Continuing Dentists who are participants in Seller's
401(k) Plan to one or more defined contribution plans (within the
meaning of Section 3(34) of ERISA) which is or are maintained by Buyer
or its Affiliates for the benefit of eligible Continuing Employees and
Continuing Dentists and which is or are qualified under Section 401(a)
of the Code.
(vii) Certain Other Matters. The terms of each Continuing
---------------------
Employee's and Continuing Dentist's employment with IPC or Associated,
as applicable, shall be in accordance with, as applicable, IPC's or
Associated's usual and customary practices for their respective
employees and include recognition of the existing seniority of all
such Continuing Employees and Continuing Dentists for eligibility,
benefit accrual, and vesting purposes for all periods of service with
Seller or its Affiliates.
(viii) Cooperation. Each of Buyer and Seller shall take all
-----------
actions which it, in its sole discretion, deems necessary or desirable
to implement the provisions of this (S)4.1(d).
(ix) Third Party Beneficiaries. It is understood and
-------------------------
agreed between Buyer and Seller that all provisions contained in this
Agreement with respect to employee benefit plans or employee
compensation or employment are included for the sole benefit of Buyer,
Associated, and Seller and do not and shall not create any right in
any other person, including but not limited to any employee, any
participant in any benefit or compensation plan or any beneficiary
thereof.
(e) [Intentionally omitted].
---------------------
22
(f) Transition Services. At the Closing, the Parties shall enter
-------------------
into a transition services agreement in the form agreed upon by the Parties
(the "Transition Services Agreement").
(g) Post-Closing Cooperation; Preservation of Records. From and after
-------------------------------------------------
the Closing:
(i) Buyer shall cooperate with Seller and its agents in
connection with legal proceedings, regulatory investigations, audits,
or other proceedings against or involving Seller which are related to
dental services provided by Seller prior to the Closing. Such
cooperation shall include by way of illustration and without
limitation: (A) making available promptly upon request copies of
records assigned and transferred to Buyer pursuant to this Agreement
as well as other records pertaining to the particular patient; and (B)
using reasonable efforts to make providers available as reasonably
requested by Seller, its counsel and carrier to adequately assess and
represent Seller's position in the investigation, legal action or
proceeding, including giving testimony;
(ii) Buyer shall maintain all dental and administrative records
consistent with applicable professional and regulatory standards,
shall not destroy any such records which pre-date the Closing Date and
relate to Seller's Dental Business without providing advance written
notice to Seller of Buyer's intent to destroy such records, and shall
honor any written request from Seller that custody of any such records
(including documents, x-rays, or other material) which pre-date the
Closing Date and relate to Seller's Dental Business be transferred to
Seller for storage in lieu of destruction; and
(iii) Buyer shall not, except as required by applicable law,
produce any documents, records, x-rays, or other materials which are
acquired by virtue of the transactions contemplated by this Agreement
and which pre-date the Closing Date to any third party without first
contacting Seller and providing Seller with a reasonable opportunity
to review the request and the circumstances under which it was made
and to intervene.
(h) Software Upgrade Project. Buyer acknowledges that, as of the
------------------------
date of this Agreement, the Xxxxx Practice Management System hardware and
software, including without limitation the AS400 computer system, are being
upgraded (the "Software Upgrade Project"). From and after the Closing,
except as otherwise provided in this (S)4.1(h), Buyer shall be solely
responsible for completion of the Software Upgrade Project materially
consistent with the project scope outcome established by Seller prior to
the date of this Agreement and shall undertake such actions as Buyer, in
its sole discretion, may deem necessary or appropriate to complete the
Software Upgrade Project by June 30, 1999, if reasonably practicable, or,
if not, as soon thereafter as reasonably practicable, but in no event later
than September 30, 1999. Upon completion of the Software Upgrade Project:
23
(i) Buyer shall provide Seller with a written certificate of
such completion, which shall be signed by Buyer's Chief Information
Officer and a representative of the Xxxxx Practice Management System
(the "Completion Certificate");
(ii) Buyer shall pay to Xxxxx Xxxxxxx a project completion
bonus in the amount of $7,500 (and, in the event that Buyer terminates
the employment of Xxxxx Xxxxxxx, Buyer shall be responsible for any
severance payments which are due to him as a Continuing Employee under
(S)4.1(d), above);
(iii) Buyer shall pay to Xxxxxx Xxxxxx a project completion
bonus in the amount of $7,500, and, upon receipt of the Completion
Certificate and proper evidence of payment of such bonus, Seller shall
reimburse Buyer for such amount (and, in the event that Buyer
terminates the employment of Xxxxxx Xxxxxx and provides Seller with
written notice thereof on or before July 31, 1999, Seller shall
reimburse Buyer for any severance payments which are due to Xxxxxx
Xxxxxx as a Continuing Employee under (S)4.1(d), above);
(iv) Upon receipt of the Completion Certificate on or before
September 30, 1999, Seller shall reimburse Buyer for employment costs
in the amount of $21,100; and
(v) Upon receipt of the Completion Certificate and proper
evidence on or before September 30, 1999, Seller shall reimburse Buyer
for up to $35,000, in the aggregate, of Buyer's costs and expenses
(other than salaries, benefits, and other direct costs of employees of
Buyer, including Continuing Employees) in completing the Software
Upgrade Project.
(i) Leases and Subleases. At the Closing, Buyer and Seller shall
--------------------
enter into leases and subleases, in the forms agreed upon by the Parties,
with respect to the Seller Facilities identified on Exhibit A attached
hereto as "Co-Located Facilities."
(j) Paseo Replacement Facility. The Parties currently intend that a
--------------------------
lease substantially in the form delivered to Buyer prior to the date hereof
will be entered into by Seller (and assigned to Buyer) with respect to the
dental facility under construction at 4157 and 0000 Xxxx Xxxxxxxxxxx Xxxxxx
in Phoenix, Arizona (the "Deer Valley Facility"). If such a lease is
entered into, then, upon the issuance of the certificate of occupancy for
the Deer Valley Facility, (i) the lease will be assigned to and assumed by
Buyer on terms substantially the same as those set forth in the assignments
and assumptions of leases contemplated by (S)5.1(c)(ii), below (including a
guaranty by ADP for so long as Seller remains obligated under the terms of
such lease), and (ii) Buyer shall reimburse Seller for 50% of the project
costs associated with the development of the Deer Valley Facility, the
budget for which costs and construction is set forth on Schedule 4.3(h);
provided that Buyer's reimbursement obligation under this (S)4.1(j) shall
not exceed $160,000. If such lease is not entered into with respect to the
Deer Valley Facility, the Parties will (A) locate a mutually acceptable
site (comparable in size and
24
quality) for a replacement facility for the Paseo Seller Facility, (B)
enter into reasonable arrangements to permit Buyer to remain at the Paseo
Seller Facility until such a replacement site is located and available to
be moved into by Buyer, and (C) replicate the economic terms set forth in
(ii) above with respect to the Deer Valley Facility (including an
obligation to reimburse Seller upon such replacement facility being
available for occupancy by Buyer).
