Exhibit 2.5
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AFFILIATION AGREEMENT AND
STOCK PURCHASE AGREEMENT
THIS AFFILIATION AGREEMENT AND STOCK PURCHASE AGREEMENT is entered into
as of the 29th day of March 1997, by and between Omega Orthodontics, Inc., a
Delaware corporation ("OMEGA") and Xxxx X. Xxxxxxx, D.D.S. ("Xx. Xxxxxxx"), who
is duly licensed to practice orthodontics in the state of Texas (the "State").
RECITALS
A. OMEGA provides professional management and marketing services to
orthodontic practices in the United States, which services include providing
practice management systems, office space, equipment, furnishings and active
administrative personnel necessary for the operation of orthodontic practices,
and which services are provided directly or indirectly through management
service organizations.
B. Xxxx X. Xxxxxxx, D.D.S., M.S., Inc., a Texas professional
corporation (the "Orthodontic Entity") owns and operates an orthodontic practice
with offices located at 0000 Xxxxxxxxx Xxxxxxx Xxxx, Xxxxxx, Xxxxx 00000 (the
"Orthodontic Offices") and furnishes orthodontic care to the general public
through the services of Xx. Xxxxxxx affiliated with the Orthodontic Entity.
C. Xx. Xxxxxxx presently holds and owns 100% of the issued and
outstanding capital stock of the Orthodontic Entity (the issued and outstanding
capital stock is hereafter referred to herein as the "Interests"), represented
by the certificates as follows:
No. Shares Stock Certificate No.
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D. Xx. Xxxxxxx desires to sell and OMEGA desires to buy the Interests
upon the terms and conditions set forth in this Agreement.
E. Prior to selling the Interests, Xx. Xxxxxxx desires to convert the
status of the Orthodontic Entity from a professional entity to a general purpose
entity and to form a new professional corporation or entity to continue his
orthodontic practice at the Orthodontic Offices.
F. Simultaneously with its acquisition of the Interests, OMEGA shall
change the name of the Orthodontic Entity to Omega Orthodontics of Austin, Inc.,
a Texas corporation.
G. OMEGA has conducted a review of the Orthodontic Entity, and has
reviewed the Orthodontic Entity's audited financial statement (the "Financial
Statement"), a copy of which is
attached hereto as Exhibit A. Based on its review of the Orthodontic Entity and
the Financial Statement, OMEGA has issued the report (the "Report"), a copy of
which has been furnished to the Orthodontic Entity. The Orthodontic Entity and
Xx. Xxxxxxx have reviewed the Report and OMEGA's literature, and agree with the
Report and the concepts of OMEGA's Exceptional Practice.
H. Subject to the terms and conditions of this Agreement, OMEGA and Xx.
Xxxxxxx have determined that it is in the best interests of each to effect a
sale and purchase of the Interests of Orthodontic Entity (the "Stock Purchase")
as provided in Section 2.1 hereof.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged to the full
satisfaction of the parties hereto, the parties hereto agree as follows:
ARTICLE I. ENTITY FORMATION AND CONVERSION
1.1 At the Closing (as defined in Section 2.3 hereof), Xx. Xxxxxxx
shall cause the Orthodontic Entity's charter ("Charter") to be amended to
convert the Orthodontic Entity into a general purpose entity under the laws of
the State.
1.2 Xx. Xxxxxxx shall sell the Interests to OMEGA for the consideration
set forth in Article II.
1.3 Xx. Xxxxxxx shall form a new professional entity (the "New PC")
under the laws of the State and, in accordance with the terms of this Agreement,
commence the practice of orthodontics through the New PC.
ARTICLE II. STOCK PURCHASE AND CONSIDERATION
2.1 Stock; Consideration and Payment.
(a) At the Effective Time (as hereinafter defined) and subject to the
terms and conditions hereinafter set forth, OMEGA hereby agrees to purchase and
Xx. Xxxxxxx hereby agrees to sell the Interests to the Orthodontic Entity for
the Consideration (as defined below) and upon the terms and conditions set forth
in the Agreement by surrendering to OMEGA the certificates therefor, duly
endorsed and transferable, free and clear of any liens, encumbrances,
restrictions, or claims of any kind (other than those liens, encumbrances,
restrictions and claims expressly disclosed to OMEGA and affirmatively accepted
by OMEGA prior to the Effective Time). The Stock Purchase shall become effective
upon the transferring of the certificates representing the Interests (the
"Effective Time") to OMEGA and the payment to Xx. Xxxxxxx of the aggregate
consideration (the "Consideration") of:
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(i) Five Hundred Thousand Dollars ($500,000.00) in cash (the
"Cash Component"); and
(iii) Five Hundred Thousand Dollars ($500,000.00) to be
represented by issuance to Xx. Xxxxxxx of an option to purchase shares
of OMEGA common stock ("OMEGA Stock") at any time within five years of
the IPO Closing (as defined below in Section 2.3), based on a value per
share equal to 100% of the IPO Price (as defined below in Section 2.3)
(the "Option Component"), if the option is exercised, the OMEGA Stock
shall thereupon be issued to Xx. Xxxxxxx, fully paid and nonassessable.
2.2 Adjustment and Audit.
(a) The Consideration is based on the value of the Interests as
determined by OMEGA from the information set forth in the Financial Statement.
(b) The Consideration shall be subject to adjustments at Closing for:
(i) prepaid and underpaid rent and other lease obligations, if the leases are to
be continued after Closing, as well as for other agreed normal and customary
prepaid and underpaid expenses; (ii) any accrued but unpaid salaries, bonuses
and other compensation, fringe and health insurance benefits, employment or
payroll taxes and related employment obligations and (iii) any accounts payable
of the Orthodontic Entity which have accrued prior to the Effective Time and
which remain unpaid as of such time (the "Accounts Payable") in excess of an
amount equal to one-half (1/2) of one "Average" month of gross income from the
Orthodontic Entity. As used herein, Average shall mean an average of the
Accounts Payable of the Orthodontic Entity using the last twelve months prior to
the end of the month immediately preceding the Effective Time.
