EXHIBIT 2.3
Annex 1
APPLE ORTHODONTIX, INC.
UNIFORM PROVISIONS
FOR THE
ACQUISITION
OF
FOUNDING COMPANIES
WORDS AND TERMS USED IN THESE UNIFORM PROVISIONS WHICH ARE DEFINED IN THE
CONTRIBUTION AGREEMENT AMONG APPLE ORTHODONTIX, INC., , AND THE OWNERS
NAMED THEREIN (CALLED THEREIN AND HEREIN "THIS AGREEMENT"), TO WHICH THESE
UNIFORM PROVISIONS ARE ATTACHED AS ANNEX 1 ARE USED HEREIN AS DEFINED
THEREIN.
TABLE OF CONTENTS
ARTICLE I ADDITIONAL DEFINITIONS........................................... 1
Section 1.02 Additional Defined Terms................................ 1
Section 1.03 Other Definitional Provisions........................... 12
Section 1.04 Captions................................................ 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH OWNER................... 12
Section 3.02 Ownership and Status of Ownership Interest.............. 12
Section 3.03 Power of the Owners; Approval of the Acquisition........ 13
Section 3.04 No Conflicts or Litigation.............................. 13
Section 3.05 No Brokers.............................................. 14
Section 3.06 [Intentionally Deleted]................................. 14
Section 3.07 Control of Related Business............................. 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER AND
THE OWNERS........................................................... 14
Section 4.02 Qualification........................................... 14
Section 4.03 Authorization: Enforceability; Absence of
Conflicts; Required Consents.......................... 14
Section 4.04 Charter Documents and Records; No Violation............. 15
Section 4.05 No Defaults............................................. 15
Section 4.06 Seller Subsidiaries..................................... 16
Section 4.07 Capital Stock of the Seller and the Seller
Subsidiaries.......................................... 16
Section 4.08 Transactions in Capital Stock........................... 16
Section 4.09 No Bonus Shares......................................... 17
Section 4.10 Predecessor Status; Etc................................. 17
Section 4.11 Related Party Agreements................................ 17
Section 4.12 Litigation.............................................. 17
Section 4.13 Financial Statements; Disclosure........................ 17
Section 4.14 Compliance With Laws.................................... 18
Section 4.15 Certain Environmental Matters........................... 18
Section 4.16 Liabilities and Obligations............................. 19
Section 4.17 Receivables............................................. 19
Section 4.18 Owned and Leased Real Properties........................ 19
Section 4.19 Owned and Leased Property, Plant and Equipment.......... 20
Section 4.20 Proprietary Rights...................................... 21
Section 4.21 Title to Other Properties............................... 21
Section 4.22 Commitments............................................. 21
Section 4.23 Capital Expenditures.................................... 23
Section 4.24 Inventories............................................. 23
Section 4.25 Insurance............................................... 23
Section 4.26 Employee Matters........................................ 24
Section 4.27 Compliance with XXXXX, Etc.............................. 26
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Section 4.28 Taxes................................................... 28
Section 4.29 Government Contracts.................................... 29
Section 4.30 Absence of Changes...................................... 29
Section 4.31 Bank Relations; Powers of Attorney...................... 31
Section 4.32 Relations With Governments, Etc......................... 31
Section 4.33 Preemptive and Other Rights; Waiver..................... 31
Section 4.34 Reliance on Representatives............................. 31
ARTICLE V REPRESENTATIONS AND WARRANTIES OF APPLE ......................... 32
Section 5.02 Organization; Power..................................... 32
Section 5.03 Authorization; Enforceability; Absence of
Conflicts; Required Consents......................... 32
Section 5.04 Charter Documents....................................... 33
Section 5.06 Subsidiaries............................................ 33
Section 5.07 Liabilities............................................. 33
Section 5.08 Compliance With Laws; No Litigation..................... 34
Section 5.09 No Brokers.............................................. 34
Section 5.10 Private Placement Memorandum............................ 34
ARTICLE VI COVENANTS EXTENDING TO THE IPO CLOSING DATE..................... 34
Section 6.02 Access and Cooperation; Due Diligence................... 34
Section 6.03 Conduct of Business Pending Closing..................... 35
Section 6.04 Prohibited Activities................................... 35
Section 6.05 No Shop; Release of Directors........................... 37
Section 6.06 [Intentionally Deleted]................................. 37
Section 6.07 Notification of Certain Matters......................... 37
Section 6.08 Supplemental Information................................ 38
Section 6.09 Cooperation in Connection With the IPO.................. 38
Section 6.10 Additional Financial Statements and Other Information... 39
Section 6.11 Termination or Transfer of Plans........................ 39
Section 6.12 [Intentionally Deleted]................................. 39
Section 6.13 HSR Act Matters......................................... 39
ARTICLE VII THE CLOSING AND CONDITIONS TO CLOSING AND
CONSUMMATION......................................................... 40
Section 7.02 Conditions to the Obligations of Each Party............. 40
Section 7.03 Conditions to the Obligations of the Seller
and the Owners........................................ 42
Section 7.04 Conditions to the Obligations of Apple ................. 43
ARTICLE VIII COVENANTS FOLLOWING THE IPO CLOSING DATE.................... 44
Section 8.02 Disclosure.............................................. 44
Section 8.03 Preparation and Filing of Tax Returns................... 44
Section 8.04 Directors............................................... 45
Section 8.05 [Intentionally deleted]................................. 45
Section 8.06 Access.................................................. 45
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Section 8.07 Licenses and Permits.................................... 45
Section 8.08 Orthodontist Employment Agreement....................... 45
ARTICLE IX INDEMNIFICATION................................................. 45
Section 9.02 Survival of Representations and Warranties.............. 45
Section 9.03 Indemnification of Apple Indemnified Parties............ 46
Section 9.04 Indemnification of Seller Indemnified Parties........... 47
Section 9.05 Conditions of Indemnification........................... 47
Section 9.06 Remedies Not Exclusive.................................. 49
Section 9.07 Limitations on Indemnification.......................... 49
ARTICLE XI GENERAL PROVISIONS.............................................. 50
Section 11.15 Treatment of Confidential Information.................. 50
Section 11.16 Bulk Sales............................................. 51
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THE UNIFORM PROVISIONS
ARTICLE I
ADDITIONAL DEFINITIONS
Section 1.02 ADDITIONAL DEFINED TERMS. These provisions constitute the
Uniform Provisions of the Contribution Agreement by and between Apple and the
Owner and, although in a separate document, are part of and are to be included
in the Contribution Agreement. As used in this Agreement, the following terms
have the meanings assigned to them below:
"Acquisition Proposal" has the meaning specified in Section 6.05.
"Affiliate" means, as to any specified Person, any other Person that,
directly or indirectly through one or more intermediaries or otherwise,
controls, is controlled by or is under common control with the specified Person.
As used in this definition, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person (whether through ownership of Capital Stock of that Person,
by contract or otherwise).
"Apple Common Stock" means the common stock, par value $.01 per share, of
Apple.
"Apple Indemnified Party" means Apple and its Affiliates and each of their
respective officers, directors, employees, agents, financial advisors and
counsel; provided, however, that no Person who indemnifies Apple Indemnified
Parties in this Agreement in his capacity as an Owner will be an Apple
Indemnified Party for purposes of this Agreement, notwithstanding that the
Person is an Apple Indemnified Party for purposes of one or more of the Other
Agreements.
"Apple Indemnified Loss" has the meaning specified in Section 9.03.
"Capital Lease" means a lease of (or other agreement conveying the right
to use) real or personal property that is required to be classified and
accounted for as a capital lease under GAAP as in effect on the date of this
Agreement.
"Capital Stock" means, with respect to: (a) any corporation, any share, or
any depositary receipt or other certificate representing any share, of an equity
ownership interest in that corporation; and (b) any other Entity, any share,
membership or other percentage interest, unit of participation or other
equivalent (however designated) of an equity interest in that Entity.
"Cash Compensation" means, as applied to any employee, nonemployee
director or officer of, or any natural person who performs consulting or other
independent contractor services for, the Seller or any Seller Subsidiary, the
wages, salaries, bonuses (discretionary and formula), fees and other cash
compensation paid or payable by the Seller and each Seller Subsidiary to that
employee or other natural person.
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"CERCLA" means the Comprehensive Environmental Response, Conservation, and
Liability Act of 1980.
"Charter Documents" means, with respect to any Entity at any time, in each
case as amended, modified and supplemented at that time, (a) the articles or
certificate of formation, incorporation, organization or association (or the
equivalent organizational documents) of that Entity, (b) the bylaws, limited
liability company agreement or regulations or partnership agreement (or the
equivalent governing documents) of that Entity and (c) each document setting
forth the designation, amount and relative rights, limitations and preferences
of any class or series of that Entity's Capital Stock or of any rights in
respect of that Entity's Capital Stock.
"Claim Notice" has the meaning specified in Section 9.05.
"Closing" has the meaning specified in Section 7.01.
"COBRA" means the Comprehensive Omnibus Budget Reconciliation Act of 1984.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means, with respect to any Person, all trade
secrets and other confidential, nonpublic and/or proprietary information of that
Person, including information derived from reports, investigations, research,
work in progress, codes, marketing and sales programs, capital expenditure
projects, cost summaries, pricing formulae, contract analyses, financial
information, projections, confidential filings with any Governmental Authority
and all other confidential, nonpublic concepts, methods of doing business,
ideas, materials or information prepared or performed for, by or on behalf of
that Person.
"Current Balance Sheet" has the meaning specified in Section 1.01.
"Current Balance Sheet Date" has the meaning specified in Section 1.01.
"Current Date" means any day during the 20-day period ending on the date
of the Closing.
"Damage" to any specified Person means any cost, damage (including any
consequential, exemplary, punitive or treble damage) or expense (including
reasonable fees and actual disbursements by attorneys, consultants, experts or
other Representatives and Litigation costs) to, any fine of or penalty on or any
liability (including loss of earnings or profits) of any other nature of that
Person.
"Damage Claim" means, as asserted (a) against any specified Person, any
claim, demand or Litigation made or pending against that Person for Damages to
any other Person, or (b) by the specified Person, any claim or demand of the
specified Person against any other Person for Damages to the specified Person.
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"Derivative Securities" of a specified Entity means any Capital Stock or
debt security or other Indebtedness of the specified Entity or any other Person
which is convertible into or exchangeable for, or any option, warrant or other
right to acquire, (a) any unissued Capital Stock of the specified Entity or (b)
any Capital Stock of the specified Entity which has been issued and is being
held by the Entity directly or indirectly as treasury Capital Stock.
"DGCL" means the General Corporation Law of the State of Delaware.
"Election Period" has the meaning specified in Section 9.05.
"Employee Policies and Procedures" means at any time all employee manuals
and all material policies, procedures and work-related rules that apply at that
time to any employee, nonemployee director or officer of, or any other natural
person performing consulting or other independent contractor services for, the
Seller or any Seller Subsidiary.
"Employment Agreement" means at any time any (a) agreement to which the
Seller or any Seller Subsidiary is a party which then relates to the direct or
indirect employment or engagement, or arises from the past employment or
engagement, of any natural person by the Seller or any Seller Subsidiary,
whether as an employee, a nonemployee officer or director, a consultant or other
independent contractor, a sales representative or a distributor of any kind,
including any employee leasing or service agreement and any noncompetition
agreement, and (b) agreement between the Seller or any Seller Subsidiary and any
Person which arises from the sale of a business by that Person to the Seller or
any Seller Subsidiary and limits that Person's competition with the Seller or
any Seller Subsidiary.
"Entity" means any sole proprietorship, corporation, professional
association or corporation, partnership of any kind having a separate legal
status, limited liability company, business trust, unincorporated organization
or association, mutual company, joint stock company or joint venture.
"Environmental Laws" means any and all Governmental Requirements relating
to the environment or worker health or safety, including ambient air, surface
water, land surface or subsurface strata, or to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes (including Solid Wastes, Hazardous
Wastes or Hazardous Substances) or noxious noise or odor into the environment,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, recycling, removal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes (including petroleum, petroleum distillates, asbestos or
asbestos-containing material, polychlorinated biphenyls, chlorofluorocarbons
(including chlorofluorocarbon-12) or hydrochlorofluorocarbons).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, with respect to any specified Person at any time,
any other Person, including an Affiliate of the specified Person, that is, or at
any time within six years of
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that time was, a member of any ERISA Group of which the specified Person is or
was a member at the same time.
"ERISA Affiliate Pension Plan" has the meaning specified in Section 4.26.
"ERISA Employee Benefit Plan" means any "employee benefit plan" as defined
in Section 3(3) of ERISA and includes any ERISA Pension Benefit Plan.
"ERISA Group" means any "group of organizations" within the meaning of
Section 414(b), (c), (m) or (o) of the Code or any "controlled group" as defined
in Section 4001(a)(14) of ERISA.
"ERISA Pension Benefit Plan" means any "employee pension benefit plan," as
defined in Section 3(2) of ERISA, including any plan that is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code (excluding any Multiemployer Plan).
"Exchange Act" means the Securities Exchange Act of 1934.
"Final Prospectus" means the prospectus included in the Registration
Statement at the time it becomes effective, except that if the prospectus first
furnished to the Underwriter after the Registration Statement becomes effective
for use in connection with the IPO differs from the prospectus included in the
Registration Statement at the time it becomes effective (whether or not that
prospectus so furnished is required to be filed with the SEC pursuant to
Securities Act Rule 424(b)), the prospectus so furnished is the "Final
Prospectus."
"Financial Statements" means the Initial Financial Statements and the
other financial statements of the Seller and the Seller Subsidiaries, delivered
to Apple pursuant to Section 6.10 prior to the IPO Closing Date.
"GAAP" means generally accepted accounting principles and practices in the
United States as in effect from time to time which (i) have been concurred in by
Xxxxxx Xxxxxxxx LLP and (ii) have been or are applied on a basis consistent
(except for changes concurred in by Xxxxxx Xxxxxxxx LLP) with the most recent
audited Financial Statements delivered to Apple prior to the IPO Closing Date.