(S)4.2. Covenants of Seller. Seller hereby jointly and severally agrees
-------------------
that:
(a) Conduct of Business. Except as otherwise expressly
-------------------
contemplated by this Agreement, from the date of this Agreement until the
Closing (the "Pre-Closing Period"): (i) Seller shall not take or permit to
be taken any action or do or permit to be done anything in the conduct of
the business of Seller or otherwise, that would be contrary to or in breach
of any of the provisions of this Agreement or which would cause any
representations and warranties of Seller contained in this Agreement to be
or become untrue in any material respect; (ii) Seller shall conduct
Seller's Dental Business in the ordinary course substantially in accordance
with past practices; and (iii) without any obligation to expend amounts
other than consistent with past practices, Seller shall use all reasonable
efforts to preserve Seller's Dental Business organization intact, keep
available to Buyer and Associated the present services of Seller's
employees and independent contractors who work within Seller's Dental
Business, keep available for the post-Closing operation of Seller's Dental
Business by Buyer and Associated the services of the dentists and dental
specialists who are employees and independent contractors of Seller, and
preserve for Buyer and Associated the goodwill of and all agreements with
third parties with whom Seller's Dental Business relationships exist.
Without limiting the generality of the foregoing, during the Pre-Closing
Period, except as otherwise expressly contemplated by this Agreement or
with the prior written consent of Buyer, Seller shall not undertake or
engage in any of the following if doing so would result in or reasonably
would be expected to result in a Material Adverse Effect on Seller's Dental
Business or Seller's ability to consummate the Asset Purchase or any of the
other transactions contemplated by this Agreement:
(i) Merge or consolidate with any other person or entity
or acquire a material amount of assets of any other person or
entity;
(ii) Sell, lease, license, pledge, encumber, or otherwise
dispose of any assets or property which are used or otherwise involved
in Seller's Dental Business other than in the ordinary course of
business consistent with past practices;
(iii) Incur, create, assume, or otherwise become liable for
any indebtedness other than indebtedness incurred consistent with past
practices;
(iv) Enter into or modify any employment, severance,
termination, or similar agreement or arrangement with, or grant any
bonuses, salary increases, severance or termination pay to, any
consultant, employee or independent
25
contractor of Seller who works within Seller's Dental Business, except
for annual pay increases in the ordinary course of business consistent
with past practices, changes in severance or other benefits in the
ordinary course of business, 1998 performance bonuses, and the signing
bonuses contemplated by (S)4.1(d), above;
(v) Other than in the ordinary course of business, adopt,
amend, or terminate any employee benefit plan covering, or increase,
amend, or terminate any benefits to, consultants, employees or
independent contractors of Seller who work within Seller's Dental
Business;
(vi) Modify in any material way or terminate any of the
contracts listed (or required to be listed) in Schedule 3.17-1 or any
Dental Benefit Plan except in the ordinary course of Seller's Dental
Business consistent with past practices;
(vii) Engage in any transaction, or enter into any
agreement, contract, lease, or other arrangement or understanding,
with any Affiliate (as defined below) of Seller, except as reasonably
necessary in connection with the consummation of the transactions
contemplated by this Agreement or in the ordinary course of Seller's
business consistent with past practices to the extent reasonably
necessary during the Pre-Closing Period; or
(viii) Agree or commit to do any of the foregoing.
For purposes of this Agreement, other than (S)3.16, above, an
"Affiliate" of a person or entity shall mean any shareholder, employee,
representative, independent contractor or other agent of such person or
entity, any person related by blood or marriage to any such person, or any
person or entity which, directly or indirectly, controls, is controlled by,
or is under common control with any such person or entity.
(b) [Intentionally omitted].
-----------------------
(c) Exclusive Rights. Neither Seller nor any of its Affiliates or
----------------
representatives shall, directly or indirectly, solicit (including without
limitation by way of furnishing or making available any non-public
information concerning Seller's Dental Business or related assets of
Seller) or engage in negotiations or discussions with, disclose any of the
terms of this Agreement to, accept any offer from, furnish any information
to, or otherwise cooperate, assist or participate with any person or
organization (other than Buyer and its representatives) regarding any
Acquisition Proposal (defined below), except that any person or entity
making an Acquisition Proposal may be informed of the restrictions
contained in this sentence. Seller shall notify Buyer promptly by
telephone, and thereafter promptly confirm in writing, if any such
information is requested from, or any Acquisition Proposal is received by,
Seller or any shareholder of Seller. For purposes of this Agreement,
"Acquisition Proposal" shall mean any offer, proposal or expression of
interest received by Seller or any shareholder of Seller prior to the
Closing Date regarding the acquisition by purchase, merger, lease, or
otherwise of any interest in Seller, any of Seller's Dental Business, or
any material
26
assets, customer relationships or other operations of Seller which relate
to Seller's Dental Business.
(d) Access to Records and Other Due Diligence. During the Pre-
-----------------------------------------
Closing Period, Seller shall: (i) make or cause to be made available to
Buyer and its representatives, attorneys, accountants and agents, for
examination, inspection, and review, the assets of Seller and all books,
contracts, agreements, commitments, records and documents of every kind
relating to Seller's Dental Business (other than tax returns of Seller and
its Affiliates), and shall permit Buyer and its representatives, attorneys,
accountants and agents to have access to the same at all reasonable times
during normal business hours and upon reasonable notice; and (ii) permit
representatives of Buyer to interview personnel of Seller with respect to
Seller's Dental Business, provided that a representative of Seller must be
present at any such interview.
(e) Disclosures. After the date of this Agreement, Seller shall not
-----------
(except in the ordinary course of business consistent with past practices):
(i) disclose to any person, association, firm, corporation or other entity
(other than Buyer and its representatives, attorneys, accountants, and
agents or those designated in writing by Buyer) in any manner, directly or
indirectly, any proprietary information or data relevant to Seller's Dental
Business, whether of a technical or commercial nature, or (ii) use, or
permit or assist, by acquiescence or otherwise, any person, association,
firm, corporation or other entity (other than Buyer and its
representatives, attorneys, accountants, and agents or those designated in
writing by Buyer) to use, in any manner, directly or indirectly, any such
information or data, excepting only (A) use of such data or information as
is at the time generally known to the public and which did not become
generally known through any breach of any provision of this section by
Seller, and (B) disclosures of information to employees of Seller who need
to know such information and use of such information by employees of Seller
who need to use such information, in each use only to the extent necessary
for the benefit of Seller or Buyer.