(c) The adjustments to the Consideration, if any, shall be applied in
the following order of priority; first to the Cash Component, and the balance,
if any, to the Option Component.
2.3 Time and Place of Closing. The closing of the transactions
contemplated hereby (herein called the "Closing") shall be held immediately
before the Effective Time at the offices of Xxxxxxxx & Xxxx, Xxx Xxxxxx Xxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000 on the date of the closing of OMEGA's initial public
offering of its securities (the "IPO Closing") pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") ("IPO"), or at such other place, date or time as may be fixed
by mutual agreement of the parties; provided, however, that in no event shall
the Closing date be extended beyond sixth months from the date of this
Agreement. On or before the IPO Closing, OMEGA will notify the Orthodontic
Entity of the projected IPO Closing Date determined by OMEGA, in its sole
discretion. As used herein "IPO Price" shall mean the initial offering price to
the public of OMEGA Stock as reflected on the cover page of its Prospectus under
the Securities Act for the IPO.
2.4 Certificates; Resignations, Filing Certificate of Name Change.
Contemporaneous
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with the Closing, Xx. Xxxxxxx shall deliver to OMEGA the certificates evidencing
the Interests, duly endorsed for transfer and otherwise as provided in Section
2.1, and written resignations from all officers and directors of the Orthodontic
Entity. OMEGA shall prepare the duly executed Certificate(s) of Name Change
reflecting the name change of the Orthodontic Entity to be filed with the State
Secretary of State.
2.5 Delivery of Records, Contracts, Interests. At the Closing Xx.
Xxxxxxx shall deliver or cause to be delivered to OMEGA:
(a) all of the Orthodontic Entity's minute books, stock records and
other books and records and the Orthodontic Entity's leases, contracts,
employment agreements, non-compete agreements, commitments and rights, with such
consents to the Stock Purchase as are necessary to assure OMEGA of the full
benefit of the same.
(b) Evidence of malpractice insurance coverage for the current and five
(5) prior years, and if applicable, evidence of so-called "tail" insurance for
such period naming the Orthodontic Entity as a co-insured or otherwise assigning
to the Orthodontic Entity, its successor and assigns the full benefits thereof.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Representations and Warranties of Xx. Xxxxxxx in the attached
Schedule 1 are hereby incorporated as if fully set forth herein. The
Representations and Warranties of OMEGA in the attached Schedule 2 are hereby
incorporated as if fully set forth herein. Capitalized words and expressions
used in this Agreement and which are defined in said Schedules 1 and 2 shall
have the same meaning as they are given therein.
ARTICLE IV. COVENANTS OF XX. XXXXXXX
Xx. Xxxxxxx hereby covenants and agrees with OMEGA as follows:
4.1 Conduct of Business. Between the date of this Agreement and the
Closing, he will do the following unless OMEGA shall otherwise consent in
writing:
(a) conduct the Orthodontic Entity business only in the
ordinary course, and refrain from changing or introducing any method of
management or operations except in the ordinary course of business and
consistent with prior practices;
(b) refrain from making any purchase, sale or disposition of
any asset or property other than in the ordinary course of business, from
purchasing any capital asset costing more than $1,000 and from mortgaging,
pledging, subjecting to a lien or otherwise encumbering any of the Interests,
the Property or other assets of the Orthodontic Entity;
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(c) refrain from incurring any contingent or fixed obligations
or liabilities except those that are usual and normal in the ordinary course of
business;
(d) refrain from making any change or incurring any obligation
to make a change in its Charter or By-laws (certified copies of which are
attached hereto as Exhibit C) or authorized or issued capital stock, except as
contemplated by this Agreement;
(e) refrain from declaring, setting aside or paying any
dividend or making any other distribution in respect of capital stock, or making
any direct or indirect redemption, purchase or other acquisition of capital
stock, of the Orthodontic Entity;
(f) use his best efforts to keep intact its business
organization, to keep available its present officers, agents and employees and
to preserve the goodwill of all patients, suppliers, and others having business
relations with it;
(g) not commit or fail to commit any act which would cause Xx.
Xxxxxxx or the Orthodontic Entity to suffer the revocation, suspension or
limitation of Xx. Xxxxxxx'x or the Orthodontic Entity's license.
(h) permit OMEGA and its authorized representatives to have
full access to all its properties, assets, records, tax returns, Orthodontic
Entity records, contracts and documents and furnish to OMEGA or its authorized
representatives such financial and other Information with respect to its
business or properties as OMEGA may from time to time reasonably request.
4.2 Authorization from Others. Prior to the Closing, he will have
obtained all assignments, authorizations, consents and permits of others
required to permit the consummation by Xx. Xxxxxxx of the transactions
contemplated by this Agreement.
4.3 Breach of Representations and Warranties. Promptly upon becoming
aware of the actual, impending or threatened occurrence of any event which would
cause or constitute a breach, or would have caused or constituted a breach had
such event occurred or been known to them prior to the date hereof, of any of
their representations and warranties contained in or referred to in this
Agreement, he shall give detailed written notice thereof to OMEGA and shall use
his best efforts to prevent or promptly remedy the same.
4.4 Consummation of Agreement. Each shall use his best efforts to
perform and fulfill all conditions and obligations on his part to be performed
and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be fully carried out.
ARTICLE V. COVENANTS OF OMEGA.
OMEGA hereby covenants and agrees with Xx. Xxxxxxx as follows:
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5.1 Authorization from Others. Prior to the Closing, it will have
obtained all authorizations, consents and permits of others required to permit
the consummation by it of the transactions contemplated by this Agreement.