"Governmental Approval" means at any time any authorization, consent,
approval, permit, franchise, certificate, license, implementing order or
exemption of, or registration or filing with, any Governmental Authority,
including any certification or licensing of a natural person to engage in a
profession or trade or a specific regulated activity, at that time.
"Governmental Authority" means (a) any national, state, county, municipal
or other government, domestic or foreign, or any agency, board, bureau,
commission, court, department or other instrumentality of any such government,
or (b) any Person having the authority under any applicable Governmental
Requirement to assess and collect Taxes for its own account.
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"Governmental Requirement" means at any time (a) any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction, writ, edict,
award, authorization or other requirement of any Governmental Authority in
effect at that time or (b) any obligation included in any certificate,
certification, franchise, permit or license issued by any Governmental Authority
or resulting from binding arbitration, including any requirement under common
law, at that time.
"Guaranty" means, for any specified Person, without duplication, any
liability, contingent or otherwise, of that Person guaranteeing or otherwise
becoming liable for any obligation of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, and including any liability of
the specified Person, direct or indirect, (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) that obligation or to purchase (or
to advance or supply funds for the purchase of) any security for the payment of
that obligation, (b) to purchase property, securities or services for the
purpose of assuring the owner of that obligation of its payment or (c) to
maintain working capital, equity capital or other financial statement condition
or liquidity of the primary obligor so as to enable the primary obligor to pay
that obligation; provided, that the term "Guaranty" does not include
endorsements for collection or deposit in the ordinary course of the endorser's
business.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976.
"Immediate Family Member" of an Owner means at any time: (a) if that Owner
is a natural person, any child or grandchild (by blood or legal adoption) or
spouse of such Owner at that time, or any child of that spouse; and (b) if that
Owner is an Entity whose ultimate beneficial owner is a natural person, or a
natural person and his spouse, any child or grandchild (by blood or legal
adoption) or spouse at that time (if not then an ultimate beneficial owner of
that Entity), or any child of that spouse, of the ultimate beneficial owner or
owners.
"Indebtedness" of any Person means, without duplication, (a) any liability
of that Person (i) for borrowed money or arising out of any extension of credit
to or for the account of that Person (including reimbursement or payment
obligations with respect to surety bonds, letters of credit, banker's
acceptances and similar instruments), for the deferred purchase price of
property or services or arising under conditional sale or other title retention
agreements, other than trade payables arising in the ordinary course of
business, (ii) evidenced by notes, bonds, debentures or similar instruments,
(iii) in respect of Capital Leases or (iv) in respect of Interest Rate
Protection Agreements, (b) any liability secured by any Lien upon any property
or assets of that Person (or upon any revenues, income or profits of that Person
therefrom), whether or not that Person has assumed that liability or otherwise
become liable for the payment thereof or (c) any liability of others of the type
described in the preceding clause (a) or (b) in respect of which that Person has
incurred, assumed or acquired a liability by means of a Guaranty.
"Indemnified Party" has the meaning specified in Section 9.05.
"Indemnifying Party" has the meaning specified in Section 9.05.
"Indemnity Notice" has the meaning specified in Section 9.05.
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"Information" means written information, including (a) data, certificates,
reports and statements (excluding Financial Statements) and (b) summaries of
unwritten agreements, arrangements, contracts, plans, policies, programs or
practices or of unwritten amendments or modifications of, supplements to or
waivers under any of the foregoing documents.
"IPO" means the first time after January 31, 1997 a registration statement
filed under the Securities Act and respecting a primary offering by Apple of
shares of Apple Common Stock (other than a registration statement respecting
shares being offered pursuant to a Seller ERISA Benefit Plan or any Other
Compensation Plan) is declared effective under the Securities Act and the shares
registered by that registration statement are issued and sold by Apple
(otherwise than pursuant to the exercise by the Underwriter of any
over-allotment option).
"IPO Closing Date" means the date on which Apple first receives payment
for the shares of Apple Common Stock it sells to the Underwriter in the IPO.
"IPO Price" means the price per share of Apple Common Stock which is set
forth as the "price to public" on the cover page of the Final Prospectus.
"IPO Pricing Date" means the date, if any, on which Apple and the
Underwriter agree in the Underwriting Agreement to the price per share of Apple
Common Stock at which the Underwriter, subject to the terms and conditions of
the Underwriting Agreement, will purchase newly issued shares of Apple Common
Stock from Apple on the IPO Closing Date.
"IRS" means the Internal Revenue Service.
"Lien" means, with respect to any property or asset of any Person (or any
revenues, income or profits of that Person therefrom) (in each case whether the
same is consensual or nonconsensual or arises by contract, operation of law,
legal process or otherwise), (a) any mortgage, lien, security interest, pledge,
attachment, levy or other charge or encumbrance of any kind thereupon or in
respect thereof or (b) any other arrangement under which the same is
transferred, sequestered or otherwise identified with the intention of
subjecting the same to, or making the same available for, the payment or
performance of any liability in priority to the payment of the ordinary,
unsecured creditors of that Person, including any "adverse claim" (as defined in
Section 8-302(b) of each applicable Uniform Commercial Code) in the case of any
Capital Stock. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, Capital
Lease or other title retention agreement relating to that asset.
"Litigation" means any action, case, proceeding, claim, grievance, suit or
investigation or other proceeding conducted by or pending before any
Governmental Authority or any arbitration proceeding.
"Material" means, as applied to any Entity, material to the business,
operations, property or assets, liabilities, financial condition or results of
operations of that Entity and its Subsidiaries considered as a whole.
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"Material Adverse Effect" means, with respect to the consequences of any
fact or circumstance (including the occurrence or non-occurrence of any event)
to the Seller and the Seller Subsidiaries considered as a whole (or after the
IPO Closing Date, Apple) that such fact or circumstance has caused, is causing
or will cause, directly, indirectly or consequentially, singly or in the
aggregate with other facts and circumstances, any Damages in excess of the
Threshold Amount.
"Material Agreement" of an Entity means any contract or agreement (a) to
which that Entity or any of its Subsidiaries is a party, or by which that Entity
or any of its Subsidiaries is bound or to which any property or assets of that
Entity or any of its Subsidiaries is subject and (b) which is Material to that
Entity.
"Minimum Cash Amount" has the meaning specified in Section 7.02.
"Moody's" means Xxxxx'x Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA, Section 414(f) of the Code or Section 3(37) of ERISA.
"Organization State" means, as applied to (a) any corporation, its state
or other jurisdiction of incorporation, (b) any limited liability company or
limited partnership, the state or other jurisdiction under whose laws it is
organized and existing in that legal form, and (c) any other Entity, the state
or other jurisdiction whose laws govern that Entity's internal affairs.
"Orthodontics" means providing services related to the movement and
rearrangement of teeth.
"Other Agreements" has the meaning specified in the Preliminary Statement
in this Agreement.
"Other Compensation Plan" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the Seller
or any Seller Subsidiary, or to which the Seller or any Seller Subsidiary
contributes, on behalf of any of its employees, nonemployee directors or
officers or other natural persons performing consulting or other independent
contractor services for the Seller or any Seller Subsidiary, (a) including all
such arrangements, plans, policies, practices or programs providing for
severance pay, deferred compensation, incentive, bonus or performance awards or
the actual or phantom ownership of any Capital Stock or Derivative Securities of
the Seller or any Seller Subsidiary, but (b) excluding all Seller ERISA Pension
Plans and Employment Agreements.
"Other Financing Sources" has the meaning specified in Section 7.02.
"Other Transaction Documents" means the Other Agreements and the other
written agreements, documents, instruments and certificates at any time executed
pursuant to or in
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connection with the Other Agreements (other than the Transaction Documents and
the Underwriting Agreement), all as amended, modified or supplemented from time
to time.
"Owner means any Person who owns any ownership interest in, or is a member
of, the Seller.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Investments" means at the time of purchase or other acquisition
by the Seller or any Seller Subsidiary (a) obligations issued or guaranteed by
the United States of America with a remaining maturity not exceeding one year,
(b) commercial paper with maturities of not more than 270 days and a published
rating of not less than A-1 by S&P or P-1 by Moody's and (c) certificates of
deposit and bankers' acceptances having maturities of not more than one year of
any commercial bank or trust company if (A) that bank or trust company has a
combined capital and surplus of at least $500,000,000 and (B) its unsecured
long-term debt obligations, or those of a holding company of which it is a
subsidiary, are rated not less than A- by S&P or A3 by Moody's.
"Permitted Liens" means, as applied to the property or assets of any
Person (or any revenues, income or profits of that Person therefrom): (a) Liens
for Taxes if the same are not at the time due and delinquent; (b) Liens incurred
in the ordinary course of that Person's business in connection with worker
compensation, unemployment insurance and other social security legislation
(other than pursuant to ERISA or Section 412(n) of the Code); (c) easements,
rights-of-way, reservations, restrictions and other similar encumbrances
incurred in the ordinary course of that Person's business or existing on
property and not materially interfering with the ordinary conduct of that
Person's business or the use of that property; (d) defects or irregularities in
that Person's title to its real properties which do not materially (i) diminish
the value of the surface estate or (ii) interfere with the ordinary conduct of
that Person's business or the use of any of such properties; (e) any interest or
title of a lessor of assets being leased by any Person pursuant to any Capital
Lease disclosed in Section 4.19 of the Disclosure Statement or any lease that,
pursuant to GAAP, would be accounted for as an operating lease; and (f) Liens
securing purchase money Indebtedness disclosed in Section 4.16 of the Disclosure
Statement so long as such Liens do not attach to any property or assets other
than the properties or assets purchased with the proceeds of such Indebtedness.
"Person" means any natural person, Entity, estate, trust, union or
employee organization or Governmental Authority or, for the purpose of the
definition of "ERISA Affiliate," any trade or business.
"Plan" has the meaning specified in Section 4.27.
"Private Placement Memorandum" means the Apple Private Placement
Memorandum dated as of January 28, 1997 relating to the offer of Apple Common
Stock in connection with the Acquisition.
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"Professional Codes" means any and all Governmental Requirements relating
to the licensing or other regulation of the business of providing orthodontic
care to patients.
"Prohibited Transaction" means any transaction that is prohibited under
Section 4975 of the Code or Section 406 of ERISA and not exempt under Section
4975 of the Code or Section 408 of ERISA.
"Property, Plant and Equipment" means at any time any property that then
would be included and classified as property, plant and equipment on a
consolidated balance sheet prepared in accordance with GAAP of the Seller and
the Seller Subsidiaries.
"Proprietary Rights" means (a) patents, applications for patents and
patent rights, (b) in each case, whether registered, unregistered or under
pending registration, trademark rights, trade names, trade name rights,
corporate names, business names, trade styles or dress, service marks and logos
and other trade designations and copyrights and (c), in the case of the Seller
or any Seller Subsidiary, all agreements relating to the technology, know-how or
processes used in any business of the Seller or any Seller Subsidiary.
"Qualified Plans" has the meaning specified in Section 4.27.
"RCRA" means the Resource Conservation and Recovery Act of 1976.
"Registration Rights Agreement" means the registration rights agreement to
be executed and delivered at the Closing by Apple and the Seller and each Owner,
as applicable, electing to be parties thereto in the form of Exhibit
7.03(b)(iv), with the blanks appropriately filled.
"Registration Statement" means the registration statement, including (a)
each preliminary prospectus included therein prior to the date on which that
registration statement is declared effective under the Securities Act (including
any prospectus filed with the SEC pursuant to Securities Act Rule 424(b)), (b)
the Final Prospectus and (c) any amendments thereof and all supplements and
exhibits thereto, filed by Apple with the SEC to register shares of Apple Common
Stock under the Securities Act for public offering and sale in the IPO.
"Returns" means the returns, reports or statements (including any
information returns) any Governmental Requirement requires to be filed for
purposes of any Tax.
"Related Party Agreement" means any contract or other agreement, written
or oral, (a) to which the Seller or any Seller Subsidiary is a party or is bound
or by which any property of the Seller or any Seller Subsidiary is bound or may
be subject and (b) (i) to which any Owner or any of that Owner's or the Seller's
Related Persons or Affiliates also is a party, (ii) of which any Owner or any of
that Owner's or the Seller's Related Persons or Affiliates is a beneficiary or
(iii) as to which any transaction contemplated thereby properly would be
characterized (without regard to the amount involved) as a related party
transaction for purposes of applying the disclosure requirements of GAAP or the
SEC applicable to the Registration Statement.
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"Related Person" of an Owner means: (a) if that Owner is a natural person,
(i) any Immediate Family Member of that Owner, (ii) any Estate of that Owner or
any Immediate Family Member of that Owner, (iii) the trustee of any inter vivos
or testamentary trust of which all the beneficiaries are Related Persons of that
Owner and (iv) any Entity the entire equity interest in which is owned by any
one or more of that Owner and Related Persons of that Owner; and (b) if that
Owner is an Entity, Estate or trust, (i) any Person who owns an equity interest
in that Owner on the date hereof, (ii) any Person who would be a Related Person
under clause (a) of this definition of a natural person who is an ultimate
beneficial owner of that Owner or (iii) any other Entity the entire equity
interest in which is owned by any one or more of that Owner and Related Persons
of that Owner. As used in this definition, "Estate" means, as to any natural
person who has died or been adjudicated mentally incompetent by a court of
competent jurisdiction, (i) that person's estate or (ii) the administrator,
conservator, executor, guardian or representative of that estate.
"Representatives" means, with respect to any Person, the directors,
officers, employees, Affiliates, accountants (including independent certified
public accountants), advisors, attorneys, consultants or other agents of that
Person, or any other representatives of that Person or of any of those
directors, officers, employees, Affiliates, accountants (including independent
certified public accountants), advisors, attorneys, consultants or other agents.
"Reportable Event" means, with respect to any Seller ERISA Pension Plan,
(a) the occurrence of any of the events set forth in Section 4043(b) or (c)
(other than a Reportable Event as to which the provision of 30 days' notice to
the PBGC is waived under applicable regulations), 4062(e) or 4063(a) of ERISA
with respect to that plan, (b) any event requiring the Seller or any ERISA
Affiliate to provide security to that plan under Section 401(a)(29) of the Code
or (c) any failure to make a payment required by Section 412(m) of the Code with
respect to that plan.