(f) Employee Retention. During the Pre-Closing Period, Seller shall
------------------
endeavor in good faith at all times to maintain good relations with all
employees of Seller who work within Seller's Dental Business. Seller shall
also use commercially reasonable efforts during the Pre-Closing Period to
cause all dentists currently employed or otherwise retained by Seller to
enter into One-Year Employment Agreements with Associated as described in
(S)4.1(d), above, and (S)5.3(g), below.
(g) Notices of Certain Events. Seller shall promptly notify Buyer
-------------------------
of:
(i) Any notice or other communication from any person or entity
alleging that the consent of such person or entity is or may be
required in connection with any of the transactions contemplated by
this Agreement;
(ii) Any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
27
(iii) Any known actions, suits, claims, investigations or
proceedings commenced or threatened against, relating to, involving,
or otherwise affecting Seller's Dental Business which, if in existence
on the date of this Agreement, would have been required to have been
disclosed by Seller pursuant to (S)3.15 or which relate to the
consummation of any of the transactions contemplated by this
Agreement; and
(iv) Any circumstances or events which, if in existence on the
date of this Agreement, would make any representation or warranty of
Seller incorrect or incomplete in any material respect.
(h) [Intentionally omitted].
---------------------
(i) Noncompetition. During the Restricted Period (defined below)
--------------
neither Seller nor any of its Affiliates shall, directly or indirectly:
(i) Own or operate, anywhere in the Restricted Territory
(defined below) (A) any dental staff model or practice providing
dental services (collectively, "Dental Staff Practice"), or (B) any
business which provides management or consulting services of the type
provided as of the date hereof by Buyer (a "Dental Practice Management
Company");
(ii) Induce or encourage any employee, officer, or director of
Associated, IPC, or ADP to terminate its relationship with Associated,
IPC, or ADP, or otherwise interfere or attempt to interfere in any way
with Associated's, IPC's, or ADP's relationships with their respective
employees, officers, or directors; or
(iii) Employ or engage any person who, at any time within the
one-year period immediately preceding such employment or engagement,
was an employee, officer, or director of Associated, IPC, or ADP;
provided that the foregoing (ii) and (iii) shall not apply to any
person hired by Seller or any of its Affiliates as a result of contact
initiated by such person or any general solicitation of employment by
Seller or its Affiliates.
For purposes of this (S)4.2(i), (A) "Restricted Period" shall mean,
with respect to (i), above, the period beginning on the Closing Date and
ending on December 31, 2003, and, with respect to (ii) and (iii) above, the
period beginning on the Closing Date and ending on December 31, 2001, and
(B) "Restricted Territory" shall mean the geographic area within a radius
of five miles from any facility or operation within the Phoenix
Metropolitan Statistical Area leased, owned, managed, or operated by IPC or
Associated.
Notwithstanding the foregoing to the contrary, this (S)4.2(i) shall
not prohibit Seller or any of its Affiliates from acquiring control of, by
purchase of assets, merger, or otherwise, any business or entity which
includes a Dental Staff Practice or Dental
28
Practice Management Company so long as such Dental Staff Practice or
DentalPractice Management Company is only an incidental portion of the
business or entity of which control is acquired.
(j) Injunctive Relief. Seller acknowledges and agrees that
-----------------
Buyer's remedies at law for any violation or attempted violation of any of
Seller's obligations under this Agreement would be inadequate, and agree
that in the event of any such violation or attempted violation, Buyer shall
be entitled to a temporary restraining order, temporary and permanent
injunctions, and other equitable relief, without the necessity of posting
any bond or proving any actual damage, in addition to all other rights and
remedies which may be available to Buyer from time to time.
(k) [Intentionally omitted].
---------------------
(l) [Intentionally omitted].
-----------------------
(m) Patient Records. At the Closing, to the extent permitted by
---------------
applicable law, Seller shall assign to Associated the Current Patient
Records by executing and delivering an Assignment and Assumption Agreement
in the form agreed upon by the Parties (the "Assignment and Assumption
Agreement").
(n) [Intentionally omitted].
-----------------------
(S)4.3. Covenants of Buyer. Buyer agrees that:
------------------
(a) Representations and Warranties. At the Closing, Buyer shall
deliver to Seller a certificate, in form and substance reasonably
satisfactory to Seller, confirming that the representations and warranties
set forth in Article II of this Agreement are correct and complete in all
material respects as of the Closing Date.
(b) Notices of Certain Events. Buyer shall promptly notify
-------------------------
Seller of each of the following which occur during the Pre-Closing Period:
(i) Any notice or other communication from any person or
entity alleging that the consent of such person or entity is or
may be required in connection with any of the transactions
contemplated by this Agreement;
(ii) Any notice or other communication from any
governmental or regulatory agency or authority in connection with
the transactions contemplated by this Agreement;
(iii) Any known actions, suits, claims, investigations or
proceedings commenced or threatened against, relating to,
involving, or otherwise affecting Buyer or any of its assets
which, if in existence on the date of this Agreement, would have
been required to have been disclosed by Buyer pursuant to (S)2.4
or
29
which relate to the consummation of any of the transactions
contemplated by this Agreement; and
(iv) Any circumstances or events which, if in existence on the
date of this Agreement, would make any representation or warranty of
Buyer incorrect or incomplete in any material respect.
(c) [Intentionally omitted].
-----------------------
(d) Injunctive Relief. Buyer acknowledges and agrees that Seller's
-----------------
remedies at law for any violation or attempted violation of any of Buyer's
obligations under this Agreement would be inadequate, and agrees that in
the event of any such violation or attempted violation, Seller shall be
entitled to a temporary restraining order, temporary and permanent
injunctions, and other equitable relief, without the necessity of posting
any bond or proving any actual damage, in addition to all other rights and
remedies which may be available to Seller from time to time.
(e) Non-Competition. Neither Buyer nor any of its Affiliates shall
---------------
operate as a comprehensive dental plan which offers insured, self-insured
or prepaid dental insurance products to group purchasers, HCFA, Arizona,
prospective individual members or other sponsors of health care benefit
plans in the State of Arizona until December 31, 2003. For purposes of this
(S)4.3(e), none of Buyer or its Affiliates shall be considered a "group
purchaser" or "other sponsor" with respect to its or their own employees.