5.2 Consummation of Agreement. It shall use its best efforts to perform
and fulfill all conditions and obligations on its part to be performed or
fulfilled under this Agreement, to the end that the transactions contemplated by
this Agreement shall be fully carried out.
ARTICLE VI. CONDITIONS TO OBLIGATIONS OF OMEGA
The obligations of OMEGA to consummate this Agreement and the
transactions contemplated hereby are subject to the condition that on or before
the Closing the actions required by this Article 6 will have been accomplished.
6.1 Representations; Warranties; Covenants. Each of the representations
and warranties of Xx. Xxxxxxx contained in Schedule 1 shall be true and correct
as though made on and as of the Closing, and Xx. Xxxxxxx shall have performed
all of his obligations hereunder which by the terms hereof are to be performed
on or before the Closing.
6.2 New PC. Xx. Xxxxxxx shall have formed the New PC under the laws of
the State in order to commence the practice of orthodontics through the New PC.
Xx. Xxxxxxx shall have furnished (i) a certificate of the State Secretary of
State as to the legal existence and professional corporation good standing of
New PC; and (ii) a copy of the resolutions adopted by the board of directors and
stockholders of New PC authorizing and approving the Management Services
Agreement and the Stock Put/Call Option and Successor Designation Agreement.
6.3 Other Agreements. Xx. Xxxxxxx shall have executed and delivered, or
shall have caused the New PC to execute and deliver, to OMEGA a Management
Services Agreement and a Stock Put/Call Option and Successor Designation
Agreement, each having substantially the terms and conditions of the forms
hereof collectively attached hereto as Exhibit D.
6.4 Initial Public Offering. OMEGA shall have completed the IPO.
6.5 Absence of Certain Litigation. There shall not be any injunction,
restraining order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided, or suit, action
or other proceeding which in the reasonable opinion of counsel for OMEGA is
likely to result in the restraint or prohibition of the consummation of any
material transaction contemplated hereby.
6.6 Notices. The Orthodontic Entity shall, at OMEGA's expense, notify
all patients and obligors of accounts receivable, and third party payors and
others designated by OMEGA of the
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Stock Purchase and the other transactions contemplated hereunder pursuant to
notices substantially in the form collectively attached hereto as Exhibit B.
6.7 Financial Condition. The financial condition of the Orthodontic
Entity shall not be materially adversely different from the Financial Statement,
as determined by OMEGA. During the period from the date of the Financial
Statement to the Closing, there shall not have been any material adverse change
in the financial condition, results of operations, business or prospects of the
Orthodontic Entity, nor any material loss or damage to its assets, whether or
not insured, which materially affects the ability of Orthodontic Entity to
conduct its business. Xx. Xxxxxxx shall cause the Orthodontic Entity to deliver
to OMEGA a certificate, dated the date of Closing, to the foregoing effect, and
further to the effect that there are no Accounts Payable or other liabilities as
of the date of Closing that are not reflected on the Financial Statement other
than those which have been disclosed in writing to and accepted in writing by
OMEGA and which incurred since the date of the Financial Statement in the
ordinary course of business.
6.8 Due Diligence. OMEGA, acting in good faith and in its sole
discretion, shall be reasonably satisfied with the results of its "Due
Diligence" on Xx. Xxxxxxx and the Orthodontic Entity as not reflecting any data
or information which individually or in the aggregate, if previously disclosed,
would have indicated that there was a material adverse change in the business of
the Orthodontic Entity or in the condition or prospects (financial or otherwise)
of the assets, properties, operations, patients, employees or equipment of the
business of the Orthodontic Entity from the information provided prior to the
date hereof. As used herein, Due Diligence shall mean, without limitation, the
results of the Audit of the Financial Statement and of all other matters
(financial or otherwise) related to, or otherwise deemed material by OMEGA,
regarding Xx. Xxxxxxx and the Orthodontic Entity, including location of the
Orthodontic Offices and its demographics, the leases, the Equipment, insurance,
licensing, malpractice issues, liabilities, compliance with laws and regulations
and health surveys.
ARTICLE VII. CONDITIONS TO OBLIGATIONS OF XX. XXXXXXX
The obligations of Xx. Xxxxxxx to consummate this Agreement and the
transactions contemplated hereby are subject to the condition that on or before
the Closing the actions required by this Article 7 will have been accomplished.
7.1 Representations; Warranties; Covenants. Each of the representations
and warranties of OMEGA contained in Schedule 2 shall be true and correct as
though made on and as of the Closing and each of OMEGA shall have performed all
of its obligations hereunder which by the terms hereof are to be performed on or
before the Closing.
7.2 Intentionally Omitted.
7.3 Other Agreements. OMEGA shall have executed and delivered to Xx.
Xxxxxxx and New PC a Management Services Agreement and a Stock Put/Call Option
and Successor
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Designation Agreement, each having substantially the terms and conditions of the
forms hereof collectively attached hereto as Exhibit D.
7.4 Initial Public Offering. OMEGA shall have completed the IPO.
7.5 Absence of Certain Litigation. There shall not be any injunction,
restraining order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided, or suit, action
or other proceeding which in the reasonable opinion of counsel for Xx. Xxxxxxx
is likely to result in the restraint or prohibition of the consummation of any
material transaction contemplated hereby.
ARTICLE VIII. OBLIGATIONS AFTER CLOSING.
8.1 OMEGA Exceptional Practice and the Report Suggestions. On and after
the Closing, Xx. Xxxxxxx agrees to cause the New PC to implement the suggestions
in the Report and the concepts of OMEGA's Exceptional Practice.
8.2 Books and Records. OMEGA shall permit Xx. Xxxxxxx, his accountants
and attorneys, reasonable access to such books and records for the purpose of
preparing such tax returns of Xx. Xxxxxxx as may be required after the Closing
and for other proper purposes approved by OMEGA.