"Restricted Payment" means, with respect to any Entity at any time, any of
the following effected by that Entity: (a) any declaration or payment of any
dividend or other distribution, direct or indirect, on account of any Capital
Stock of that Entity or any Affiliate of that Entity or (b) any direct or
indirect redemption, retirement, purchase or other acquisition for value of, or
any direct or indirect purchase, payment or sinking fund or similar deposit for
the redemption, retirement, purchase or other acquisition for value of, or to
obtain the surrender of, any then outstanding Capital Stock of that Entity or
any Affiliate of that Entity or any then outstanding warrants, options or other
rights to acquire or subscribe for or purchase unissued or treasury Capital
Stock of that Entity or any Affiliate of that Entity.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Security Agreement" has the meaning set forth in the Service Agreement.
"Seller Commitment" has the meaning specified in Section 4.22.
10
"Seller ERISA Benefit Plan" has the meaning specified in Section 4.26.
"Seller ERISA Pension Plan" has the meaning specified in Section 4.26.
"Seller Indemnified Loss" has the meaning specified in Section 9.04.
"Seller Indemnified Party" means the Seller and each of his employees,
agents and counsel.
"Seller Subsidiary" means at any time any Entity that is a Subsidiary of
the Seller at that time.
"Solid Wastes, Hazardous Wastes or Hazardous Substances" have the meanings
ascribed to those terms in CERCLA, RCRA or any other Environmental Law
applicable to the business or operations of the Seller or any Seller Subsidiary
which imparts a broader meaning to any of those terms than does CERCLA or RCRA.
"S&P" means Standard and Poor's Rating Group.
"Subsidiary" of any specified Person at any time, means any entity a
majority of the Capital Stock of which is at that time owned or controlled,
directly or indirectly, by the specified Person.
"Supplemental Information" has the meaning specified in Section 6.08.
"Tax" or "Taxes" means all net or gross income, gross receipts, net
proceeds, sales, use, ad valorem, value added, franchise, bank shares,
withholding, payroll, employment, excise, property, deed, stamp, alternative or
add-on minimum, environmental or other taxes, assessments, duties, fees, levies
or other governmental charges or assessments of any nature whatever imposed by
any Governmental Requirement, whether disputed or not, together with any
interest, penalties, additions to tax or additional amounts with respect
thereto.
"Taxing Authority" means any Governmental Authority having or purporting
to exercise jurisdiction with respect to any Tax.
"Termination Event" means, with respect to any Seller ERISA Pension Plan,
(a) any Reportable Event with respect to that plan which is likely to result in
the termination of that plan, (b) the termination of, or the filing of a notice
of intent to terminate, that plan or the treatment of any amendment to that plan
as a termination under Section 4041(c) of ERISA or (c) the institution of
proceedings to terminate, or the appointment of a trustee to administer, that
plan under Section 4042 of ERISA.
"Third Party Claim" has the meaning specified in Section 9.05.
"Transaction Document" means this Agreement, the Registration Rights
Agreement, the Service Agreement, the Security Agreement and the other written
agreements, documents,
11
instruments and certificates executed pursuant to or in connection with this
Agreement (other than the Other Transaction Documents and the Underwriting
Agreement), including those specified in Article VII to be delivered at or
before the Closing, all as amended, modified or supplemented from time to time.
"Underwriter" means collectively (a) the investment banking firms that
prospectively may enter into the Underwriting Agreement and (b) from and after
the IPO Pricing Date, the investment banking firms parties to the Underwriting
Agreement.
"Underwriting Agreement" has the meaning specified in Section 7.02.
"Welfare Plan" means an "employee welfare benefit plan" as defined in
Section 3(1) of ERISA.
Section 1.03 OTHER DEFINITIONAL PROVISIONS. (a) Except as otherwise
specified herein, all references herein to any Governmental Requirement defined
or referred to herein, including the Code, CERCLA, ERISA, the Exchange Act, RCRA
and the Securities Act, shall be deemed references to that Governmental
Requirement or any successor Governmental Requirement, as the same may have been
amended or supplemented from time to time, and any rules or regulations
promulgated thereunder.
(b) When used in this Agreement, the words "herein," "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any provision of this Agreement, and the words "Article," "Section,"
"Addendum," "Annex" and "Exhibit" refer to Articles and Sections of, and
Xxxxxxx, Annexes and Exhibits to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the singular number includes the
plural and vice versa, and a reference to one gender includes the other gender
and the neuter.
(d) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding such word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
Section 1.04 CAPTIONS. Captions to Articles, Sections and subsections of,
and Addenda, Annexes and Exhibits to, this Agreement or any other Transaction
Document are included for convenience of reference only, and such captions shall
not constitute a part of this Agreement or any other Transaction Document for
any other purpose or in any way affect the meaning or construction of any
provision of this Agreement or any other Transaction Document.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH OWNER
12
Section 3.02 OWNERSHIP AND STATUS OF OWNERSHIP INTEREST. Each Owner is the
record and beneficial owner (or, if the Owner is a trust or the estate of a
deceased natural person, the legal owner) of the shares of Seller Common Stock
(in the case Seller is a corporation) or ownership interest (in the case Seller
is a partnership) set forth opposite the Owner's name in Section 3.02 of the
Disclosure Statement, free and clear of all Liens, except for the Liens
accurately set forth in Section 3.02 of the Disclosure Statement, all of which
will be released at or before the IPO Closing Date.
Section 3.03 POWER OF THE OWNERS; APPROVAL OF THE ACQUISITION. (a) Each
Owner has the full power, legal capacity and authority to execute and deliver
this Agreement and each other Transaction Document to which the Owner is a party
and to perform the Owner's obligations in this Agreement and in all other
Transaction Documents to which the Owner is a party. This Agreement constitutes,
and each such other Transaction Document, when executed in the Owner's
individual capacity and delivered by the Owner, will constitute, the legal,
valid and binding obligation of the Owner, enforceable against the Owner in
accordance with its terms, except as that enforceability may be (i) limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and (ii) subject
to general principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law). If the Owner is an Entity, the
Owner has obtained, in accordance with all applicable Governmental Requirements
and its Charter Documents, all approvals and the taking of all actions necessary
for the authorization, execution, delivery and performance by the Owner of this
Agreement and the other Transaction Documents to which the Owner is a party. If
the Owner is acting otherwise than in his individual capacity (whether as an
executor or a guardian or in any other fiduciary or representative capacity),
all actions on the part of the Owner and all other Persons (including any court)
necessary for the authorization, execution, delivery and performance by the
Owner of this Agreement and the other Transaction Documents to which the Owner
is a party have been duly taken.
(b) Each Owner, acting in each capacity in which he is entitled, by reason
of the Seller's Charter Documents or the Governmental Requirements of the
Seller's Organization State or for any other reason, to vote to approve or
disapprove the consummation of the Acquisition, has voted all Seller Common
Stock or interests in Seller (as the case may be) owned by him and entitled to a
vote or votes on that matter, in any one or more of the manners prescribed or
permitted by the Seller's Charter Documents or the Governmental Requirements of
the Seller's Organization State, whichever are controlling, to approve this
Agreement and the consummation of the Acquisition and the other transactions
contemplated hereby.
Section 3.04 NO CONFLICTS OR LITIGATION. The execution, delivery and
performance in accordance with their respective terms by each Owner of this
Agreement and the other Transaction Documents to which such Owner is a party do
not and will not (a) violate or conflict with any Governmental Requirement, (b)
breach or constitute a default under any agreement or instrument to which such
Owner is a party or by which such Owner is bound or any of the interests in
Seller owned by Owner is bound, (c) result in the creation or imposition of, or
afford any Person the right to obtain, any Lien upon any of the interests in
Seller owned by the Owner (or upon any revenues, income or profits of the Owner
therefrom) or (d) if the Owner is an Entity, violate the Owner's Charter
Documents. No Litigation is pending or, to the knowledge of such Owner,
threatened to which the Owner is or may become a party which (a) questions or
involves the validity or enforceability of any of the Owner's obligations under
any Transaction Document or (b) seeks (or reasonably may be expected to seek)
(i) to prevent or delay the consummation by the Owner of the transactions
contemplated by this Agreement to be
13
consummated by the Owner or (ii) damages in connection with any consummation by
the Owner of the transactions contemplated by this Agreement.
Section 3.05 NO BROKERS. Except as disclosed in the Private Placement
Memorandum or in Section 11.03 of the Disclosure Statement, each Owner has not,
directly or indirectly, in connection with this Agreement or the transactions
contemplated hereby (a) employed any broker, finder or agent (other than a
Purchaser Representative) or (b) agreed to pay or incurred any obligation to pay
any broker's or finder's fee, any sales commission or any similar form of
compensation.
Section 3.06 [INTENTIONALLY DELETED].
Section 3.07 CONTROL OF RELATED BUSINESS. Except as accurately set forth
in Schedule 3.07 of the Disclosure Statement, each Owner is not, alone or with
one or more other Persons, the controlling Affiliate of any Entity, business or
trade (other than the Seller and the Seller Subsidiaries, if the Owner is an
Affiliate of the Seller) that (a) is engaged in any line of business which is
the same as or similar to any line of business in which the Seller or any Seller
Subsidiary is engaged or (b) is, or has within the three-year period ending on
the date of this Agreement, engaged in any transaction with the Seller or any
Seller Subsidiary, except for transactions in the ordinary course of business of
the Seller or that Seller Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF
THE SELLER AND THE OWNERS
Section 4.02 QUALIFICATION. Section 4.02 of the Disclosure Statement
accurately lists all the jurisdictions in which each of the Seller and the
Seller Subsidiaries is authorized or qualified to own or lease and to operate
its properties or to carry on its business as now conducted, and neither the
Seller nor any Seller Subsidiary owns, leases or operates properties or carries
on its business in any jurisdiction not listed in that Section which is Material
to the Seller.
Section 4.03 AUTHORIZATION: ENFORCEABILITY; ABSENCE OF CONFLICTS; REQUIRED
CONSENTS. (a) The execution, delivery and performance by the Seller of this
Agreement and each other Transaction Document to which it is a party, and the
effectuation of the Acquisition and the other transactions contemplated hereby
and thereby, are within its corporate or partnership power under its Charter
Documents and the applicable Governmental Requirements of its Organization State
and have been duly authorized by all proceedings, including actions permitted to
be taken in lieu of proceedings, required under its Charter Documents and those
Governmental Requirements.
(b) This Agreement has been, and each of the other Transaction Documents
to which the Seller is a party, when executed and delivered to Apple will have
been, duly executed
14
and delivered by the Seller and is, or when so executed and delivered will be,
the legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as that enforceability may be (i)
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and (ii)
subject to general principles of equity (regardless of whether that
enforceability is considered in a proceeding in equity or at law).
(c) Except as set forth in Section 4.03 of the Disclosure Statement, the
execution, delivery and performance in accordance with their respective terms by
the Seller of the Transaction Documents to which it is a party have not and will
not (i) violate, breach or constitute a default under (A) the Charter Documents,
if any, of the Seller and the Seller Subsidiaries, (B) any Governmental
Requirement applicable to any of the Seller and the Seller Subsidiaries or (C)
any Material Agreement of the Seller, (ii) result in the acceleration or
mandatory prepayment of any Indebtedness, or any Guaranty not constituting
Indebtedness, of the any of the Seller and the Seller Subsidiaries or afford any
holder of any of that Indebtedness, or any beneficiary of any of those
Guaranties, the right to require any of the Seller and the Seller Subsidiaries
to redeem, purchase or otherwise acquire, reacquire or repay any of that
Indebtedness, or to perform any of those Guaranties, (iii) cause or result in
the imposition of, or afford any Person the right to obtain, any Lien upon any
property or assets of any of the Seller and the Seller Subsidiaries (or upon
revenues, income or profits of any of the Seller and the Seller Subsidiaries
therefrom) or (iv) result in the revocation, cancellation, suspension or
material modification, in any single case or in the aggregate, of any
Governmental Approval possessed by any of the Seller and the Seller Subsidiaries
at the date hereof and necessary for the ownership or lease or the operation of
its properties or the carrying on of its business as now conducted, including
any necessary Governmental Approval under each applicable Environmental Law and
Professional Code.
(d) Except (i) for filings of the Registration Statement under the
Securities Act and the SEC order declaring the Registration Statement effective
under the Securities Act and (ii) as may be required by the HSR Act or the
applicable state securities or blue sky laws, no Governmental Approvals are
required to be obtained, and no reports or notices to or filings with any
Governmental Authority are required to be made, by any of the Seller and the
Seller Subsidiaries for the execution, delivery or performance by the Seller of
the Transaction Documents to which it is a party, the enforcement against the
Seller of its obligations thereunder or the effectuation of the Acquisition and
the other transactions contemplated thereby.
Section 4.04 CHARTER DOCUMENTS AND RECORDS; NO VIOLATION. The Seller has
caused true, complete and correct copies of the Charter Documents, each as in
effect on the date hereof, and the minute books and similar corporate or other
Entity records of each of the Seller and the Seller Subsidiaries to be delivered
or otherwise made available to Apple. No breach or violation of any Charter
Document of any of the Seller and the Seller Subsidiaries has occurred and is
continuing.
Section 4.05 NO DEFAULTS. No condition or state of facts exists, or, with
the giving of notice or the lapse of time or both, would exist, which (a)
entitles any holder of any outstanding Indebtedness, or any Guaranty not
constituting Indebtedness, of any of the Seller and the Seller
15
Subsidiaries, or a representative of that holder, to accelerate the maturity, or
require a mandatory prepayment, of that Indebtedness or Guaranty, or affords
that holder or its representative, or any beneficiary of that Guaranty, the
right to require any of the Seller and the Seller Subsidiaries to redeem,
purchase or otherwise acquire, reacquire or repay any of that Indebtedness, or
to perform that Guaranty in whole or in part, (b) entitles any Person to obtain
any Lien (other than a Permitted Lien) upon any properties or assets of any of
the Seller and the Seller Subsidiaries (or upon revenues, income or profits of
any of the Seller and the Seller Subsidiaries therefrom) or (c) constitutes a
violation or breach of, or a default under, any Material Agreement of the Seller
by any of the Seller and the Seller Subsidiaries.