Notwithstanding the foregoing to the contrary, this (S)4.3(e) shall not
prohibit Buyer or any of its Affiliates from acquiring control of, by
purchase of assets, merger, or otherwise, any business or enterprise which
includes only incidentally any of the businesses described in the first
sentence of this (S)4.3(e). Until December 31, 2001, neither Buyer nor any
of its Affiliates shall:
(i) Induce or encourage any employee, officer, or director of
Seller or CDHP of Arizona to terminate its relationship with Seller or
CDHP of Arizona or otherwise interfere or attempt to interfere in any
way with Seller's or CDHP of Arizona's relationships with their
respective employees, officers, or directors; or
(ii) Employ or engage any person who, at any time within the
one-year period immediately preceding such employment or engagement,
was an employee, officer, or director of Seller or CDHP of Arizona;
provided that the foregoing (i) and (ii) shall not apply to any person
hired by Buyer or any of its Affiliates as a result of contact
initiated by such person or any general solicitation of employment by
Buyer or its Affiliates.
(f) [Intentionally omitted].
-----------------------
(g) Seller Schedule Updates. Buyer acknowledges and agrees that,
-----------------------
after the date of this Agreement and through and including the end of the
third business day prior to the Closing Date, Seller shall have the right
to supplement or amend any Seller
30
Schedule with respect to any matter arising or discovered after the date of
this Agreement which, if existing or known as of the date of this
Agreement, would have been required to be included in such Seller Schedule.
For purposes of Article VII of this Agreement, any such supplemental or
amended disclosure shall not be deemed to have cured any breach of any
representation or warranty made in this Agreement.
(h) [Intentionally omitted].
-----------------------
(i) Indemnification of Seller for Failure to Obtain Consents.
--------------------------------------------------------
Buyer shall indemnify and hold Seller harmless from and against any and all
Damages (as defined in (S)7.2(a), below, including for purposes of this
(S)4.3(i) rent increases for Buyer and/or Seller at the Scottsdale, The
Pointe, Chandler, Mesa, and Sun City Seller Facilities (including the
portions thereof not to be subleased to Buyer)) asserted against, resulting
to, imposed upon, or incurred or suffered by Seller, directly or
indirectly, as a result of or arising from the failure of any of the
consents or approvals described in the last paragraph of (S)1.6, above, to
have been obtained prior to the Closing. Notwithstanding the foregoing,
(i) Seller shall not be entitled to indemnification from Buyer for any fee
paid by Seller to any third party in order to obtain from such third party
its consent or approval unless Buyer has approved in writing the payment of
such fee, and (ii) Buyer shall have no obligation to indemnify Seller for
the administrative fee payments Seller has agreed to pay pursuant to the
last paragraph of (S)1.6, above.
ARTICLE V
CONDITIONS
----------
(S)5.1. Mutual Conditions. The obligations of the Parties to consummate
-----------------
the Asset Purchase and the other transactions contemplated by this Agreement
shall be subject to the fulfillment of all of the following conditions unless
waived in writing by Seller and Buyer:
(a) Legal Prohibition. No temporary restraining order,
-----------------
preliminary or permanent injunction or other order or decree which prevents
the consummation of the Asset Purchase or any of the other transactions
contemplated by this Agreement having been issued and remaining in effect,
and no statute, rule or regulation having been enacted by any state or
federal government or governmental agency which would prevent the
consummation of the Asset Purchase or the other transactions contemplated
by this Agreement.
(b) Governmental Approvals. Any governmental or other approvals
----------------------
or reviews of this Agreement or the transactions contemplated by this
Agreement required under any applicable laws, statutes, orders, rules,
regulations, policies or guidelines promulgated thereunder shall have been
received.
(c) Leases. Buyer and Seller (or one of its Affiliates, as
------
applicable) shall have (i) entered into written leases or subleases, as
applicable, for the Seller Facilities identified on Exhibit A attached
hereto as West Ridge, Paseo, Scottsdale, and The Pointe,
31
on the terms agreed upon by the Parties, and (ii) entered into written
assignment and assumption agreements of the Leases for the Seller
Facilities identified on Exhibit A attached hereto as Chandler, Mesa, and
Sun City, on the terms agreed upon by the Parties.
(S)5.2. Conditions to Obligations of Seller. The obligations of Seller
-----------------------------------
to consummate the Asset Purchase and the other transactions contemplated by this
Agreement shall be subject to the fulfillment of all of the following conditions
unless waived by Seller in writing:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Buyer set forth in Article II of this Agreement shall be true
and correct in all material respects as of the date of this Agreement and
as of the Closing Date as though made at and as of the Closing (except for
any representations and warranties which speak as of a different date,
which shall be true and correct in all material respects as of such date).
(b) Performance of Agreement. Buyer shall have performed and
------------------------
observed in all material respects all obligations and conditions to be
performed or observed by it under this Agreement at or prior to the
Closing.
(c) Certificate. Buyer shall have furnished Seller with a
-----------
certificate dated the Closing Date signed by its a senior officer of Buyer
to the effect that the conditions set forth in (S)(S)5.2(a) and (b) have
been satisfied.
(d) [Intentionally omitted].
-----------------------
(e) Authority. Seller shall have received evidence reasonably
---------
satisfactory to it that this Agreement and the transactions contemplated by
this Agreement have been properly authorized by Buyer.
(f) PPO and Provider Agreements. Associated shall have entered
---------------------------
into PPO and Provider Agreements with Connecticut General Life Insurance
Company ("CGLIC") and CDHP of Arizona, respectively, in the forms agreed
upon by the Parties.
(g) Patient Records. To the extent permitted by applicable law,
---------------
Associated shall have assumed from Seller the Current Patient Records by
executing and delivering the Assignment and Assumption Agreement as
contemplated by (S)4.2(m), above.
(h) Employment Agreements. At least 10 Dentists shall have
---------------------
entered into One-Year Employment Agreements (including, for each One-Year
Employment Agreement, the Acknowledgment attached thereto) as described in
(S)5.3(g), below.
(i) Supplemental Agreement. ADP shall have entered into the
----------------------
Supplemental Agreement with CDHP of Arizona in the form agreed upon by the
Parties.
32
(S)5.3. Conditions to Obligations of Buyer. The obligations of Buyer to
----------------------------------
consummate the Asset Purchase and the other transactions contemplated by this
Agreement shall be subject to the fulfillment of all of the following conditions
unless waived by Buyer in writing:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Seller set forth in Article III of this Agreement shall be
true and correct in all material respects as of the date of this Agreement
and as of the Closing Date as though made at and as of the Closing (except
for any representations and warranties which speak as of a different date,
which shall be true and correct in all material respects as of such date).