8.3 License. Xx. Xxxxxxx shall maintain all licenses necessary to
practice orthodontics in the State. Xx. Xxxxxxx shall not commit or fail to
commit any act which would cause Xx. Xxxxxxx or the New PC to suffer the
revocation, suspension or limitation of Xx. Xxxxxxx'x or the New PC's license.
ARTICLE IX. INDEMNIFICATION.
9.1 Indemnification By Xx. Xxxxxxx. Subject to the limitations set
forth in Section 9.3, Xx. Xxxxxxx agrees to defend, indemnify and hold each of
OMEGA harmless from and against any damages, liabilities, losses and expenses
(including reasonable counsel fees) of any kind or nature whatsoever which may
be sustained or suffered by OMEGA based upon a breach of any representation,
warranty or covenant made by Xx. Xxxxxxx in this Agreement or in any exhibit,
certificate, schedule or financial statement delivered hereunder, or by reason
of any claim, action or proceeding asserted or instituted growing out of any
matter or thing covered by such representations, warranties or covenants.
9.2 Indemnification By OMEGA. Subject to the limitations set forth in
Section 9.3, OMEGA agrees to defend, indemnify and hold Xx. Xxxxxxx harmless
from and against any damages, liabilities, losses and expenses (including
reasonable counsel fees) of any kind or nature whatsoever which may be sustained
or suffered by Xx. Xxxxxxx based upon a breach of any
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representation, warranty or covenant made by OMEGA in this Agreement or in any
exhibit, certificate, schedule or financial statement delivered hereunder, or by
reason of any claim, action or proceeding asserted or instituted growing out of
any matter or thing covered by such representations, warranties or covenants.
9.3 Exclusions. Notwithstanding Sections 9.1 and 9.2:
(a) no indemnification shall be payable to the extent any
claim is covered by insurance; and
(b) no indemnification shall be payable with respect to claims
asserted more than five (5) years after the Closing.
9.4 Notice: Defense of Claims. Prompt written notice of each claim for
indemnification hereunder shall be given to the other party, specifying the
amount and nature of the claim, and of any matter which in the opinion of the
claimant is likely to give rise to an indemnification claim. The indemnifying
party shall have the right to participate at its own expense in the defense of
any such matter or its settlement. If, in the opinion of the indemnified party,
its financial condition or business would not be impaired thereby, such party
may authorize the indemnifying party to take over the defense of such matter so
long as such defense is expeditious. Failure to give notice of a matter which
may give rise to an indemnification claim shall not affect the rights of any
party to collect such claim from the other party or its transferees in
liquidation.
9.5 Payment of Claims; Alternative Dispute Resolution. (a) Any
indemnification claims shall be paid or otherwise satisfied by Xx. Xxxxxxx, or
Xx. Xxxxxxx'x transferees in liquidation, within 30 days after notice thereof is
given by OMEGA. In the event Xx. Xxxxxxx indicates in a writing delivered to
OMEGA that he disputes the nature or amount of the claim, in which event the
dispute upon the election of any party hereto after said 30-day period shall be
handled in accordance with this Section.
(b) If a dispute arises under this Agreement which cannot be resolved
informally by the parties, any party may invoke the procedures set forth in
Exhibit D hereto and the parties agree to use these procedures, except paragraph
(c) of this Section 9.5, prior to any party pursuing other available remedies.
The parties will meet and attempt in good faith to resolve any controversy or
claim arising out of or relating to this Agreement.
(c) Notwithstanding anything in this Section 9.5 to the contrary,
nothing in this Section 9.5 shall preclude any party from seeking a preliminary
injunction or other provisional relief, either prior to or during the proceeding
provided for in this section, if in its judgment such action is necessary to
avoid irreparable damage or to preserve the status quo.
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ARTICLE X. MISCELLANEOUS.
10.1 Termination.
(a) At any time prior to the Closing, this Agreement may be terminated
(i) by mutual consent of the parties with the approval of their respective board
of directors or members, (ii) by either if there has been a material
misrepresentation, breach of warranty or breach of covenant by the other party
in its representations, warranties and covenants set forth herein, (iii) by
OMEGA if the conditions stated in Article VI have not been satisfied at or prior
to the Closing, or (iv) by Xx. Xxxxxxx if the conditions stated in Article VII
have not been satisfied at or prior to the Closing.
(b) If the IPO is not successfully completed within six (6) months of
this Agreement, this Agreement may be terminated by OMEGA or Xx. Xxxxxxx upon
written notice to the other party, and if so terminated, all obligations of the
parties hereunder shall terminate without any further liability of either party
to the other, except that each party shall remain obligated in respect of the
provisions of Section 10.3 and 10.7 which shall survive any such termination.
10.2 Survival of Warranties and Other Obligations. All representations,
warranties, agreements, covenants and obligations herein or in any schedule,
exhibit, certificate or financial statement delivered by either party to the
other party incident to the transactions contemplated hereby are material, shall
be deemed to have been relied upon by the other party and shall survive the
Closing regardless of any investigation and shall not merge in the performance
of any obligation by either party hereto.
10.3 Fees and Expenses. Each of the parties will bear its or his own
expenses in connection with the negotiation and the consummation of the
transactions contemplated by this Agreement.
10.4 Notices. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram or facsimile transmission) addressed as provided below and if either
(a) actually delivered at said address, or (b) in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mail, postage prepaid and registered or certified, return receipt
requested, or sent by reputable overnight courier:
If to Xx. Xxxxxxx, to:
Xxxx X. Xxxxxxx, D.D.S.
0000 Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
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If to the OMEGA, to:
Omega Orthodontics, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of
delivery thereof.