Section 4.06 SELLER SUBSIDIARIES. Section 4.06 of the Disclosure Statement
either (a) accurately sets forth the form of organization, legal name, each
assumed name and Organization State of each Seller Subsidiary or (b) correctly
states no Entity is a Seller Subsidiary. Except as accurately disclosed in
Section 4.06 of the Disclosure Statement, each Seller Subsidiary is a Wholly
Owned Subsidiary. In the case of any Seller Subsidiary that is not a Wholly
Owned Subsidiary, Section 4.06 of the Disclosure Statement accurately sets
forth, by each class and each series within each class, the number of
outstanding shares of Capital Stock of the Seller Subsidiary, (a) the Seller's
aggregate direct and indirect ownership of those shares and (b) the name and
address of record and percentage ownership of those shares of each holder of
record thereof other than the Seller or a Seller Subsidiary. No Lien exists on
any outstanding share of Capital Stock of any Seller Subsidiary which is owned
directly or indirectly by the Seller other than (a) the Liens, if any, described
in Section 4.06 of the Disclosure Statement, all of which will be released at or
before the IPO Closing Date, and (b) Permitted Liens. Except as accurately set
forth in Section 4.06 of the Disclosure Statement, the Seller does not own, of
record or beneficially, directly or indirectly through any Person, and does not
control, directly or indirectly through any Person or otherwise, any Capital
Stock or Derivative Securities of any Entity other than a Seller Subsidiary.
Section 4.07 CAPITAL STOCK OF THE SELLER AND THE SELLER SUBSIDIARIES. All
the issued and outstanding shares of Capital Stock of each of the Seller and the
Seller Subsidiaries (a) have been duly authorized and validly issued in
accordance with the applicable Governmental Requirements of their issuer's
Organization State and Charter Documents and (b) are fully paid and
nonassessable. Neither the Seller nor any Seller Subsidiary has issued or sold
any shares of its outstanding Capital Stock in breach or violation of (a) any
applicable statutory or contractual preemptive rights, or any other rights of
any kind (including any rights of first offer or refusal), of any Person or (b)
the terms of any of its Derivative Securities which then were outstanding. No
Person has, otherwise than solely by reason of that Person's right, if any, to
vote shares of the Capital Stock of the Seller or any Seller Subsidiary it holds
(to the extent those shares afford the holder thereof any voting rights) any
right to vote on any matter with the holders of Capital Stock of the Seller or
any Seller Subsidiary.
Section 4.08 TRANSACTIONS IN CAPITAL STOCK. Except as accurately set forth
in Section 4.08 of the Disclosure Statement: (a) the Seller has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire or reacquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof; and (b) no transaction
16
has been effected, and no action in contemplation of the transactions described
in this Agreement has been taken, respecting the equity ownership of either the
Seller or any Seller Subsidiary.
Section 4.09 NO BONUS SHARES. Except as accurately set forth in Section
4.09 of the Disclosure Statement, no outstanding share of Capital Stock of the
Seller was issued for less than the fair market value thereof at the time of
issuance or was issued in exchange for any consideration other than cash.
Section 4.10 PREDECESSOR STATUS; ETC. Section 4.10 of the Disclosure
Statement accurately lists all the legal and assumed names of all predecessor
companies for the past five years of the Seller, including the names of any
Entities from which the Seller previously acquired material assets. Except as
accurately disclosed in Section 4.10 of the Disclosure Statement, the Seller has
not been a Subsidiary or division of another corporation or a part of an
acquisition that later was rescinded.
Section 4.11 RELATED PARTY AGREEMENTS. Except as set forth in Section 4.11
of the Disclosure Statement, each Related Party Agreement in effect on the date
hereof will have been terminated as of the IPO Closing Date.
Section 4.12 LITIGATION. Except as accurately disclosed in Section 4.12 of
the Disclosure Statement, no Litigation is pending or, to the knowledge of the
Seller or any Owner, threatened to which the Seller or any Seller Subsidiary is
or may become a party.
Section 4.13 FINANCIAL STATEMENTS; DISCLOSURE. (a) FINANCIAL STATEMENTS.
(i) The Financial Statements (including in each case the related schedules and
notes) delivered to Apple present fairly, in all material respects, the
consolidated financial position of the Seller and the Seller Subsidiaries at the
respective dates of the balance sheets included therein and the consolidated
results of their operations and their consolidated cash flows and stockholders'
or other owners' equity for the respective periods set forth therein and have
been prepared in accordance with GAAP. As of the date of any balance sheet
included in those Financial Statements, neither the Seller nor any Seller
Subsidiary then had any outstanding Indebtedness to any Person or any
liabilities of any kind (including contingent obligations, tax assessments or
unusual forward or long-term commitments), or any unrealized or anticipated
loss, which in the aggregate then were Material to the Seller and required to be
reflected in those Financial Statements or in the notes related thereto in
accordance with GAAP which were not so reflected.
(ii) Since the Current Balance Sheet Date, no change has occurred in the
business, operations, properties or assets, liabilities, condition (financial or
other) or results of operations of the Seller or any Seller Subsidiary that
could reasonably be expected, either alone or together with all other such
changes, to have a Material Adverse Effect on the Seller.
(iii) All financial budgets and projections that have been or are
hereafter from time to time prepared by the Seller or any of its Representatives
and made available prior to the IPO Closing Date to Apple pursuant to or in
connection with this Agreement, any other Transaction Document or the
transactions contemplated hereby or thereby have been and will be prepared and
furnished to Apple in good faith and were and will be based on facts and
assumptions that
17
are believed by the management of the Seller to be reasonable in light of the
then current and foreseeable business conditions of the Seller and the Seller
Subsidiaries and represented and will represent that management's good faith
estimate of the consolidated projected financial performance of the Seller and
the Seller Subsidiaries based on the information available to the Responsible
Officer at the time so furnished.
Section 4.14 COMPLIANCE WITH LAWS. (a) Except as accurately disclosed in
Section 4.14 of the Disclosure Statement: (i) each of the Seller and the Seller
Subsidiaries possesses, if required by the applicable Governmental Requirement,
Governmental Approvals required for the conduct of its business; and (ii) to the
knowledge of the Seller, each of the Seller and the Seller Subsidiaries and such
one or more of its employees are in compliance in all material respects with the
terms and conditions of all Governmental Approvals necessary for the ownership
or lease and the operation of its properties (including all the facilities and
sites it owns or holds under any leases) and the carrying on of its business as
now conducted. The Seller has provided Apple with an accurate, complete written
list of all the Governmental Approvals so possessed. To the knowledge of the
Seller, all the Governmental Approvals so listed are valid, and, except as
accurately disclosed in Section 4.14 of the Disclosure Statement, neither the
Seller nor any Seller Subsidiary has received, nor to the knowledge of any Owner
has any employee of either received, any notice from any Governmental Authority
of its intention to cancel, terminate or not renew any of those Governmental
Approvals.
(b) Except as accurately disclosed in Section 4.14 of the Disclosure
Statement, each of the Seller and the Seller Subsidiaries: (i) to the knowledge
of the Seller, has been and continues to be in compliance with all Governmental
Requirements applicable to it or any of its presently or previously owned or
operated properties (including all the facilities and sites now or previously
owned or held by it under any lease), businesses or operations, including all
applicable Governmental Requirements under ERISA, Environmental Laws and
Professional Codes; and (ii)(A) neither the Seller nor any Seller Subsidiary has
received, nor to the knowledge of the Seller has any employee of either
received, any notice from any Governmental Authority which asserts, or raises
the possibility of assertion of, any noncompliance with any of those
Governmental Requirements and, to the knowledge of each of the Seller, the
Seller Subsidiaries and the Owners, (B) no condition or state of facts exists
which would provide a valid basis for any such assertion.
Section 4.15 CERTAIN ENVIRONMENTAL MATTERS. Except as accurately disclosed
in Section 4.15 of the Disclosure Statement: (a) to the knowledge of the Seller,
the Seller and each Seller Subsidiary have complied, and remain in compliance,
to the knowledge of the Seller, with the provisions of all Environmental Laws
applicable to any of them or any of their respective presently owned or operated
facilities, sites or other properties, businesses and operations and which
relate to the reporting by the Seller and each Seller Subsidiary of all sites
presently owned or operated by any of them where Solid Wastes, Hazardous Wastes
or Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (b) no release (as defined in those Environmental Laws) at, from, in or
on any site owned or operated by the Seller or any Seller Subsidiary has
occurred which, if all relevant facts were known to the relevant Governmental
Authorities, reasonably could be expected to require remediation to avoid deed
record notices, restrictions, liabilities or other consequences that would not
be applicable if that release had not
18
occurred; (c) neither the Seller nor any Seller Subsidiary (or any agent or
contractor of either) has transported or arranged for the transportation of any
Solid Wastes, Hazardous Wastes or Hazardous Substances to, or disposed or
arranged for the disposition of any Solid Wastes, Hazardous Wastes or Hazardous
Substances at, any off-site location that could lead to any claim against the
Seller, any Seller Subsidiary or Apple, as a potentially responsible party or
otherwise, for any clean-up costs, remedial work, damage to natural resources,
personal injury or property damage, including any claim under CERCLA; and (d) no
storage tanks exist on or under any of the properties owned or operated by the
Seller or any Seller Subsidiary from which any Solid Wastes, Hazardous Wastes or
Hazardous Substances have been released into the surrounding environment. The
Seller has provided Apple with copies (or if not available, accurate written
summaries) of all environmental investigations, studies, audits, reviews and
other analyses conducted by or on behalf, or which otherwise are in the
possession, of the Seller or any Seller Subsidiary respecting any facility, site
or other property presently owned or operated by the Seller and each Seller
Subsidiary.
Section 4.16 LIABILITIES AND OBLIGATIONS. Section 4.16 of the Disclosure
Statement accurately lists all present liabilities, of every kind, character and
description and whether accrued, absolute, fixed, contingent or otherwise, of
each of the Seller and the Seller Subsidiaries which (a) (i) exceed or
reasonably could be expected to exceed $1,000 and (ii) (A) had been incurred
prior to the Current Balance Sheet Date, but are not reflected on the Current
Balance Sheet, or (B) were incurred after the Current Balance Sheet otherwise
than in the ordinary course of business, and consistent with the past practice,
of that Entity. That Section also accurately lists and describes, for each of
the Seller and the Seller Subsidiaries: (a) each of its outstanding secured and
unsecured Guaranties not constituting its Indebtedness and, for each of those
Guaranties, whether any Owner or Related Person or Affiliate of any Owner is a
Person whose obligation is covered by that Guaranty, and (b) for each of the
items listed under clause (a) of this sentence, (i) if that item is secured by
any property or asset of the Seller or any Seller Subsidiary, the nature of that
security, and (ii) if that item is covered in whole or in part by a Guaranty of
any Owner or any Related Person or Affiliate of any Owner, the name of the
guarantor.
Section 4.17 RECEIVABLES. Except as accurately set forth in Section 4.17
of the Disclosure Statement; all the accounts and notes or other advances
receivable of the Seller and the Seller Subsidiaries reflected on the Current
Balance Sheet were collected, or are, in the good faith belief of the Seller's
management, collectible, in the respective amounts so reflected, net of the
reserves, if any, reflected in the Current Balance Sheet.
Section 4.18 OWNED AND LEASED REAL PROPERTIES. (a) Section 4.18 of the
Disclosure Statement accurately lists and correctly describes in all material
respects: (i) all real properties owned by any of the Seller and the Seller
Subsidiaries and, for each of those properties, the address thereof, the type
and square footage of each structure located thereon and the use thereof in the
business of the Seller and the Seller Subsidiaries; (ii) all real properties of
which any of the Seller and the Seller Subsidiaries is the lessee and, for each
of those properties, the address thereof, the type and square footage of each
structure located thereon the Seller or a Seller Subsidiary is leasing and the
expiration date of its lease and the use thereof in the business of the Seller
and the Seller Subsidiaries; and (iii) in the case of each real property listed
as being
19
owned, whether it was previously owned, and in the case of each real property
listed as being leased, whether it is presently owned, by any Owner or any of
his or the Seller's Related Persons or Affiliates (other than the Seller and the
Seller Subsidiaries, if the Owner is an Affiliate of the Seller).
(b) The Seller has provided Apple with true, complete and correct copies
of all title reports and insurance policies owned or in the possession of any of
the Seller and the Seller Subsidiaries and relating to any of the real
properties listed as being owned in Section 4.18 of the Disclosure Statement.
Except as accurately set forth in that Section or those reports and policies,
and except for Permitted Liens, the Seller or a Seller Subsidiary owns in fee,
and has good, valid and marketable title to, free and clear of all Liens, the
Acquired Assets.
(c) The Seller has provided Apple with true, correct and complete copies
of all leases under which the Seller or a Seller Subsidiary is leasing each of
the properties listed in Section 4.18 of the Disclosure Statement as being
leased and, except as accurately set forth in Section 4.18 of the Disclosure
Statement, (i) each of those leases is, to the knowledge of the Seller, valid
and binding on the lessor party thereto, and (ii) the lessee party thereto has
not sublet any of the leased space to any Person other than the Seller or a
Seller Subsidiary.
(d) The fixed assets of each of the Seller and the Seller Subsidiaries are
affixed only to one or more of the real properties listed in Section 4.18 of the
Disclosure Statement and, except as accurately set forth in that Section, are
well-maintained and adequate for the purposes for which they presently are being
used or held for use, ordinary wear and tear excepted.