(b) Performance of Agreement. Seller shall have performed and
------------------------
observed in all material respects all obligations and conditions to be
performed or observed by it under this Agreement at or prior to the
Closing.
(c) Certificate. Seller shall have furnished Buyer with a
-----------
certificate dated the Closing Date signed by a senior officer of Seller to
the effect that the conditions set forth in (S)(S)5.3(a) and (b) have been
satisfied.
(d) [Intentionally omitted].
-----------------------
(e) Authority. Buyer shall have received evidence reasonably
---------
satisfactory to it that this Agreement and the transactions contemplated by
this Agreement have been properly authorized by Seller.
(f) [Intentionally omitted].
-----------------------
(g) Existing Employment and Deferred Compensation Agreements.
--------------------------------------------------------
Of the dentists currently employed by Seller (the "Dentists"), at least 15
shall have entered into a one-year employment agreement with Associated
substantially in the form attached hereto as Exhibit B, including the
Acknowledgment attached thereto (the "One-Year Employment Agreement").
(h) Third Party Consents. Buyer shall have received or received
--------------------
satisfactory evidence of all necessary or appropriate third party consents
and approvals relating to this Agreement and the transactions contemplated
by this Agreement which are described or identified as closing conditions
in Schedule 3.18.
(i) Material Adverse Change. No Material Adverse Effect shall
-----------------------
have occurred with respect to Seller's Dental Business during the Pre-
Closing Period.
(j) Books and Records. Seller shall have delivered to Buyer all
-----------------
books and records of Seller relating solely to the Assets.
(k) PPO and Provider Agreements. CGLIC and CDHP of Arizona shall
---------------------------
have entered into PPO and Provider Agreements, respectively, with
Associated in the forms agreed upon by the Parties.
33
ARTICLE VI
TERMINATION AND AMENDMENT
-------------------------
(S)6.1. Termination.
-----------
(a) Termination by Seller. This Agreement may be terminated and
---------------------
canceled at any time prior to the Closing by Seller: (i) if (A) any of the
representations or warranties of Buyer contained in this Agreement shall
prove to be inaccurate in any material respect, or any obligation or
condition to be performed or observed by Buyer under this Agreement has not
been performed or observed in any material respect at or prior to the time
specified in this Agreement, and (B) such inaccuracy or failure shall not
have been cured within 15 business days after receipt by Buyer of written
notice of such occurrence from Seller; (ii) if any permanent injunction or
other order of a court or other competent authority preventing consummation
of the Asset Purchase or any other transaction contemplated by this
Agreement shall have become final and non-appealable; or (iii) if the
Closing has not occurred on or before April 1, 1999; provided that the
right to terminate this Agreement under this clause (iii) shall not be
available if Seller's failure to fulfill any obligation or condition under
this Agreement is the cause of or results in the failure of the Closing to
occur by such date.
(b) Termination by Buyer. This Agreement may be terminated and
--------------------
canceled at any time prior to the Closing by Buyer: (i) if (A) any of the
representations or warranties of Seller contained in this Agreement or the
Seller Schedules shall prove to be inaccurate in any material respect, or
any obligation or condition to be performed or observed by Seller under
this Agreement has not been performed or observed in any material respect
at or prior to the time specified in this Agreement, and (B) such
inaccuracy or failure shall not have been cured within 15 business days
after receipt by Seller of written notice of such occurrence from Buyer;
(ii) if any permanent injunction or other order of a court or other
competent authority preventing consummation of the Asset Purchase or any
other transaction contemplated by this Agreement shall have become final
and non-appealable; (iii) in the event a Material Adverse Effect shall have
occurred during the Pre-Closing Period; or (iv) if the Closing has not
occurred on or before April 1, 1999; provided that the right to terminate
this Agreement under this clause (iv) shall not be available if Buyer's
failure to fulfill any obligation or condition under this Agreement is the
cause of or results in the failure of the Closing to occur by such date.
(c) Effect of Termination. In the event that this Agreement
---------------------
shall be terminated pursuant to this (S)6.1, all further obligations of the
Parties under this Agreement shall terminate without further liability of
any Party to another; provided that the obligations of the Parties
contained in (S)(S)4.1(c), 8.8, and 8.11 shall survive any such
termination. Notwithstanding the foregoing, the termination of this
Agreement shall not terminate the Confidentiality Agreement dated March 25,
1996, between ADP and Seller.
34
(S)6.2. Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed by all of the Parties.
(S)6.3. Extension; Waiver. At any time prior to the Closing, Buyer (with
-----------------
respect to Seller) and Seller (with respect to Buyer) may, to the extent legally
allowed: (i) extend the time for the performance of any of the obligations or
other acts of any other Party; (ii) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant hereto; or (iii) waive compliance with any of the agreements
or conditions contained in this Agreement. Any agreement on the part of a Party
to any such extension or waiver shall be valid only if set forth in a written
instrument signed by such Party.
ARTICLE VII
INDEMNIFICATION
---------------
(S)7.1. Survival of Representations, Warranties and Agreements.
------------------------------------------------------
(a) Subject to the limitations set forth in (S)7.3, below, and
notwithstanding any investigation conducted at any time by or on behalf of
Buyer, all representations, warranties, covenants and agreements of Seller
in this Agreement and in any other documents executed or delivered by
Seller or any of its Affiliates pursuant to this Agreement or in connection
with the transactions contemplated by the Agreement (the "Additional
Documents") shall survive the execution, delivery and performance of this
Agreement and the Additional Documents unless otherwise provided. All
representations and warranties of Seller set forth in this Agreement and in
the Additional Documents shall be deemed to have been made again by Seller
at and as of the Closing.
(b) As used in this Article, any reference to a representation,
warranty or covenant contained in any section of this Agreement shall
include the Seller Schedules relating to such section.
(S)7.2. Indemnification.
---------------
(a) Subject to the limitations set forth in (S)7.3, below, from
and after the Closing, Seller shall jointly and severally indemnify and
hold harmless Buyer from and against any and all losses, liabilities,
damages, demands, claims, suits, actions, judgments or causes of action,
assessments, costs and expenses, including without limitation interest,
penalties, attorneys' fees, any and all expenses incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever, and any and all amounts paid in settlement of any
claim or litigation (collectively, "Damages"), asserted against, resulting
to, imposed upon, or incurred or suffered by Buyer, directly or indirectly,
as a result of or arising from: (i) any inaccuracy in or breach or
nonfulfillment of any of the representations and warranties, covenants or
agreements made by Seller in this Agreement; or (ii) any Excluded Liability
(defined below).