10.5 Entire Agreement. This Agreement (including all exhibits or
schedules appended to this Agreement and all documents delivered pursuant to the
provisions of this Agreement, all of which are hereby incorporated herein by
reference) together with the Management Services Agreement and the Stock
Put/Call Option and Successor Designation Agreement (including all exhibits and
schedules thereto), taken together, constitute the entire agreement between the
parties, and all promises, representations, understandings, warranties and
agreements with reference to the subject matter hereof and inducements to the
making of this Agreement relied upon by my party hereto, have been expressed
herein or therein.
10.6 Binding Agreement, Successors. This Agreement shall be binding
upon, and shall be enforceable by and inure to the benefit of, the parties named
herein and their respective successors and assigns; provided, however, that this
Agreement may not be assigned by any of the parties without the prior written
consent of all the other parties.
10.7 Confidentiality. As used herein, "Confidential Information" means
any information or data that a party has acquired from another party that is
confidential or not otherwise available to the public, whether oral or written,
including without limitation any analyses, computations, studies or other
documents prepared from such information or data by or for the directors,
officers, employees, agents or representatives of such party (collectively, the
"Representatives"), but excluding information or data which (i) became available
to the public other than as a result of such party's violation of this
Agreement, (ii) became available to such party from a source other than the
other party if that source was not bound by a confidentiality agreement with
such other party and such source lawfully obtained such information or data, or
(iii) is required to be disclosed by applicable law, provided that promptly
after being compelled to disclose any such information or data, the party being
so compelled shall provide prompt notice thereof to the other party so that such
other party may seek a protective order or other appropriate remedy. Each party
covenants and agrees that it and its Representatives shall keep confidential and
shall not disclose all Confidential Information, except to its Representatives
and lenders who need to know such information and agree to keep it confidential.
Each party shall be responsible for any breach of this provision by its
Representatives. In the event that the Closing does not occur, each party will
promptly return to the other all copies of such other party's Confidential
Information.
10.8 Governing Law; Severability. This Agreement shall be deemed a
contract made under the laws of the State of Delaware and, together with the
rights and obligations of the parties hereunder, shall be construed under and
governed by the laws of such state. The invalidity or
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unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision hereof.
10.9 Referrals. Nothing in this Agreement shall be construed as an
offer or payment to the other party or any affiliate of the other party of any
cash or other remuneration whether directly or indirectly, overtly or covertly,
specifically for patient referrals or for recommending or arranging the
purchase, lease or order of any item or service. The Consideration to be
received upon consummation of the Stock Purchase represents the fair market
value of the Orthodontic Entity and is not in any way related to or dependent
upon referrals by and between OMEGA and Xx. Xxxxxxx.
10.10 Further Assurances. Following the execution of this Agreement,
Xx. Xxxxxxx and OMEGA each agrees:
(a) to deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement, and the transactions contemplated herein;
(b) to confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally or in writing of any
change or event resulting in or which, insofar as can reasonably be foreseen
could result in, a material adverse effect on such party or which would cause or
constitute a material breach of any of the representations, warranties or
covenants of such party contained herein; and
(c) to provide the other (or its counsel) promptly with copies of all
filings made by such party with any state or federal governmental entity in
connection with this Agreement or the transactions contemplated hereby.
10.11 Termination of Prior Agreement. OMEGA, Xx. Xxxxxxx, the
Orthodontic Entity; and Omega Orthodontics of Austin, Inc., a Delaware
corporation to be formed and to become a wholly owned subsidiary of OMEGA
("Acquisition") entered into an Affiliation Agreement and Agreement and Plan of
Merger (the "Original Agreement") dated March 20, 1997. Subsequent to executing
the Original Agreement, the parties thereto desired to modify the structure of
the transaction from a merger to a stock purchase. Acquisition was never formed,
and thus is not a party to this Agreement. The Orthodontic Entity is a party to
this Agreement only for purposes of this Section 10.11. OMEGA, Xx. Xxxxxxx and
the Orthodontic Entity agree that the Original Agreement is hereby terminated.
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10.12 Counterparts; Section Headings; Gender. This Agreement may be
executed, accepted and delivered in any number of counterparts, but all
counterparts shall together constitute but one and the same instrument. The
underlined section headings are inserted for convenience of reference only and
are not to be construed as part of this Agreement. The use of the masculine or
neuter gender includes each of the other genders.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
D.D.S.
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Printed Name: Xxxx X. Xxxxxxx, D.D.S.
Xxxx X. Xxxxxxx, D.D.S., M.S., Inc.
(As to Section 10.11 Only)
By:
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Xxxx X. Xxxxxxx, D.D.S.
Its
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Duly Authorized
OMEGA ORTHODONTICS, INC.
By:
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Printed Name: Xxxxxx X. Xxxxxxxx
Its President and Chief Executive Officer
Duly Authorized
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Exhibit A
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Financial Statement
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Exhibit B
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Notices
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Exhibit C
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Orthodontic Entity's Charter and
By-Laws
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Exhibit D
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Draft Management Services Agreement and
Stock Put/Call Option and Successor Designation Agreement
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Exhibit E
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ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
A. Method of Invoking ADR Procedures
1. These procedures may be invoked by any party to an agreement which
incorporates these procedures by giving written notice to the other of the
dispute and designating a person with decision-making authority (the
"representative") to act on behalf of the disputing party regarding the dispute.
The other party shall be required to respond to the disputing party's notice
within five (5) business days by designating in writing its own representative.
A party may choose more than one person to represent it. If a party appoints
only one representative, one or more of its officers may nonetheless attend such
meetings.
2. The parties, each acting through its representative, shall meet at a
mutually acceptable time and place within five business days after the
non-disputing party designates its representative to the other. At that meeting,
the parties shall attempt in good faith to negotiate a resolution of the
dispute, or failing that, to agree on a method for resolving the claim or
dispute.
3. If, within ten (10) business days after the first meeting or within
such longer period of time as the parties may mutually agree, the parties have
not succeeded in negotiating a resolution of the claim or dispute or agreeing on
a dispute resolution mechanism, they shall submit the dispute to mediation in
accordance with the procedures set forth herein.