(e) The Seller has accurately disclosed in Section 4.18 of the Disclosure
Statement in all material respects all plans or projects involving the opening
of new operations, the expansion of any existing operations or the acquisition
of any real property or existing business, with respect to which management of
the Seller or any Seller Subsidiary has made any expenditure in the two-year
period prior to the date of the Agreement in excess of $1,000, or which if
pursued by the Seller or any Seller Subsidiary would require additional capital
expenditures in excess of $1,000.
Section 4.19 OWNED AND LEASED PROPERTY, PLANT AND EQUIPMENT. (a) The
Seller has provided Apple with a list accurate and complete in all material
respects of the Property, Plant and Equipment owned and leased by any of the
Seller and the Seller Subsidiaries, which list states, in the case of each of
those properties listed as being owned, whether it was previously owned, and in
the case of each of those properties listed as being leased, whether it is
presently owned, by any Owner or any of his or the Seller's Related Persons or
Affiliates (other than the Seller and the Seller Subsidiaries, if the Owner is
an Affiliate of the Seller).
(b) Except as accurately set forth in Section 4.19 of the Disclosure
Statement and except for Permitted Liens, the Seller or a Seller Subsidiary has
good, valid and marketable title to, free and clear of all Liens, the Acquired
Assets.
(c) The Seller has provided Apple with true, correct and complete copies
of all leases under which the Seller or a Seller Subsidiary is leasing each of
the properties listed in Section
20
4.21 of the Disclosure Statement as being leased and all leases referred to in
Section 4.19 and, except as accurately set forth in Section 4.19 of the
Disclosure Statement, (i) each of those leases is, to the knowledge of the
Seller, valid and binding on the lessor party thereto, and (ii) the lessee party
thereto has not sublet any of the leased property to any Person other than the
Seller or a Seller Subsidiary.
(d) Except as accurately set forth in Section 4.19 of the Disclosure
Statement, all the Property, Plant and Equipment are in good working order and
condition, ordinary wear and tear excepted, and adequate for the purposes for
which they presently are being used or held for use.
Section 4.20 PROPRIETARY RIGHTS. Except as accurately set forth in Section
4.20 of the Disclosure Statement, each of the Seller and the Seller Subsidiaries
owns or has the legal right to use all Proprietary Rights that are necessary to
the conduct of its business as now conducted, in each case free of any claims or
infringements known to the Seller or any Owner. Section 4.20 of the Disclosure
Statement accurately (a) lists these Proprietary Rights and (b) indicates those
owned by the Seller or any Seller Subsidiary and, for those not listed as so
owned, the agreement or other arrangement pursuant to which they are possessed.
Except as accurately set forth in that Section, (a) no consent of any Person
will be required for the use of any of these Proprietary Rights by Apple or any
Subsidiary of Apple following the IPO Closing Date and (b) no governmental
registration of any of these Proprietary Rights has lapsed or expired or been
canceled, abandoned, opposed or the subject of any reexamination request.
Section 4.21 TITLE TO OTHER PROPERTIES. In each case, free and clear of
all Liens except for Permitted Liens and as accurately set forth in Section 4.21
of the Disclosure Statement, each of the Seller and the Seller Subsidiaries has
good and valid title to, or holds under a lease valid and binding on the lessor
party thereto, all its tangible personal properties and assets (other than
Property, Plant and Equipment) that individually is or in the aggregate are
Material to the Seller.
Section 4.22 COMMITMENTS. (a) Except as accurately set forth in Section
4.22(a) of the Disclosure Statement, the Seller has provided Apple with a
complete, accurate list of each of the following (each a "Seller Commitment") to
which any of the Seller and the Seller Subsidiaries is a party or by which any
of its properties is bound and which presently remains executory in whole or in
any part:
(i) each partnership, joint venture or cost-sharing
agreement;
(ii) each guaranty or suretyship, indemnification or
contribution agreement or performance bond;
(iii) each instrument, agreement or other obligation
evidencing or relating to Indebtedness of any of the
Seller and the Seller Subsidiaries or to money lent or
to be lent to another Person;
(iv) each contract to purchase or sell real property;
21
(v) each agreement with dealers or sales or commission
agents, public relations or advertising agencies,
accountants or attorneys (other than in connection with
this Agreement and the transactions contemplated hereby)
involving total payments within any 12-month period in
excess of $5,000 and which is not terminable without
penalty and on no more than 30 days' prior notice;
(vi) each Related Party Agreement involving total payments
within any 12-month period in excess of $1,000 and which
is not terminable without penalty on no more than 30
days' prior notice;
(vii) each agreement for the acquisition or provision of
services, supplies, equipment, inventory, fixtures or
other property involving more than $1,000 in the
aggregate;
(viii) each contract containing any noncompetition agreement,
covenant or undertaking;
(ix) each agreement providing for the purchase from a
supplier of all or substantially all the requirements of
the Seller or any Seller Subsidiary of a particular
product or service; or
(x) each other agreement or commitment not made in the
ordinary course of business or that is Material to the
Seller.
True, correct and complete copies of all written Seller Commitments, and
true, correct and complete written descriptions of all oral Seller Commitments,
have heretofore been delivered or made available to Apple. Except as accurately
set forth in Section 4.22(a) of the Disclosure Statement: (i) there are no
existing or asserted defaults, events of default or events, occurrences, acts or
omissions that, with the giving of notice or lapse of time or both, would
constitute defaults or events of default under any Seller Commitment Material to
the Seller by any of the Seller and the Seller Subsidiaries or, to the knowledge
of the Seller, any other party thereto; and (ii) no penalties have been
incurred, nor are amendments pending, with respect to the Owner Seller
Commitments Material to the Seller. The Seller Commitments are in full force and
effect and are valid and enforceable obligations of the Seller or the Seller
Subsidiaries parties thereto and, to the knowledge of the Seller, the other
parties thereto in accordance with their respective terms, and no defenses,
off-sets or counterclaims have been asserted or, to the knowledge of the Seller,
may be made by any party thereto (other than by the Seller or a Seller
Subsidiary), nor has the Seller or a Seller Subsidiary, as the case may be,
waived any rights thereunder, except as accurately described in Section 4.22(a)
of the Disclosure Statement.
(b) Except as accurately disclosed in Section 4.22(b) of the Disclosure
Statement or contemplated hereby or by any other Transaction Document to which
the Seller or any Seller Subsidiary or Oener is a party: (i) neither the Seller
nor any Seller Subsidiary or Owner has
22
received notice of any plan or intention of any other party to any Seller
Commitment to exercise any right to cancel or terminate any Seller Commitment,
and neither the Seller nor any Seller Subsidiary or Owner knows of any condition
or state of facts which would justify the exercise of such a right; and (ii)
neither the Seller nor any Seller Subsidiary or Owner currently contemplates, or
has reason to believe any other Person currently contemplates, any amendment or
change to any Seller Commitment.
Section 4.23 CAPITAL EXPENDITURES. Section 4.23 of the Disclosure
Statement accurately sets forth the total amount of capital expenditures
currently budgeted to be incurred by the Seller and the Seller Subsidiaries
during the balance of the Seller's current fiscal year. Except as accurately set
forth in that Section, to the knowledge of the Seller and the Owners, no
condition or state of facts exists which will cause the total capital
expenditures of the Seller and the Seller Subsidiaries which will be required to
replace worn-out Property, Plant and Equipment in any of the Seller's five
fiscal years following that current fiscal year to exceed by a material amount
the amount budgeted for capital expenditures of that type by the Seller and the
Seller Subsidiaries for that current fiscal year in order to maintain the types
and levels of patients and services the Seller and the Seller Subsidiaries
presently provide.
Section 4.24 INVENTORIES. Except as accurately set forth in Section 4.24
of the Disclosure Statement: (a) all inventories, net of reserves determined in
accordance with GAAP, of each of the Seller and the Seller Subsidiaries which
are classified as such on the Current Balance Sheet are, to the knowledge of the
Seller, merchantable and salable or usable in the ordinary course of business of
the Seller and the Seller Subsidiaries; (b) the inventories reflected in the
Financial Statements, as at the Current Balance Sheet Date, (i) were reasonable
in relation to the then existing circumstances of the Seller and the Seller
Subsidiaries on a consolidated basis and classified as current assets in
accordance with GAAP, (ii) were consistent with their past practices and (iii)
fairly reflected the average inventory levels maintained during the 12-month
periods ended on that date; and (c) neither the Seller nor any Seller Subsidiary
depends on any single vendor for its inventories the loss of which could have a
Material Adverse Effect on the Seller or ever has sustained a difficulty
Material to the Seller in obtaining its inventories.
Section 4.25 INSURANCE. Except as accurately set forth in Section 4.25 of
the Disclosure Statement: (a) the Seller has provided Apple with: (i) a list
accurate as of the Current Balance Sheet Date of all insurance policies then
carried by each of the Seller and the Seller Subsidiaries; (ii) an accurate list
of all insurance loss runs and worker's compensation claims received for the
most recently ended three policy years; and (iii) true, complete and correct
copies of all insurance policies carried by each of the Seller and the Seller
Subsidiaries which are in effect, all of which (A) have been issued by insurers
of recognized responsibility and (B) currently are, and will remain without
interruption through the IPO Closing Date, in full force and effect; (b) no
insurance carried by the Seller or any Seller Subsidiary has been canceled by
the insurer during the past five years, and neither the Seller nor any Seller
Subsidiary has ever been denied coverage; and (c) neither the Seller nor any
Seller Subsidiary or Owner has received any notice or other communication from
any issuer of any such insurance policy of any material increase in any
deductibles, retained amounts or the premiums payable thereunder, and, to the
knowledge of the Seller and the Owners, no such increase in deductibles,
retainages or premiums is threatened.
23
Section 4.26 EMPLOYEE MATTERS. (a) CASH COMPENSATION. The Seller has
provided Apple with an accurate, complete written list of the names, titles and
rates of annual Cash Compensation, at the Current Balance Sheet Date and at the
date hereof (and the portions thereof attributable to salary or the equivalent,
fixed bonuses, discretionary bonuses and other Cash Compensation, respectively)
of all employees (including all employees who are officers or directors),
nonemployee officers, nonemployee directors and key consultants and independent
contractors of each of the Seller and the Seller Subsidiaries.
(b) EMPLOYMENT AGREEMENTS . Section 4.26(b) of the Disclosure Statement
accurately lists all Employment Agreements remaining executory in whole or in
part on the date hereof, and the Seller has provided Apple with true, complete
and correct copies of all those Employment Agreements. Neither the Seller nor
any Seller Subsidiary is a party to any oral Employment Agreement.
(c) OTHER COMPENSATION PLANS. Section 4.26(c) of the Disclosure Statement
accurately lists all Other Compensation Plans either remaining executory at the
date hereof or to become effective after the date hereof. The Seller has
provided Apple with a true, correct and complete copy of each of those Other
Compensation Plans that is in writing and an accurate description of each of
those Other Compensation Plans that is not written. Except as accurately set
forth in Section 4.26(c) of the Disclosure Statement, each of the Other
Compensation Plans, including each that is a Welfare Plan, may be unilaterally
amended or terminated by the Seller or any Seller Subsidiary without liability
to any of them, except as to benefits accrued thereunder prior to that amendment
or termination.
(d) ERISA BENEFIT PLANS. Section 4.26(d) of the Disclosure Statement
accurately (i) lists each ERISA Pension Benefit Plan (A)(1) the funding
requirements of which (under Section 301 of ERISA or Section 412 of the Code)
are, or at any time during the six-year period ending on the date hereof were,
in whole or in part, the responsibility of the Seller or any Seller Subsidiary
or (2) respecting which the Seller or any Seller Subsidiary is, or at any time
during that period was, a "contributing sponsor" or an "employer" as defined in
Sections 4001(a)(13) and 3(5), respectively, of ERISA (each plan described in
this clause (A) being a "Seller ERISA Pension Plan"), (B) each other ERISA
Pension Benefit Plan respecting which an ERISA Affiliate is, or at any time
during that period was, such a "contributing sponsor" or "employer" (each plan
described in this clause (B) being an "ERISA Affiliate Pension Plan") and (C)
each other ERISA Employee Benefit Plan that is being, or at any time during that
period was, sponsored, maintained or contributed to by the Seller or any Seller
Subsidiary (each plan described in this clause (C) and each Seller ERISA Pension
Plan being a "Seller ERISA Benefit Plan"), (ii) states the termination date of
each Seller ERISA Benefit Plan and ERISA Affiliate Pension Plan that has been
terminated and (iii) identifies for each ERISA Affiliate Pension Plan the
relevant ERISA Affiliates. The Seller has provided Apple with (i) true, complete
and correct copies of (A) each Seller ERISA Benefit Plan and ERISA Affiliate
Pension Plan, (B) each trust agreement related thereto and (C) all amendments to
those plans and trust agreements. Except as accurately set forth in Section
4.26(d) of the Disclosure Statement, (i) neither the Seller nor any Seller
Subsidiary is, or at any time during the six-year period ended on the date
hereof was, a member of any ERISA Group that currently includes, or included
when the Seller or a Seller Subsidiary was a member, among its members any
Person other than the Seller and the Seller
24
Subsidiaries and (ii) no Person is an ERISA Affiliate of the Seller or any
Seller Subsidiary (other than the Seller or any Seller Subsidiary in the case of
any other Seller Subsidiary or any Seller Subsidiary in the case of the Seller,
if the Seller and the Seller Subsidiaries comprise an ERISA Group).
(e) EMPLOYEE POLICIES AND PROCEDURES. Section 4.26(e) of the Disclosure
Statement accurately lists all Employee Policies and Procedures. The Seller has
provided Apple with a copy of all written Employee Policies and Procedures and a
written description of all material unwritten Employee Policies and Procedures.
(f) UNWRITTEN AMENDMENTS. Except as accurately described in Section
4.26(f) of the Disclosure Statement, no material unwritten amendments have been
made, whether by oral communication, pattern of conduct or otherwise, with
respect to any of the Employment Agreements, Other Compensation Plans or
Employee Policies and Procedures.