35
(b) For purposes of this Agreement: (i) the term "Excluded
Liabilities" shall mean (A) any and all claims of any current or former
holder of any legal or beneficial ownership interest in or to Seller which
are based upon, relate to, or arise out of any agreements, transactions,
acts, or omissions made or occurring at or prior to the Closing, excepting
only any claims against Buyer arising out of the failure of Buyer to
perform its obligations under this Agreement, (B) any and all claims of any
third party or governmental agency or entity arising out of or related to
non-compliance by Seller or any employee, agent, or independent contractor
of Seller with any Applicable Laws prior to the Closing, and (C) any
liabilities of Seller's Dental Business not specifically assumed by Buyer
under this Agreement; and (ii) the term "Indemnifiable Claims" shall mean
the matters with respect to which Buyer is entitled to indemnification
under (S)7.2(a).
(S)7.3. Limitations on Indemnification. Rights to indemnification under
------------------------------
(S)7.2(a)(i) are subject to the following limitations:
(a) Buyer shall not be entitled to indemnification hereunder
with respect to an Indemnifiable Claim arising out of a breach of a
representation or warranty (or, if more than one such Indemnifiable Claim
is asserted, with respect to all such Indemnifiable Claims) unless, and
then only to the extent that, the amount of Damages with respect to all
Indemnifiable Claims exceeds $25,000, in the aggregate; provided that such
$25,000 threshold shall not apply to any Indemnifiable Claim relating to a
breach of the representations and warranties set forth in (S)(S)3.2 and
3.3.
(b) The total liability of Seller for Damages with respect to
all Indemnifiable Claims arising out of (S)7.2(a)(i) shall not exceed, in
the aggregate, $1,000,000.
(c) The obligation of indemnity with respect to the
representations and warranties set forth in (S)3.8 of this Agreement shall
terminate on the expiration of the respective periods of limitations
applicable to assessment and collection of taxes under laws then applicable
to such taxes.
(d) The obligation of indemnity with respect to the
representations and warranties set forth in (S)3.16 of this Agreement shall
terminate upon expiration of the respective statutes of limitation
applicable to the items addressed in such section.
(e) The obligation of indemnity with respect to the
representations and warranties contained in (S)(S)3.2 and 3.3 of this
Agreement shall not expire.
(f) The obligation of indemnity with respect to the
representations and warranties set forth in this Agreement other than those
addressed in the immediately preceding subsections (c), (d) and (e) shall
terminate on the second anniversary of the Closing Date.
(g) The foregoing provisions of this (S)7.3 notwithstanding, if,
prior to the termination of any obligation of indemnity, written notice of
a claimed breach or other occurrence or matter giving rise to a claim of
indemnification is given by Buyer to Seller,
36
or a suit, action, or other proceeding based upon a claimed breach is
commenced against Seller, Buyer shall not be precluded from pursuing such
claimed breach, occurrence, other matter, or suit or action, or from
recovering from Seller (whether through the courts or otherwise) on the
claim, suit, action, or proceeding, by reason of the termination otherwise
provided for above.
(S)7.4. Procedure for Indemnification with Respect to Third Party Claims.
----------------------------------------------------------------
(a) If Buyer desires to seek indemnification under this Article
with respect to an Indemnifiable Claim resulting from the assertion of
liability by a third party (a "Third-Party Claim"), or if Seller desires to
seek indemnification under this Article with respect to a matter with
respect to which Seller is entitled to indemnification under (S)7.7, below
(a "Seller's Indemnifiable Claim"), resulting from a Third-Party Claim, the
Party seeking indemnification (the "Indemnified Party") shall give notice
to the other Party (hereinafter being the "Indemnifying Party") within 15
days of the Indemnified Party's becoming aware of any such Third-Party
Claim, which notice shall set forth such material information with respect
to such Third-Party Claim as is then reasonably available to the
Indemnified Party. If any Third-Party Claim is asserted against the
Indemnified Party and the Indemnified Party notifies the Indemnifying Party
of such Third-Party Claim, the Indemnifying Party shall be entitled, if it
so elects by written notice delivered to the Indemnified Party within a
reasonable period of time (not to exceed 10 days in any event) after
receiving the Indemnified Party's notice (the "Response Period"), to assume
the defense of such Third-Party Claim with counsel reasonably satisfactory
to the Indemnified Party. Notwithstanding the foregoing: (i) the
Indemnified Party shall have no obligation to give any notice of any Third-
Party Claim unless such assertion is in writing; (ii) the rights of the
Indemnified Party to be indemnified in respect of Indemnifiable Claims
resulting from the assertion of any Third-Party Claim shall not be
adversely affected by its failure to give notice pursuant to the foregoing
provisions unless, and, if so, only to the extent that, the Indemnifying
Party is prejudiced by such failure; and (iii) each Party shall cooperate
at its own expense with any other Party in all ways reasonably requested by
such other Party in connection with the defense of any such Third-Party
Claims. With respect to any Third-Party Claim that results in a claim for
indemnification under this Article, the Parties shall make available to
each other all relevant information in their possession which is material
to any such Third-Party Claim.
(b) In the event that the Indemnifying Party fails to assume the
defense of the Indemnified Party against any Third-Party Claim within the
Response Period, the Indemnified Party shall have the right to defend,
compromise or settle such Third-Party Claim on behalf, for the account, and
at the risk of the Indemnifying Party.
(c) Notwithstanding anything in this (S)7.4 to the contrary, (i)
if there is a reasonable probability that a Third-Party Claim may
materially and adversely affect an Indemnified Party, its subsidiaries or
affiliates, other than as a result of money damages or other money
payments, then the Indemnified Party shall have the right, at its cost and
expense, to participate in the defense and settlement of such Third-Party
Claim; and (ii) the Indemnifying Party shall not settle or compromise any
Third-Party Claim against the
37
Indemnified Party or consent to entry of any judgment in respect of any
Third-Party Claim against the Indemnified Party without the prior written
consent of the Indemnified Party, unless such settlement, compromise or
consent includes as an unconditional term the giving by the claimant or the
plaintiff to the Indemnified Party (and its subsidiaries and affiliates) of
a release from all liability in respect of such Third-Party Claim.