4. The parties will jointly appoint a mutually acceptable mediator to
mediate the dispute. If the parties are unable to agree on a mutually acceptable
mediator within five (5) days after the conclusion of the negotiations described
in paragraph 3 above, then the parties shall select a neutral third party from
either the Center for Public Resources, New York, New York ("CPR") Panels of
Neutrals, the American Arbitration Association ("AAA") or the Association of
Attorney Mediators ("AAM"), with the assistance of such organization, unless the
parties agree otherwise in finding a mutually acceptable mediator.
5. OMEGA shall bear 50% and the New PC and Xx. Xxxxxxx shall bear 50%
of the fees and costs of the mediator and any fees and costs of CPR, AAA or AAM.
6. The parties agree to participate in good faith in the mediation and
negotiations related thereto for a period of thirty (30) days from appointment
of a mediator by any of the parties or the CPR, AAA or AAM.
B. Mediation procedures
1. The mediator shall be neutral and impartial.
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2. The mediator shall control the procedural aspects of the mediation.
The parties will cooperate fully with the mediator.
(a) The mediator is free to meet and communicate separately with
each party.
(b) The mediator will decide when to hold joint meetings with the
parties and when to hold separate meetings. There shall be no
stenographic record of any meeting. Formal rules of evidence
will not apply.
(c) The mediator may request that there be no direct communication
between the parties or between their attorneys without the
concurrence of the mediator.
3. Each party may be represented by more than one person, e.g., one or
more of its officers and an attorney. Each party will have a representative
fully authorized to negotiate a settlement of the dispute present.
4. The process will be conducted expeditiously.
5. The mediator will not transmit information received from any party
to another party or any third person unless authorized to do so by the party
transmitting the information.
6. The entire process is confidential. The parties and the mediator
will not disclose information regarding the process, including settlement terms,
to third persons, unless the parties otherwise agree. The process shall be
treated as a compromise negotiation for purposes of the Federal Rules of
Evidence and state rules of evidence.
7. The parties will refrain from pursuing administrative and/or
judicial remedies during the mediation process, except as otherwise expressly
provided in the agreement which incorporates these procedures.
8. Unless all parties and the mediator otherwise agree in writing,
(a) The mediator will be disqualified as a witness, consultant or
expert in any pending or future investigation, action or
proceeding relating to the subject matter of the mediation
(including any investigation, action or proceeding which
involves persons not party to this mediation); and
(b) The mediator and any documents and information in the
mediator's possession will not be subpoenaed in any such
investigation, action or proceeding, and all parties will
oppose any effort to have the mediator and documents
subpoenaed.
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9. If the dispute goes into arbitration, the mediator shall not serve
as an arbitrator, unless the parties and the mediator otherwise agree in
writing.
10. The mediator, if a lawyer, may freely express views to the parties
on the legal issues of the dispute.
11. The mediator shall not be liable for any act or omission in
connection with the mediation.
12. The mediator may withdraw at any time by written notice to the
parties (i) for overriding personal reasons, (ii) if the mediator believes that
a party is not acting in good faith, or (iii) if the mediator concludes that
further mediation efforts would not be useful.
C. Binding Arbitration
If the parties do not resolve the dispute through mediation within the
period provided in Part A above, the parties shall submit the matter to binding
arbitration before AAA, AAM or CPR, to a qualified sole arbitrator in accordance
with the then current CPR Rules for Non-Administered Arbitration of Business
Disputes or comparable AAA or AAM rules. The sole arbitrator shall be agreed
upon by the parties within twenty (20) days after either party elects to submit
any issue to arbitration or, failing that, shall be selected by the organization
to whom the parties selected for arbitration. A qualified arbitrator is one who
is familiar with the principal subject matter of the issues to be arbitrated
such as by way of example, healthcare services industry matters, management
consulting services generally or business law/corporate matters generally.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction. The arbitrator shall not have the authority to award
multiple, punitive or consequential damages under any circumstances. If the
party initially raising the dispute to be resolved is New PC or Xx. Xxxxxxx, the
arbitration shall be held in Boston, Massachusetts, and if the party initially
raising the dispute to be resolved is the MSO or OMEGA, the arbitration shall be
held in Austin, Texas.
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Schedule 1
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Representations and Warranties of
Xx. Xxxxxxx to OMEGA
Xx. Xxxxxxx hereby represents and warrants to OMEGA as follows:
1. Organization and Qualification of the Orthodontic Entity. The
Orthodontic Entity is a duly formed and organized professional corporation under
the laws of the State. The Orthodontic Entity is a legally existing professional
corporation under the State Professional Corporation Act (the "Act") and no
event has occurred which alone or after the passage of time would result in the
dissolution of the Orthodontic Entity. The Orthodontic Entity has the full power
to conduct business as currently conducted by the Orthodontic Entity and to own
and lease the property it purports to own. The copies of any articles of
organization or incorporation and by-laws, as defined in the Act, of the
Orthodontic Entity which are currently in effect, and all amendments thereto
(collectively, the "Charter and By-Laws"), certified by Xx. Xxxxxxx, attached
hereto as Exhibit C are complete and correct.
2. Authorization of Transaction. All necessary action, Orthodontic
Entity or otherwise, has been taken to authorize the execution of the Agreement
by Xx. Xxxxxxx, and the delivery and performance of this Agreement and the
transactions contemplated hereby, and the Agreement is the valid and binding
obligation of Xx. Xxxxxxx, enforceable against Xx. Xxxxxxx in accordance with
its terms.