(g) LABOR COMPLIANCE. To the knowledge of the Seller, each of the Seller
and the Seller Subsidiaries has been and is in compliance with all applicable
Governmental Requirements respecting employment and employment practices, terms
and conditions of employment and wages and hours, and neither the Seller nor any
Seller Subsidiary is liable for any arrears of wages or penalties for failure to
comply with any of the foregoing. Neither the Seller nor any Seller Subsidiary
has engaged in any unfair labor practice or discriminated on the basis of race,
color, religion, sex, national origin, age, disability or handicap in its
employment conditions or practices. Except as accurately set forth in Section
4.26(g) of the Disclosure Statement, there are no (i) unfair labor practice
charges or complaints or racial, color, religious, sex, national origin, age,
disability or handicap discrimination charges or complaints pending or, to the
knowledge of the Seller, threatened against the Seller or any of the Seller
Subsidiaries before any Governmental Authority (nor, to the knowledge of the
Seller, does any valid basis therefor exist) or (ii) existing or, to the
knowledge of the Seller, threatened labor strikes, disputes, grievances,
controversies or other labor troubles affecting the Seller or any of the Seller
Subsidiaries (nor, to the knowledge of the Seller, does any valid basis therefor
exist).
(h) UNIONS. Neither the Seller nor any Seller Subsidiary or ERISA
Affiliate has ever been a party to any agreement with any union, labor
organization or collective bargaining unit. No employees of the Seller and the
Seller Subsidiaries are represented by any union, labor organization or
collective bargaining unit. Except as accurately set forth in Section 4.26(h) of
the Disclosure Statement, to the knowledge of the Seller, none of the employees
of the Seller and the Seller Subsidiaries has threatened to organize or join a
union, labor organization or collective bargaining unit.
(i) NO ALIENS. All employees of each of the Seller and the Seller
Subsidiaries are citizens of, or are authorized in accordance with federal
immigration laws to be employed in, the United States.
(j) CHANGE OF CONTROL BENEFITS. Except as accurately set forth in Section
4.26(j) of the Disclosure Statement, neither the Seller nor any of the Seller
Subsidiaries is a party to any agreement, or has established any policy,
practice or program, requiring it to
25
make a payment or provide any other form of compensation or benefit or vesting
rights to any person performing services for the Seller or any of the Seller
Subsidiaries which would not be payable or provided in the absence of this
Agreement or the consummation of the transactions contemplated by this
Agreement, including any parachute payment under Section 280G of the Code.
(k) RETIREES. Neither the Seller nor any of the Seller Subsidiaries has
any obligation or commitment to provide medical, dental or life insurance
benefits to or on behalf of any of its employees who may retire or any of its
former employees who have retired except as may be required pursuant to the
continuation of coverage provisions of Section 4980B of the Code and the
applicable parallel provisions of ERISA.
Section 4.27 COMPLIANCE WITH ERISA, ETC. (a) COMPLIANCE. Each of the
Seller ERISA Benefit Plans and Other Compensation Plans (each, a "Plan") (i) is
in substantial compliance with all applicable provisions of ERISA, as well as
with all other applicable Governmental Requirements, and (ii) has been
administered, operated and managed in accordance with its governing documents.
(b) QUALIFICATION. All Plans that are intended to qualify under Section
401(a) of the Code (the "Qualified Plans") are so qualified and have been
determined by the IRS to be so qualified (or application for determination
letters have been timely submitted to the IRS). The Seller has provided Apple
with true, complete and correct copies of the current plan determination
letters, most recent actuarial valuation reports, if any, most recent Form 5500,
or, as applicable, Form 5500-C/R, filed with respect to each such Qualified Plan
and most recent trustee or custodian report. To the extent that any Qualified
Plans have not been amended to comply with applicable Governmental Requirements,
the remedial amendment period permitting retroactive amendment of these
Qualified Plans has not expired and will not expire within 120 days after the
IPO Closing Date. All reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries
(including annual reports, summary annual reports, actuarial reports, PBGC-1
Forms, audits or Returns) have been timely filed or distributed.
(c) NO PROHIBITED TRANSACTIONS, ETC. None of the Owners, any Plan or the
Seller or any Seller Subsidiary has engaged in any Prohibited Transaction. No
Plan has incurred an accumulated funding deficiency, as defined in Section
412(a) of the Code and Section 302(a) of ERISA, and no circumstances exist
pursuant to which the Seller or any Seller Subsidiary could have any direct or
indirect liability whatsoever (including being subject to any statutory Lien to
secure payment of any such liability), to the PBGC under Title IV of ERISA or to
the IRS for any excise tax or penalty with respect to any Plan now or hereafter
maintained or contributed to by the Seller or any of its ERISA Affiliates.
Further:
(i) there have been no terminations, partial terminations or
discontinuances of contributions to any Qualified Plan
without a determination by the IRS that such action does
not adversely affect the tax-qualified status of that
plan;
26
(ii) no Termination Event has occurred;
(iii) no Reportable Event has occurred with respect to any
Plan which was not properly reported;
(iv) the valuation of assets of any Qualified Plan, as of the
IPO Closing Date, shall equal or exceed the actuarial
present value of all "benefit liabilities" (within the
meaning of Section 40001(a)(16) of ERISA) under that
plan in accordance with the assumptions contained in the
Regulations of the PBGC governing the funding of
terminated defined benefit plans;
(v) with respect to Plans qualifying as "group health plans"
under Section 4980B of the Code or Section 607(l) or 609
of ERISA and related regulations (relating to the
benefit continuation rights imposed by COBRA or
qualified medical child support orders), the Seller,
each Seller Subsidiary and the Owners, have complied
(and at the IPO Closing Date will have complied) in all
material respects with all reporting, disclosure,
notice, election and other benefit continuation and
coverage requirements imposed thereunder as and when
applicable to those plans, and neither the Seller nor
any Seller Subsidiary has incurred (or will incur) any
direct or indirect liability and will not be subject to
any loss, assessment, excise tax penalty, loss of
federal income tax deduction or other sanction, arising
on account of or in respect of any direct or indirect
failure by the Seller, any Seller Subsidiary or any
Owner, at any time prior to the IPO Closing Date, to
comply with any such federal or state benefit
continuation or coverage requirement, which is capable
of being assessed or asserted before or after the IPO
Closing Date directly or indirectly against the Seller,
any Seller Subsidiary, any Owner or Apple with respect
to any of those group health plans;
(vi) the Financial Statements as of the Current Balance Sheet
Date reflect the approximate total unfunded (or
uninsured) pension, medical and other benefit liability
for all Plans determined in accordance with accounting
principles and actuarial assumptions consistently
applied in the on-going administration of the Plans;
and, and no material funding changes or irregularities
are reflected thereon which would cause those Financial
Statements to be not representative of prior periods;
and
27
(vii) neither the Seller nor any Seller Subsidiary has
incurred liability under Section 4062 of ERISA.
(d) MULTIEMPLOYER PLANS. Except as set forth in Section 4.27(d) of the
Disclosure Statement, neither the Seller nor any Seller Subsidiary, and no ERISA
Affiliate of any of them, is, or at any time during the six-year period ended on
the date hereof was, obligated to contribute to a Multiemployer Plan. Neither
the Seller nor any Seller Subsidiary, and no ERISA Affiliate of any of them, has
made a complete or partial withdrawal from a Multiemployer Plan so as to incur
withdrawal liability as defined in Section 4201 of ERISA.
(e) CLAIMS AND LITIGATION. Except as accurately set forth in Section
4.27(e) of the Disclosure Statement, no Litigation or claims (other than routine
claims for benefits) are pending or, to the knowledge of the Seller, threatened
against, or with respect to, any of the Plans or with respect to any fiduciary,
administrator or sponsor thereof (in their capacities as such), or any
party-in-interest thereof.
(f) EXCISE TAXES, DAMAGES AND PENALTIES. No act, omission or transaction
has occurred which would result in the imposition on the Seller or any Seller
Subsidiary of (i) breach of fiduciary duty liability damages under Section 409
of ERISA, (ii) a civil penalty assessed pursuant to subsection (c), (i) or (l)
of Section 502 of ERISA or (iii) any excise tax under applicable provisions of
the Code with respect to any Plan.
(g) VEBA WELFARE TRUST. Any trust funding a Plan, which is intended to be
exempt from federal income taxation pursuant to Section 501(c)(9) of the Code,
satisfies the requirements of that section and has received a favorable
exemption letter from the IRS regarding that exempt status and has not, since
receipt of the most recent favorable exemption letter, been amended or operated
in a way that would adversely affect that exempt status. The value of assets of
each trust described in the Section 4.27(g) equals or exceeds the value of
benefit liabilities of such trust (or related Plan) determined in accordance
with actuarial assumptions consistently applied in the on-going administration
of such trust (or related Plan).
Section 4.28 TAXES. (a) Each of the following representations and
warranties in this Section 4.28 is qualified to the extent set forth in Section
4.28 of the Disclosure Statement.
(b) All Returns required to be filed with respect to any Tax for which any
of the Seller and the Seller Subsidiaries is liable have been duly and timely
(taking into account applicable extensions) filed with the appropriate Taxing
Authority, all such Returns were correct and complete in all material respects,
all Taxes that have become due from the Seller have been paid, each Tax payable
by the Seller or a Seller Subsidiary by assessment has been timely paid in the
amount assessed and adequate reserves have been established on the books of the
Seller and the Seller Subsidiaries for all Taxes for which any of the Seller and
the Seller Subsidiaries is liable, but the payment of which is not yet due.
Neither the Seller nor any Seller Subsidiary is, or ever has been, liable for
any Tax payable by reason of the income or property of a Person other than the
Seller or a Seller Subsidiary. Each of the Seller and the Seller Subsidiaries
has timely filed true, correct and complete declarations of estimated Tax in
each jurisdiction in which any such declaration is required to be filed by it.
No Liens for Taxes exist upon the
28
assets of the Seller or any Seller Subsidiary except Liens for Taxes which are
not yet due. Neither the Seller nor any Seller Subsidiary is, or ever has been,
subject to Tax in any jurisdiction outside of the United States. No Litigation
with respect to any Tax for which the Seller or any Seller Subsidiary is
asserted to be liable is pending or, to the knowledge of the Seller or any
Owner, threatened and no basis which the Seller or any Owner believes to be
valid exists on which any claim for any such Tax can be asserted against the
Seller or any Seller Subsidiary. There are no requests for rulings or
determinations in respect of any Taxes pending between the Seller or any Seller
Subsidiary and any Taxing Authority. No extension of any period during which any
Tax may be assessed or collected and for which the Seller or any Seller
Subsidiary is or may be liable has been granted to any Taxing Authority. Neither
the Seller nor any Seller Subsidiary is or has been a party to any tax
allocation or sharing agreement. All amounts required to be withheld by any of
the Seller and the Seller Subsidiaries and paid to governmental agencies for
income, social security, unemployment insurance, sales, excise, use and other
Taxes have been collected or withheld and paid to the proper Taxing Authority.
The Seller and each Seller Subsidiary have made all deposits required by law to
be made with respect to employees' withholding and other employment taxes.
(c) Neither the Seller nor any Owner is a "foreign person," as that term
is referred to in Section 1445(f)(3) of the Code.
(d) The Seller has not filed a consent pursuant to Section 341(f) of the
Code or any comparable provision of any other Tax statute nor has agreed to have
Section 341(f)(2) of the Code or any comparable provision of any other Tax
statute apply to any disposition of an asset. The Seller has not made, is not
obligated to make and is not a party to any agreement that could require it to
make any payment that is not or would not be deductible under Section 280G of
the Code. No asset of the Seller or of any Seller Subsidiary is subject to any
provision of applicable law which eliminates or reduces the allowance for
depreciation or amortization in respect of that asset below the allowance
generally available to an asset of its type. No accounting method changes of the
Seller or of any Seller Subsidiary exist or are proposed or threatened which
could give rise to an adjustment under Section 481 of the Code.
Section 4.29 GOVERNMENT CONTRACTS. Except as accurately set forth in
Section 4.29 of the Disclosure Statement, neither the Seller nor any Seller
Subsidiary is a party to any governmental contract subject to price
redetermination or renegotiation.
Section 4.30 ABSENCE OF CHANGES. Since the Current Balance Sheet Date,
except as accurately set forth in Section 4.30 of the Disclosure Statement, none
of the following has occurred with respect to the Seller or any Seller
Subsidiary:
(a) any circumstance, condition, event or state of facts (either singly or
in the aggregate), other than conditions generally affecting the business of
providing orthodontic care to patients, which has caused, is causing or will
cause a Material Adverse Effect on the Seller;
(b) any change in its authorized Capital Stock or in any of its
outstanding Capital Stock or Derivative Securities;
29
(c) any Restricted Payment;
(d) any increase in, or any commitment or promise to increase, the rates
of Cash Compensation as of the date hereof, or the amounts or other benefits
paid or payable under any Seller ERISA Pension Plan or Other Compensation Plan,
except for ordinary and customary bonuses and salary increases for employees
(other than the Owners or their Immediate Family Members) at the times and in
the amounts consistent with its past practice;
(e) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, that will have a Material Adverse
Effect on Newco following the IPO Closing Date;
(f) any distribution, sale or transfer of, or any Seller Commitment to
distribute, sell or transfer, any of its assets or properties of any kind which
singly is or in the aggregate are Material to the Seller, other than
distributions, sales or transfers in the ordinary course of its business and
consistent with its past practices to Persons other than the Owners and their
Immediate Family Members and Affiliates;
(g) any cancellation, or agreement to cancel, any Indebtedness, obligation
or other liability owing to it, including any Indebtedness, obligation or other
liability of any Owner or any Related Person or Affiliate thereof, provided that
it may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice, if all those adjustments
are included in the Supplemental Information provided Apple pursuant to Section
6.08;
(h) any plan, agreement or arrangement granting any preferential rights to
purchase or acquire any interest in any of its assets, property or rights or
requiring consent of any Person to the transfer and assignment of any such
assets, property or rights;
(i) any purchase or acquisition of, or agreement, plan or arrangement to
purchase or acquire, any property, rights or assets outside of the ordinary
course of its business consistent with its past practices;
(j) any waiver of any of its rights or claims that singly is or in the
aggregate are Material to the Seller;
(k) any transaction by it outside the ordinary course of its business or
not consistent with its past practices;
(l) any incurrence by it of any Indebtedness or any Guaranty not
constituting its Indebtedness, or any Seller Commitment to incur any
Indebtedness or any such Guaranty;
(m) any investment in the Capital Stock, Derivative Securities or
Indebtedness of any Person other than a Permitted Investment;
30
(n) except in accordance with the Seller's consolidated capital
expenditure budget for the Seller's current fiscal year, any capital expenditure
or series of related capital expenditures by the Seller and the Seller
Subsidiaries collectively in excess of $5,000, or commitments by the Seller and
the Seller Subsidiaries to make capital expenditures totaling in excess of
$5,000; or
(o) any cancellation or termination of a Material Agreement of the Seller.