(S)7.5. Procedure For Indemnification with Respect to Non-Third Party
-------------------------------------------------------------
Claims. In the event that an Indemnified Party asserts the existence of an
------
Indemnifiable Claim or Seller's Indemnifiable Claim giving rise to Damages other
than an Indemnifiable Claim or Seller's Indemnifiable Claim resulting from a
Third-Party Claim, it shall give written notice to the Indemnifying Party
specifying the nature and amount of the Indemnifiable Claim asserted. If the
Indemnifying Party, within 30 days after the receipt of such notice by the
Indemnified Party, has not given written notice to the Indemnified Party
announcing its intention to contest such assertion by the Indemnified Party,
such assertion shall be deemed accepted and the amount of Indemnifiable Claim
shall be deemed a valid Indemnifiable Claim or Seller's Indemnifiable Claim. In
the event, however, that the Indemnifying Party contests the assertion of an
Indemnifiable Claim or Seller's Indemnifiable Claim by giving such written
notice to the Indemnified Party within such 30-day period, then if the Parties,
acting in good faith, cannot reach agreement with respect to such Indemnifiable
Claim within 15 days after such notice, the contested assertion of the claim
shall be subject to (S)8.10, below.
(S)7.6. Right of Setoff. In addition to its other rights under this
---------------
Agreement and the Additional Documents, each Party shall have the right to
setoff any amounts owing to it by the other Party against any amounts owing to
the other Party by it.
(S)7.7. Indemnification of Seller. All representations, warranties,
-------------------------
covenants, and agreements of Buyer in this Agreement and in any other documents
executed or delivered by Buyer or any of its Affiliates pursuant to this
Agreement or the Additional Documents shall survive the execution, delivery, and
performance of this Agreement and the Additional Documents unless otherwise
provided. All representations and warranties of Buyer set forth in this
Agreement and in the Additional Documents shall be deemed to have been made
again by Buyer at and as of the Closing. Subject to the limitation contained in
the following paragraph, Buyer shall indemnify and hold harmless Seller from and
against any and all Damages asserted against, resulting to, imposed upon, or
incurred or suffered by Seller, directly or indirectly, as a result of or
arising from (a) any inaccuracy in or breach or nonfulfillment of any of the
representations, warranties, covenants, or agreements made by Buyer in this
Agreement, or (b) any Assumed Liabilities.
The representations and warranties of Buyer contained in this Agreement and
the obligations of indemnity of Buyer with respect to those representations and
warranties shall terminate on the second anniversary of the Closing Date;
provided that if, prior to termination of any obligation of indemnity with
respect to any such representation or warranty, written notice of a claimed
breach of same is given by Seller to Buyer, or a suit, action, or other
proceeding based upon the claimed breach is commenced against Buyer, Seller
shall not be precluded from pursuing such claimed breach, or from recovering
from Buyer (whether through the courts or otherwise) on that claim, by reason of
the termination otherwise provided for above.
38
(S)7.8 Insurance Proceeds. The amount of any damages sustained by any
------------------
Party shall be reduced by any amount received with respect thereto under any
insurance coverage or from any other party alleged to be responsible therefor.
Each Party shall use reasonable efforts to collect any amounts available under
such insurance coverage and from such other party alleged to have
responsibility. If an indemnitee receives an amount under insurance coverage or
from such other party with respect to damages at anytime subsequent to any
indemnification provided pursuant to this Article VII, then such indemnitee
shall promptly reimburse the other Party for any payment made or expense
incurred in connection with providing such indemnification up to such amount
received by the indemnitee.
(S)7.9 Exclusive Remedy. After the Closing, unless a Party is entitled
----------------
to the relief described in (S)(S)4.2(j) and 4.3(d), above, this Article VII
shall be the exclusive remedy for any inaccuracy in or breach or nonfulfillment
of any of the representations and warranties, covenants, or agreements made by
Buyer and Seller in this Agreements; provided that nothing in this Article VII
shall limit the remedies at law or in equity available to the Buyer with to
respect to Excluded Liabilities and to the Seller with respect to the Assumed
Liabilities.
(S)7.10 No Punitive Damages. Notwithstanding anything to the contrary
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elsewhere in this Agreement, no Party (or any of its Affiliates) shall, in any
event, be liable to the other Party (or any of its Affiliates) for any punitive
damages of such other Party (or any of its Affiliates).
ARTICLE VIII
MISCELLANEOUS
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(S)8.1. Notices. All notices and other communications under this
-------
Agreement to any Party shall be in writing and shall be deemed given when
delivered personally, telecopied (which is confirmed) to that Party at the
telecopy number for that Party set forth below, mailed by certified mail (return
receipt requested) to that Party at the address for that Party (or at such other
address for such Party as such Party shall have specified in notice to the other
Parties), or delivered to Federal Express, UPS, or any similar express delivery
service for delivery to that Party at that address:
(a) If to Buyer:
American Dental Partners, Inc.
000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, President
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxxxxx LLP
00 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
39
Attention: Xxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) If to Seller:
c/o CIGNA Dental Health, Inc.
000 X.X. 00xx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
Telecopy No.: (000) 000-0000
with copies to:
CIGNA Dental Health, Inc.
000 Xxxxxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
O'Melveny & Xxxxx LLP
000 00xx Xxxxxx, X.X., Xxxxx 000X
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
(S)8.2. Non-Waiver. No failure by any Party to insist upon strict
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compliance with any term or provision of this Agreement, to exercise any option,
to enforce any right, or to seek any remedy upon any default of any other Party
shall affect, or constitute a waiver of, any other Party's right to insist upon
such strict compliance, exercise that option, enforce that right, or seek that
remedy with respect to that default or any prior, contemporaneous, or subsequent
default. No custom or practice of the Parties at variance with any provision of
this Agreement shall affect or constitute a waiver of, any Party's right to
demand strict compliance with the provisions of this Agreement.
(S)8.3. Genders and Numbers. Where permitted by the context, each pronoun
-------------------
used in this Agreement includes the same pronoun in other genders and numbers,
and each noun used in this Agreement includes the same noun in other numbers.
(S)8.4. Headings. The headings of the various articles and sections of
--------
this Agreement are not part of the context of this Agreement, are merely labels
to assist in locating such articles and sections, and shall be ignored in
construing this Agreement.
(S)8.5. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.
40
(S)8.6. Entire Agreement. This Agreement (including all exhibits,
----------------
schedules, and other documents referred to in this Agreement (the "Incorporated
Documents"), all of which are hereby incorporated by reference) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the Parties with respect to the subject matter of this
Agreement. All obligations of any Party under any Incorporated Document shall
constitute an obligation of such Party under this Agreement. Any capitalized
terms used in any Incorporated Document which are not otherwise defined therein
shall have the respective meanings given such terms in this Agreement.