3. Present Compliance with Obligations and Laws. Except as disclosed on
Exhibit X attached to this Schedule, there is not: (a) any violation of the
Charter or By-Laws; (b) a default in the performance of any obligation,
agreement or condition of any debt instrument from Xx. Xxxxxxx or the
Orthodontic Entity which (with or without the passage of time or the giving of
notice) affords to any person the right to accelerate any material indebtedness
or terminate any right; (c) a default of or breach of (with or without the
passage of time or the giving of notice) any other contract to which Xx. Xxxxxxx
or the Orthodontic Entity is a party or by which their assets are bound; or (d)
any violation of any law, regulation, administrative order or judicial order
applicable to Xx. Xxxxxxx or the Orthodontic Entity, or their business or
assets.
4. No Conflict of Transaction With Obligations and Laws.
(a) Neither the execution, delivery and performance of this Agreement,
nor the performance of the transactions contemplated hereby, will: (i)
constitute a breach or violation of Orthodontic Entity's Charter or By-Laws;
(ii) conflict with or constitute (with or without the passage of time or the
giving of notice) a breach of, or default under, any debt instrument to which
Xx. Xxxxxxx or the Orthodontic Entity is a party, or give any person the right
to accelerate any indebtedness or terminate any right; (iii) constitute (with or
without the passage of time or giving of notice) a default under or breach of
any other agreement, instrument or obligation to which the Orthodontic Entity or
Xx. Xxxxxxx is a party or by which their assets are bound; or (iv)
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result in a violation of any law, regulation, administrative order or judicial
order applicable to the Orthodontic Entity, Xx. Xxxxxxx, their business or
assets.
(b) Except as disclosed on the attached Exhibit X to this Schedule, the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby by the Orthodontic Entity do not require the consent,
waiver, approval, authorization, exemption of or giving of notice to any
governmental authority.
5. Investigations and Licenses.
(a) The Orthodontic Entity and Xx. Xxxxxxx have all necessary licenses
to practice orthodontics in the State.
(b) Neither the Orthodontic Entity nor Xx. Xxxxxxx is subject to any
investigation, whether threatened, current or pending, under which the
Orthodontic Entity or Xx. Xxxxxxx may be required to forfeit or suffer the
revocation, suspension or limitation of Xx. Xxxxxxx'x or the Orthodontic
Entity's license to practice orthodontics and neither the Orthodontic Entity nor
Xx. Xxxxxxx is subject to any investigation, whether threatened, current or
pending by a commercial third-party payor.
6. Financial Statement. Attached as Exhibit A to the Agreement is the
Financial Statement of the Orthodontic Entity. To the best knowledge of Xx.
Xxxxxxx, the Financial Statement is complete and correct and fairly presents in
all material respects the financial position of the Orthodontic Entity as at the
date of such statement and the results of its operations for the period then
ended, in accordance with generally accepted accounting principles consistently
applied throughout the periods covered thereby for the periods covered thereby.
7. Capitalization and the Interests. The authorized capital of the
Orthodontic Entity consists of the Interests. All of the Interests have been
validly issued and are fully paid and non-assessable. There are no options,
warrants, rights or other agreements or commitments obligating the Orthodontic
Entity or Xx. Xxxxxxx to issue or sell the Interests and there are no
pre-emptive rights with respect to any Interests. Xx. Xxxxxxx is the beneficial
and record owner of the Interests. Xx. Xxxxxxx has good title to the Interests,
free and clear of any liens, encumbrances or restrictions of any kind. The
Interests are not subject to any voting or similar agreement.
8. Property; Liens; Condition.
(a) Except as set forth on Exhibit X to this Schedule, the Orthodontic
Entity has good and marketable title in fee simple to all of its owned real and
personal property, including without limitation, all machinery and equipment
used or owned by the Orthodontic Entity (the "Equipment") free of liens and
encumbrances (the "Property"). All the Property owned or leased by the
Orthodontic Entity is in good repair, has been well maintained, substantially
conforms with all applicable ordinances, regulations and zoning or other laws.
The Equipment is in good working order.
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(b) No other entity or person owns any of the assets necessary for the
operation of the Orthodontic Entity. The Orthodontic Entity does not operate any
of its practice through any other entities or persons.
9. Payment of Taxes. The Orthodontic Entity has filed all federal,
state and local income, excise or franchise tax returns, real estate and
personal property tax returns, sales and use tax returns and other tax returns
required to be filed and has paid all taxes owing except taxes which have not
yet accrued or otherwise become due for which adequate provision has been made
in the Financial Statement. All transfer, excise or other taxes payable by
reason of the Stock Purchase pursuant to the Agreement shall be paid or provided
for by the Xx. Xxxxxxx after the Closing out of the Consideration to be received
upon consummation of the Stock Purchase.
10. Absence of Undisclosed Liabilities and Changes.
(a) As of the date of the Financial Statement, the Orthodontic Entity
had no liabilities of any nature, whether accrued, absolute, contingent or
otherwise (including without limitation liabilities as guarantor or otherwise
with respect to obligations of others, or liabilities for taxes due or then
accrued or to become due), except (i) liabilities stated or adequately reserved
against on the Financial Statement, (ii) liabilities not in excess of $5,000
arising in the ordinary course of business since the date of the Financial
Statement, and (iii) liabilities disclosed in Exhibit X to this Schedule. There
is no fact which materially adversely affects, or may in the future (so far as
can now be reasonably foreseen) materially adversely affect, the business,
properties, operations or condition of the Orthodontic Entity which has not been
specifically disclosed herein or in Exhibit X to this Schedule.
(b) Except as disclosed in Exhibit X to this Schedule, since the date
of the Financial Statement there has not been:
(i) any change in the financial condition, properties, assets,
liabilities, business or operations of the Orthodontic Entity, which change by
itself or in conjunction with all other such changes, whether or not arising in
the ordinary course of business, has been materially adverse with respect to the
Orthodontic Entity;
(ii) any mortgage, encumbrance or lien placed on any of the
Interests or the Property, or the property subject to any lease, or which
remains in existence on the date hereof or at the time of Closing; or
(iii) any obligation or liability incurred by the Orthodontic
Entity other than obligations and liabilities incurred in the ordinary course of
business and disclosed on Exhibit X attached to this Schedule.