Section 4.31 BANK RELATIONS; POWERS OF ATTORNEY. The Seller has provided
Apple with an accurate, complete written statement setting forth:
(a) the name of each financial institution in which the Seller or any
Seller Subsidiary has borrowing or investment arrangements, deposit or checking
accounts or safe deposit boxes;
(b) the types of those arrangements and accounts, including, as
applicable, names in which accounts or boxes are held, the account or box
numbers and the name of each Person authorized to draw thereon or have access
thereto; and
(c) the name of each Person holding a general or special power of attorney
from the Seller or any Seller Subsidiary and a description of the terms of each
such power.
Section 4.32 RELATIONS WITH GOVERNMENTS, ETC. Neither the Seller nor any
Seller Subsidiary has made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office which
would cause the Seller or any Seller Subsidiary to be in violation of the
Foreign Corrupt Practices Act of 1977 or any Governmental Requirement to a
similar effect.
Section 4.33 PREEMPTIVE AND OTHER RIGHTS; WAIVER. Except for the right of
the Seller to receive shares of Apple Common Stock as a result of the
Acquisition or to acquire Apple Common Stock pursuant to any written option
granted by Apple to the Seller, the Seller either (a) does not own or otherwise
have any statutory or contractual preemptive or other right of any kind
(including any right of first offer or refusal) to acquire any shares of Apple
Common Stock or interests in Seller or (b) hereby irrevocably waives each right
of that type the Seller does own or otherwise has.
Section 4.34 RELIANCE ON REPRESENTATIVES. Each Owner is solely relying on
his own Representatives (including his own legal counsel and accountant) as to
legal, tax and related matters concerning the transaction contemplated by this
Agreement and is in no way relying on Apple or Apple's Representatives
(including Apple's legal counsel and account) as to such legal, tax and related
matters. Further, such Owner acknowledges that neither Apple nor Apple's
Representatives have made any representations regarding the tax treatment of the
transactions contemplated by this Agreement.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF APPLE
Section 5.02 ORGANIZATION; POWER. Apple is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and Apple has all requisite corporate power and authority under the laws of its
Organization State and its Charter Documents to own or lease and to operate its
properties presently and following the IPO Closing Date and to carry on its
business as now conducted and as proposed to be conducted following the IPO
Closing Date. Apple has not engaged in any operations since its organization
other than in connection with their formation and capitalization and the
transactions contemplated by this Agreement and the Other Agreements.
Section 5.03 AUTHORIZATION; ENFORCEABILITY; ABSENCE OF CONFLICTS; REQUIRED
CONSENTS. (a) The execution, delivery and performance by Apple of this Agreement
and each other Transaction Document to which it is a party, and the effectuation
of the Acquisition and the other transactions contemplated hereby and thereby,
are within its corporate power under its Charter Documents and the applicable
Governmental Requirements of its Organization State and have been duly
authorized by all proceedings, including actions permitted to be taken in lieu
of proceedings, required under its Charter Documents and the applicable
Governmental Requirements of its Organization State.
(b) This Agreement has been, and each of the other Transaction Documents
to which Apple is a party, when executed and delivered to the other parties
thereto, will have been, duly executed and delivered by it and is, or when so
executed and delivered will be, its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except as that
enforceability may be (i) limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and (ii) subject to general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law).
(c) The execution, delivery and performance in accordance with their
respective terms by Apple of the Transaction Documents to which it is a party
have not and will not (i) violate, breach or constitute a default under (A) the
Charter Documents of Apple, (B) any Governmental Requirement applicable to Apple
or (C) any Material Agreement of Apple, (ii) result in the acceleration or
mandatory prepayment of any Indebtedness, or any Guaranty not constituting
Indebtedness, of Apple or afford any holder of any of that Indebtedness, or any
beneficiary of any of those Guaranties, the right to require Apple to redeem,
purchase or otherwise acquire, reacquire or repay any of that Indebtedness, or
to perform any of those Guaranties, (iii) cause or result in the imposition of,
or afford any Person the right to obtain, any Lien upon any property or assets
of Apple (or upon any revenues, income or profits of Apple therefrom) or (iv)
result in the revocation, cancellation, suspension or material modification, in
any single case or in the aggregate, of any Governmental Approval possessed by
Apple at the date hereof and necessary for the ownership or lease and the
operation of its properties or the carrying on of its business as now conducted,
including any necessary Governmental Approval under each applicable
Environmental Law and Professional Code.
32
(d) Except for (i) filings of the Registration Statement under the
Securities Act and the SEC order declaring the Registration Statement effective
under the Securities Act and (ii) as may be required by the HSR Act or the
applicable state securities or blue sky laws, no Governmental Approvals are
required to be obtained, and no reports or notices to or filings with any
Governmental Authority are required to be made, by Apple for the execution,
delivery or performance by Apple of the Transaction Documents to which it is a
party, the enforcement against Apple of its obligations thereunder or the
effectuation of the Acquisition and the other transactions contemplated thereby.
Section 5.04 CHARTER DOCUMENTS. Apple has, or will have prior to the IPO
Pricing Date, delivered to the Seller true, complete and correct copies of the
Charter Documents of each of Apple. No breach or violation of any Charter
Document of either Apple has occurred and is continuing.
Section 5.05 CAPITAL STOCK OF APPLE. (a) Immediately prior to the IPO
Closing Date, (i) the authorized Capital Stock of Apple will be comprised of (A)
50,000,000 shares of Apple Common Stock and (B) 10,000,00 shares of preferred
stock, $.01 par value per share, (ii) before giving effect to the Acquisition
and the merger or other acquisition transactions contemplated by the Other
Agreements, (A) the number of shares of Apple Common Stock then issued and
outstanding will be as set forth in the Registration Statement when it becomes
effective under the Securities Act, (B) no shares of the Apple preferred stock
then will be issued or outstanding and (C) Apple will have reserved for issuance
pursuant to Other Compensation Plans or the exercise of Derivative Securities
the number of shares of Apple Common Stock set forth in the Registration
Statement when it becomes effective under the Securities Act.
(b) All shares of Apple Common Stock outstanding immediately prior to the
IPO Closing Date, and all shares of Apple Common Stock to be issued pursuant to
Section 2.04, when issued, (i) will have been duly authorized and validly issued
in accordance with the DGCL and their issuer's Charter Documents and (ii) will
be fully paid and nonassessable. None of the shares of Apple Common Stock to be
issued pursuant to Section 2.04 will, when issued, have been issued in breach or
violation of (i) any applicable statutory or contractual preemptive rights, or
any other rights of any kind (including any rights of first offer or refusal),
of any Person or (ii) the terms of any of its Derivative Securities then
outstanding.
Section 5.06 SUBSIDIARIES. Immediately prior to the IPO Closing Date, (a)
Apple will have no Subsidiaries and (b) Apple will not own, of record or
beneficially, directly or indirectly through any Person or otherwise (except
pursuant hereto or to the Other Agreements), any Capital Stock or Derivative
Securities of any Entity not described in this Section 5.06 as a Subsidiary of
Apple.
Section 5.07 LIABILITIES. Except as disclosed in the Private Placement
Memorandum, Apple has no material liabilities of any kind other than those
incurred in connection with this Agreement and the Other Agreements and the
transactions contemplated hereby and thereby, including the IPO.
33
Section 5.08 COMPLIANCE WITH LAWS; NO LITIGATION. Apple is in compliance
with all Governmental Requirements applicable to it, and no Litigation is
pending or, to the knowledge of Apple, threatened to which Apple is or may
become a party which (a) questions or involves the validity or enforceability of
any obligation of Apple under any Transaction Document, (b) seeks (or reasonably
may be expected to seek) (i) to prevent or delay consummation by Apple of the
transactions contemplated by this Agreement to be consummated by Apple or (ii)
damages from Apple in connection with any such consummation.
Section 5.09 NO BROKERS. Except as disclosed in the Private Placement
Memorandum, Apple has not, directly or indirectly, in connection with this
Agreement or the transactions contemplated hereby (a) employed any broker,
finder or agent or (b) agreed to pay or incurred any obligation to pay any
broker's or finder's fee, any sales commission or any similar form of
compensation.
Section 5.10 PRIVATE PLACEMENT MEMORANDUM. At the date hereof, the
PrivatePlacement Memorandum (other than the historical financial statements,
including the notes thereto, of the Founding Companies (other than the Seller)
and the historical information contained therein respecting the Seller and the
Owners to which this Section 5.10 does not apply) does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not materially misleading in the light
of the circumstances under which those statements are made.
ARTICLE VI
COVENANTS EXTENDING TO THE IPO CLOSING DATE
Section 6.02 ACCESS AND COOPERATION; DUE DILIGENCE. (a) From the date
hereof and until the IPO Closing Date, the Seller will (i) afford to the
Representatives of Apple reasonable access to all the key employees, sites,
properties, books and records of each of the Seller and the Seller Subsidiaries,
(ii) provide Apple with such additional financial and operating data and other
information relating to the business and properties of each of the Seller and
the Seller Subsidiaries as Apple or any Other Founding Seller may from time to
time reasonably request and (iii) cooperate with Apple and each Other Founding
Seller and their respective Representatives in the preparation of any documents
or other material which may be required in connection with any Transaction
Documents or any Other Transaction Documents. Each Owner and the Seller will
treat all Confidential Information obtained by them in connection with the
negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to Apple as confidential in accordance
with the provisions of Section 11.01.
(b) Each of the Seller and the Owners, if any, will use its best efforts
to secure, as soon as practicable after the date hereof, all approvals or
consents of third Persons as may be necessary to consummate the transactions
contemplated hereby.
(c) From the date hereof and until the IPO Closing Date, Apple will (i)
afford to the Representatives of the Seller and the Owners, if any, access to
all sites, properties, books
34
and records of Apple, (ii) provide the Seller with such additional financial and
operating data and other information relating to the business and properties of
Apple as the Seller or any Owner may from time to time reasonably request and
(iii) cooperate with the Seller and the Owners, and their respective
Representatives in the preparation of any documents or other material which may
be required in connection with any Transaction Documents.
(d) If this Agreement is terminated pursuant to Section 12.1, Apple
promptly will return all written Confidential Information of the Seller it then
possesses to the Seller.
Section 6.03 CONDUCT OF BUSINESS PENDING CLOSING. From the date hereof and
until the IPO Closing Date, the Seller will, and will cause each Seller
Subsidiary to, except as and only to the extent set forth in Section 6.03 of the
Disclosure Statement:
(a) carry on its businesses in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform all its obligations under agreements relating to or affecting
its assets, properties and other rights;
(d) keep in full force and effect without interruption all its present
insurance policies or other comparable insurance coverage;
(e) use reasonable commercial efforts to (i) maintain and preserve its
business organization intact, (ii) retain its present employees and (iii)
maintain its relationships with suppliers, customers, patients and others having
business relations with it;
(f) comply with all applicable Governmental Requirements; and
(g) except as required or expressly permitted by this Agreement, maintain
the instruments and agreements governing its outstanding Indebtedness and leases
on their present terms and not enter into new or amended Indebtedness or lease
instruments or agreements involving amounts over $1,000 in any case or $5,000 in
the aggregate, without the prior written consent of Apple (which consent will
not be unreasonably withheld).
Section 6.04 PROHIBITED ACTIVITIES. From the date hereof and until the IPO
Closing Date, without the prior written consent of Apple or unless as required
or expressly permitted by this Agreement, the Seller will not, and will not
permit any Seller Subsidiary to:
(a) make any change in its Charter Documents;
(b) issue any of its Capital Stock or issue or otherwise create any of its
Derivative Securities;
35
(c) make any Restricted Payment (other than as provided in Section 6.04 of
the Disclosure Statement);
(d) make any investments (other than Permitted Investments) in the Capital
Stock, Derivative Securities or Indebtedness of any Person;
(e) enter into any contract or commitment or incur or agree to incur any
liability or make any capital expenditures in a single transaction or a series
of related transactions involving an aggregate amount of more than $1,000
otherwise than in the ordinary course of its business and consistent with its
past practice;
(f) increase or commit or promise to increase the Cash Compensation
payable or to become payable to any officer, director, stockholder, employee or
agent, consultant or independent contractor of any of the Seller and the Seller
Subsidiaries or make any discretionary bonus or management fee payment to any
such Person, except bonuses or salary increases to employees (other than the
Owners Immediate Family Members) at the times and in the amounts consistent with
its past practice;
(g) create, assume or permit to be created or imposed any Liens (other
than Permitted Liens) upon any of its assets or properties, whether now owned or
hereafter acquired, except for purchase money Liens incurred in connection with
the acquisition of equipment with an aggregate cost not in excess of $1,000 and
necessary or desirable for the conduct of the business of any of the Seller and
the Seller Subsidiaries;
(h) (i) adopt, establish, amend or terminate any ERISA Employee Benefit
Plan, or any Other Compensation Plan or Employee Policies and Procedures or (ii)
take any discretionary action, or omit to take any contractually required
action, if that action or omission could either (A) deplete the assets of any
ERISA Employee Benefit Plan or any Other Compensation Plan or (B) increase the
liabilities or obligations under any such plan;
(i) sell, assign, lease or otherwise transfer or dispose of any of its
owned or leased property or equipment otherwise than in the ordinary course of
its business and consistent with its past practice;
(j) negotiate for the acquisition of any business or the start-up of any
new business;
(k) merge, consolidate or effect a share exchange with, or agree to merge,
consolidate or effect a share exchange with any other Entity;
(l) waive any of its material rights or claims, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, but such adjustments will not be
deemed to be included in Section 4.17 of the Disclosure Statement unless
specifically listed in the Supplemental Information;
36
(m) commit a material breach of or amend or terminate any Material
Agreement of the Seller or any of its Governmental Approvals; or
(n) enter into any other transaction (i) outside the ordinary course of
its business and consistent with its past practice or (ii) prohibited hereby.