(S)8.7. No Third Party Beneficiaries. Nothing contained in this
----------------------------
Agreement, expressed or implied, is intended or shall be construed to confer
upon or give to any person, firm, corporation or legal entity, other than the
Parties, any rights, remedies or other benefits under or by reason of this
Agreement.
(S)8.8. Governing Law. This Agreement, the legal relations between the
-------------
Parties, and any action, whether contractual or non-contractual, instituted by
any Party with respect to matters arising under or growing out of or in
connection with or in respect of this Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona without regard to
principles of conflicts of law.
(S)8.9. Successors; Assignment. This Agreement shall be binding upon,
----------------------
inure to the benefit of, and be enforceable by and against the Parties and their
respective successors and assigns. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be transferred or assigned
by any of the Parties without the prior written consent of the other Parties.
(S)8.10. Remedies. Except as set forth in (S)7.9, above, all rights and
--------
remedies of each Party under this Agreement shall be cumulative and in addition
to all other rights and remedies which may be available to that Party from time
to time, whether under any other agreement, at law, or in equity.
Each Party irrevocably designates and appoints the individual identified in
or pursuant to (S)8.1, above, to receive notices on its behalf, as its agent to
receive on its behalf service of all process in any action arising under or out
or in respect of or in connection with this Agreement or any related document or
obligation before any body, such service being hereby acknowledged to be
effective and binding service in every respect. A copy of any such process so
served shall be mailed by registered mail to each Party at its address provided
in (S)8.1, above; provided that, unless otherwise provided by applicable law,
any failure to mail such copy shall not affect the validity of the service of
such process. If any agent so appointed refuses to accept service, the
designating party hereby agrees that service of process sufficient for personal
jurisdiction in any action against it in the applicable jurisdiction may be made
by registered or certified mail, return receipt requested, to its address
provided in (S)8.1, above. Each Party hereby acknowledges that such service
shall be effective and binding in every respect. Nothing herein shall affect the
right to serve process in any other manner permitted by law or shall limit the
right of any Party to bring any action or proceeding against the other Party in
any other jurisdiction.
41
(S)8.11. Expenses. Except as otherwise specifically provided in this
--------
Agreement, each Party shall bear his, her, or its respective legal, accounting,
and other costs and expenses associated with the transactions contemplated by
this Agreement (including without limitation the costs of any brokers and
financial advisors).
(S)8.12. Announcements. This Agreement and the transactions contemplated
-------------
herein shall be confidential, and no Party shall disclose any information
relating to the transactions contemplated by this Agreement without the prior
written consent of Seller and Buyer, except for such disclosures to such
professional advisors as may be necessary or appropriate in order to enter into
this Agreement and consummate the transactions contemplated by this Agreement.
Each Party and its representatives will exercise all reasonable efforts to
maintain confidentiality with respect to such transactions at all times prior to
the public announcement, if any, of this Agreement. The provisions of this
section will be subject to each Party's obligation to comply with applicable
requirements of federal or state laws or any governmental order or regulation.
(S)8.13. Severability. With respect to any provision of this Agreement
------------
finally determined by a court of competent jurisdiction to be unenforceable,
such court shall have jurisdiction to reform such provision so that it is
enforceable to the maximum extent permitted by applicable law, and the Parties
shall abide by such court's determination. In the event that any provision of
this Agreement cannot be reformed, such provision shall be deemed to be severed
from this Agreement, but every other provision of this Agreement shall remain in
full force and effect.
(S)8.14. Construction. This Agreement shall supersede, in its entirety,
------------
the Asset Purchase Agreement among the Parties dated January 15, 1999.
EACH OF THE UNDERSIGNED CONFIRMS THAT IT OR HE HAS READ AND FULLY UNDERSTANDS
THIS AGREEMENT, INCLUDING WITHOUT LIMITATION THE EXHIBITS ATTACHED HERETO.
CIGNA DENTAL HEALTH, INC. AMERICAN DENTAL PARTNERS, INC.
By ______________________________ By _________________________________
Print Name ______________________ Xxxxxxx X. Xxxxxx, President
Its _____________________________
CIGNA HEALTHCARE OF ARIZONA, INC. INNOVATIVE PRACTICE CONCEPTS,
INC.
By ______________________________ By __________________________________
Print Name ______________________ Xxxxxxx X. Xxxxxx, Chairman
Its _____________________________
42
INDEX OF SELLER SCHEDULES
Schedule 3.2 Subsidiaries
Schedule 3.4 Consents and Approvals
Schedule 3.5 Financial Statements
Schedule 3.6 Undisclosed Liabilities
Schedule 3.7 Absence of Certain Changes
Schedule 3.9-1 Noncompliance with Laws
Schedule 3.9-2 Permits
Schedule 3.9-3 Hazardous Waste Disposal
Schedule 3.11 Restrictive Documents or Laws
Schedule 3.12 Insurance
Schedule 3.13-1 Title to Properties/Assets
Schedule 3.13-2 Liens
Schedule 3.13-3 Financing Statements
Schedule 3.13-4 Legal Descriptions
Schedule 3.13-5 Condition of Property
Schedule 3.15 Legal Proceedings
Schedule 3.17-1 Material Contracts Payable
Schedule 3.17-2 Dental Benefit Plans
Schedule 3.17-3 Dentists
Schedule 3.18 Conflicts or Defaults
Schedule 3.20 Compensation
43
Schedule 3.21 Labor Relations
Schedule 3.22 Suppliers and Employer Groups
Schedule 3.23 Medicare and Medicaid
Schedule 3.24 Disciplinary Actions
Schedule 3.26 Persons Determining Seller's Knowledge
44
INDEX OF OTHER SCHEDULES
Schedule 1.1(d) Assumed Contracts
Schedule 1.2 Excluded Assets
Schedule 4.1(d)(ii) Staff Model Employees
Schedule 4.3(h) Deer Valley Budget
45
INDEX OF EXHIBITS
Exhibit A Seller Facilities Background Information
Exhibit B One-Year Employment Agreement - (S)5.3(g)
INDEX OF ADDITIONAL DOCUMENTS
Assignment and Assumption Agreement (IPC) - (S)1.4(b)
Xxxx of Sale - (S)1.6(a)
Assignment of Intangible Assets - (S)1.6(b)
Transition Services Agreement - (S)4.1(f)
Assignment and Assumption Agreement (Associated) - (S)4.2(m)
Leases and Subleases - (S)5.1(c)(i)
Assignment and Assumption of Leases - (S)5.1(c)(ii)
CGLIC PPO Agreement - (S)5.2(f)
CDHP of Arizona Provider Agreement - (S)5.2(f)
Supplemental Agreement - (S)5.2(i)
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