11. Litigation. Except for matters described on Exhibit X to this
Schedule, there is no action, suit, claim, proceeding or investigation pending
or, to the knowledge of the Orthodontic
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Entity or Xx. Xxxxxxx, threatened against the Orthodontic Entity or Xx. Xxxxxxx,
at law or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality or
governmental inquiry pending or, to the knowledge of the Orthodontic Entity or
Xx. Xxxxxxx, threatened against or involving Xx. Xxxxxxx or the Orthodontic
Entity, and there is no basis for any of the foregoing, and there are no
outstanding court orders, court decrees, or court stipulations to which the
Orthodontic Entity or Xx. Xxxxxxx is a party which question this Agreement or
affect the transactions contemplated hereby, or which will result in any
materially adverse change in the business, properties, operations, prospects,
assets or in the condition, financial or otherwise, of Xx. Xxxxxxx or the
Orthodontic Entity.
12. Insurance. The Orthodontic Entity has possessed adequate occurrence
Professional liability coverage for the five (5) years prior to the date of this
Agreement protecting the Orthodontic Entity and Xx. Xxxxxxx from any
professional malpractice liability that might arise because of the Orthodontic
Entity's or Xx. Xxxxxxx'x practice activities over the preceding five (5) years.
Prior to the Closing, the New PC shall have obtained and shall continue to
maintain, at its cost, Occurrence Medical Malpractice Liability Insurance for
Xx. Xxxxxxx and the New PC. The Orthodontic Entity possesses adequate insurance
coverage for its Property.
13. Taxes. The Orthodontic Entity has filed all tax returns, federal,
state, county and local, required to be filed by it, and the Orthodontic Entity
has paid all taxes shown to be due by such returns as well as all other taxes,
assessments and governmental charges which have become due or payable, including
without limitation all taxes which the Orthodontic Entity is obligated to
withhold from amounts owing to employees, creditors and third parties. The
Orthodontic Entity has established adequate reserves for all taxes accrued but
not yet payable. All tax elections have been made by the Orthodontic Entity in
accordance with generally accepted practice. The federal income tax returns of
the Orthodontic Entity have never been audited by the Internal Revenue Service.
No deficiency assessment with respect to or proposed adjustment of the
Orthodontic Entity's federal, state, county or local taxes is pending or
threatened. There is no tax lien, whether imposed by any federal, state, county
or local taxing authority, outstanding against the assets, properties or
business of the Orthodontic Entity. Neither the Orthodontic Entity nor any of
its present or former stockholders has ever filed an election pursuant to
Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"), that
the Orthodontic Entity be taxed as an S corporation. The Orthodontic Entity's
net operating losses for federal income tax purposes, as set forth in the
financial statements referred to in Section 2.05, are not subject to any
limitations imposed by Section 382 of the Code and the full amount of such net
operating losses are available to offset the taxable income of the Orthodontic
Entity for the current fiscal year and, to the extent not so used, succeeding
fiscal years. Consummation of the transactions contemplated by this Agreement or
by any other agreement, understanding or commitment (contingent or otherwise) to
which the Orthodontic Entity is a party or by which it is otherwise bound will
not have the effect of limiting the Orthodontic Entity's ability to use such net
operating losses in full to offset such taxable income.
14. Assumptions, Guaranties, Etc. of Indebtedness of Other Persons.
Except as set forth in Schedule X, The Orthodontic Entity has not assumed,
guaranteed, endorsed or otherwise become directly or contingently liable on any
indebtedness of any other person (including, without limitation,
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liability by way of agreement, contingent or otherwise, to purchase, to provide
funds for payment, to supply funds to or otherwise invest in the debtor, or
otherwise to assure the creditor against loss), except for guaranties by
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business.
15. Compliance with ERISA. Except as set forth in Schedule X, the
Orthodontic Entity has not established, maintained, made or been required to
make any contributions to, or terminated, nor does it have any liabilities with
respect to, any employee benefit plan within the meaning of, and which is
subject to, Section 3 of the Employee Retirement Income Security Act of 1974, as
amended.
16. Disclosures. Neither this Agreement nor any exhibit or schedule
hereto, nor any report, certificate or instrument furnished to the Purchasers or
their counsel in connection with the transaction contemplated by this Agreement,
when read together, contains or will contain any material misstatement of fact
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading. The Seller knows of no information or fact which has or
would have a material adverse effect on the financial condition, business or
prospects of the Orthodontic Entity which has not been disclosed to the
Purchasers.
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EXHIBIT X
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Exceptions to Representations and
Warranties of Xx. Xxxxxxx to OMEGA
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Schedule 2
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Representations and Warranties of
OMEGA to Xx. Xxxxxxx
OMEGA hereby represents and warrants to Xx. Xxxxxxx as follows:
1. Organization. That it is a corporation duly organized, validly
existing and in good standing under the laws of Delaware with full corporate
power to own or lease its properties and to conduct its business in the manner
and in the places where such properties are owned or leased or such business is
conducted by it.
2. Authorization of Transaction. All necessary action, corporate or
otherwise, has been taken by it to authorize the execution, delivery and
performance of this Agreement, and this Agreement is a valid and binding
obligation of it enforceable against it in accordance with its terms, subject to
laws of general application affecting creditor's rights generally.
3. Litigation. There is no litigation pending or, to its knowledge,
threatened against it which would prevent or hinder the consummation of the
transactions contemplated by this Agreement.
4. Securities Not Registered. It understands that the Interests to be
purchased have not been registered under the Securities Act of 1933, as amended,
or under the securities laws of any state and that neither the Securities and
Exchange Commission nor any state securities commission has approved or
disapproved of the securities.
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