Section 6.05 NO SHOP; RELEASE OF DIRECTORS. (a) Each of the Seller and the
Owners agrees that, from the date hereof and until the first to occur of the IPO
Closing Date or the termination of this Agreement in accordance with Article
XII, neither the Seller nor any Owner, nor any of their respective officers and
directors shall, and the Seller and each Owner will direct and use their best
efforts to cause each of their respective Representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including any proposal or offer to the
Owners) with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, the Seller (any such proposal or offer being
an "Acquisition Proposal") or engage in any activities, discussions or
negotiations concerning, or provide any Confidential Information respecting, the
Seller, any Other Founding Company or Apple to, or have any discussions with,
any Person relating to an Acquisition Proposal or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal. The Seller and
each Owner will: (i) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and each will take the steps necessary to
inform the Persons referred to in the first sentence of this Section 6.05(a) of
the obligations undertaken in this Section 6.05(a); and (ii) notify Apple
immediately if any such inquiries or proposals are received by, any such
information is requested from or any such discussions or negotiations are sought
to be initiated or continued with the Seller or any Owner.
(b) Each of the Seller and the Owners hereby (i) waives every right, if
any, the Governmental Requirements of the Seller's Organization State afford the
Seller or Owners to require the Seller's directors (or their equivalents if the
Seller is not a corporation), in the exercise of their fiduciary duties in their
capacity as such, to engage in any of the activities prohibited by this Section
6.05 and (ii) releases each such person from any and all liability he might
otherwise have to the Seller or any Owners but for this release.
Section 6.06 [INTENTIONALLY DELETED].
Section 6.07 NOTIFICATION OF CERTAIN MATTERS. The Owners and the Seller
shall give prompt notice to Apple of (a) the existence or occurrence of each
condition or state of facts which will or reasonably could be expected to cause
any representation or warranty of the Seller or any Owner contained herein to be
untrue or incorrect in any material respect at or prior to the Closing or on the
IPO Closing Date and (b) any material failure of any Owner or the Seller to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by that Person hereunder, provided that no such notice shall be
required until Apple shall give notice to the Seller and the Owners of the date
scheduled for the Closing with respect to the occurrence in the ordinary course
of business and consistent with past practice of the Seller or any Seller
Subsidiary, as the case may be, of any condition or state of facts which would
cause
37
any Sections of the Disclosure Statement to be incorrect. Apple shall give
prompt notice to the Seller of (a) the existence or occurrence of each condition
or state of facts which will or reasonably could be expected to cause any
representation or warranty of Apple contained herein to be untrue or inaccurate
at or prior to the Closing or on the IPO Closing Date and (b) any material
failure of Apple to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder. The delivery of any notice
pursuant to this Section 6.07 shall not be deemed to (a) modify the
representations or warranties herein of the party delivering that notice, or any
other party, which modification may be made only pursuant to Section 6.08, (b)
modify the conditions set forth in Article VII or (c) limit or otherwise affect
the remedies available hereunder to the party receiving that notice.
Section 6.08 SUPPLEMENTAL INFORMATION. The Seller and each Owner agrees
that, with respect to the representations and warranties of that party contained
in this Agreement, that party will have the continuing obligation (except to the
extent otherwise provided in Section 6.07) until the Closing to provide Apple
promptly with such additional supplemental Information (collectively, the
"Supplemental Information"), in the form of (a) amendments to then existing
Sections of the Disclosure Statement or (b) additional Sections of the
Disclosure Statement, as would be necessary, in the light of the circumstances,
conditions, events and states of facts then known to the Seller or any Owner, to
make each of those representations and warranties true and correct as of the
Closing and on the IPO Closing Date. For purposes only of determining whether
the conditions to the obligations of Apple which are specified in Sections
7.04(a)(ii)(A) and 7.04(b)(ii) have been satisfied, and not for any purpose
under Article IX, the Disclosure Statement as of the Closing and on the IPO
Closing Date shall be deemed to be the Disclosure Statement as of the date
hereof as amended or supplemented by the Supplemental Information provided to
Apple prior to the Closing pursuant to this Section 6.08; provided, however,
that if the Supplemental Information so provided discloses the existence of
circumstances, conditions, events or states of facts which, in any combination
thereof, (a) have had a Material Adverse Effect on the Seller which was not
reflected in the determination of the Transaction Value or, in the sole judgment
of Apple (which shall be conclusive for purposes of this Section 6.08 and
Article XII, but not for any purpose of Article IX), (b) are having or will have
a Material Adverse Effect on the Seller, Apple will be entitled either (i) to
terminate this Agreement pursuant to Section 12.01(d) or (ii) to treat as Apple
Indemnified Losses for all purposes of Article IX (which treatment will not
prejudice the right of Seller under Article IX to contest Damage Claims made by
Apple in respect of those Apple Indemnified Losses) all Damages to the Seller
which are attributable to the circumstances, conditions, events and states of
facts first disclosed herein after the date hereof in the Supplemental
Information. Apple will provide the Seller with copies of the Registration
Statement, including all pre-effective amendments thereto, promptly after the
filing thereof with the SEC under the Securities Act.
Section 6.09 COOPERATION IN CONNECTION WITH THE IPO. The Seller and the
Owners will (a) provide Apple and the Underwriter with all the Information
concerning the Seller or any Owner which is reasonably requested by Apple and
the Underwriter from time to time in connection with effecting the IPO and (b)
cooperate with Apple and the Underwriter and their respective Representatives in
the preparation and amendment of the Registration Statement (including the
Financial Statements) and in responding to the comments of the SEC staff, if
any, with respect thereto. The Seller and each Owner agree promptly to (a)
advise Apple if, at any
38
time during the period in which a prospectus relating to the IPO is required to
be delivered under the Securities Act, any information contained in the then
current Registration Statement prospectus concerning the Seller or the Owners
becomes incorrect or incomplete in any material respect and (b) provide Apple
with the information needed to correct or complete that information.
Section 6.10 ADDITIONAL FINANCIAL STATEMENTS AND OTHER INFORMATION. The
Seller will furnish to Apple:
(a) as soon as available and in any event within 30 days after the end of
each of the Seller's fiscal quarters which ends prior to the IPO Pricing Date,
an unaudited consolidated balance sheet of the Seller and the Seller
Subsidiaries as of the end of that fiscal quarter and the related consolidated
statements of income or operations, cash flows and stockholders' or other
owners' equity for that fiscal quarter and for the period of the Seller's fiscal
year ended with that quarter, in each case (i) setting forth in comparative form
the figures for the corresponding portion of the Seller's previous fiscal year
and (ii) prepared in accordance with GAAP applied on basis consistent (A)
throughout the periods indicated (excepting footnotes) and (B) with the basis on
which the Initial Financial Statements including the Current Balance Sheet were
prepared;
(b) if requested by Apple in connection with any amendment of the
Registration Statement and promptly following any such request, such summary
consolidated operating or other financial information of the Seller and the
Seller Subsidiaries as of the end of either the first or second fiscal month in
any of the Seller's fiscal quarters as Apple may request; and
(c) to the extent not provided at the time of execution and delivery of
this Agreement, on or prior to March 1, 1997 the information concerning the
Owner and the Business contemplated by the Agreement to be set forth in the
Disclosure Statement.
Section 6.11 TERMINATION OR TRANSFER OF PLANS. If requested by Apple, the
Seller will, or will cause the applicable Seller Subsidiary to, if permitted by
all applicable Governmental Requirements to do so, terminate each Plan
identified in Section 4.26(c) or (d) of the Disclosure Statement as a "Plan To
Be Terminated" prior to the IPO Closing Date.
Section 6.12 [INTENTIONALLY DELETED].
Section 6.13 HSR ACT MATTERS. If Apple shall determine that filings
pursuant to and under the HSR Act are necessary or appropriate in connection
with the effectuation of the Acquisition or the consummation of the acquisitions
contemplated by the Other Agreements, and advises the Seller in writing of that
determination, the Seller promptly will compile and file under the HSR Act such
information respecting it as the HSR Act requires of an Entity to be acquired,
and the expiration or termination of the applicable waiting period and any
extension thereof under the HSR Act shall be deemed a condition precedent set
forth in Section 7.02(b).
39
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.02 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. (a) The
obligation of each party hereto to take the actions contemplated to be taken by
that party at the Closing is subject to the satisfaction of each of the
following conditions on or before the date of the Closing:
(i) NO LITIGATION. Except as set forth in Section 7.02 of
the Disclosure Statement, no Litigation shall be pending
on the date of the Closing to restrain, prohibit or
otherwise interfere with, or to obtain material damages
or other relief from Apple in connection with, the
consummation of the Acquisition or the IPO;
(ii) GOVERNMENTAL APPROVALS. All Governmental Approvals
required to be obtained by any of the Seller and Apple
in connection with the consummation of the Acquisition
and the IPO shall have been obtained; and
(iii) THE REGISTRATION STATEMENT. (A) The
Registration Statement, as amended to cover the
offering, issuance and sale by Apple of such number of
shares of Apple Common Stock at the IPO Price (which
need not be set forth in the Registration Statement when
it becomes effective under the Securities Act) as shall
yield aggregate cash proceeds to Apple from that sale
(net of the Underwriter's discount or commissions) in at
least the amount (the "Minimum Cash Amount") that is
sufficient, when added to the funds, if any, available
from other sources (if any, and as set forth in the
Registration Statement when it becomes effective under
the Securities Act) (the "Other Financing Sources") to
enable Apple to pay or otherwise deliver on the IPO
Closing Date (1) the total cash portion of the
Acquisition Consideration then to be delivered pursuant
to Section 2.04, (2) the total cash portion of the
consideration then to be delivered pursuant to the Other
Agreements as a result of the consummation of the
Acquisition or other acquisition transactions
contemplated thereby and (3) the total amount of
Indebtedness of the Founding Companies and Apple which
the Registration Statement discloses at the time it
becomes effective under the Securities Act will be
repaid on the IPO Closing Date with proceeds received by
Apple from the IPO and the Other Financing Sources,
shall have been declared effective under the Securities
Act by the SEC; (B)
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no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the
SEC, and the SEC shall not have initiated or threatened
to initiate Litigation for that purpose; and (C) the
Underwriter shall have agreed in writing (the
"Underwriting Agreement," which term includes the
related pricing agreement, if any) to purchase from
Apple on a firm commitment basis for resale to the
public initially at the IPO Price, subject to the
conditions set forth in the Underwriting Agreement, such
number of shares of Apple Common Stock covered by the
Registration Statement as, when multiplied by the price
per share of Apple Common Stock to be paid by the
Underwriter to Apple pursuant to the Underwriting
Agreement, shall equal at least the Minimum Cash Amount.
(b) The obligation of each party hereto with respect to the actions to be
taken on the IPO Closing Date is subject to the satisfaction on that date of
each of the following conditions:
(i) NO LITIGATION. Except as set forth in Section 7.02 of
the Disclosure Statement, no Litigation shall be pending
on the IPO Closing Date to restrain, prohibit or
otherwise interfere with, or to obtain material damages
or other relief from Apple in connection with, the
consummation of the Acquisition or the IPO;
(ii) GOVERNMENTAL APPROVALS. All Governmental Approvals
required to be obtained by the Seller and Apple in
connection with the consummation of the Acquisition and
the IPO shall have been obtained;
(iii) RECEIPT OF CERTAIN CERTIFICATES. Each Owner or Seller,
as applicable, or his Representative shall receive the
certificates that such party is entitled to receive on
the IPO Closing Date; and
(iv) CLOSING OF THE IPO. Apple shall have issued and sold
shares of Apple Common Stock to the Underwriter in
accordance with the Underwriting Agreement for initial
resale at the IPO Price and received payment therefor in
an amount at least equal to the amount by which (A) the
Minimum Cash Amount exceeds (B) the aggregate amount of
funds actually received on the IPO Closing Date, if any,
from any one or more of the Other Financing Sources.
41
Section 7.03 CONDITIONS TO THE OBLIGATIONS OF THE SELLER AND THE OWNERS.
The obligations of the Seller and each Owner with respect to actions to be taken
by them at or before the Closing and the actions to be taken on the IPO Closing
Date are subject to the satisfaction, or the written waiver by the Seller on
behalf of itself and each Owner pursuant to Section 11.05 on or before the date
of the Closing of, in addition to the conditions specified in Section 7.02(a) or
7.02(b), as applicable, (i) all the conditions set forth in Section 7.01(b), if
any, and (ii) all the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. All the representations and warranties
of Apple in Article V shall be true and correct as of the Closing as though made
at that time;
(b) DELIVERY OF DOCUMENTS. Apple shall have delivered to the Seller:
(i) an Apple officer's certificate respecting the representations
and warranties of Apple in Article V and compliance with the
covenants of Apple in Article VI and in the form thereof
attached as an exhibit to the Closing Memorandum;
(ii) opinions dated the IPO Closing Date and addressed to the
Seller and the Owners from Counsel for Apple substantially in
the forms thereof attached as exhibits to the Closing
Memorandum;
(iii) a certificate of the secretary or any assistant secretary of
Apple in the form thereof attached as an exhibit to the
Closing Memorandum and respecting, and to which is attached,
(A) the Charter Documents of Apple (certified by the Secretary
of State of the State of Delaware in the case of the
certificates of incorporation included therein); (B)the
resolutions of the board of directors of Apple respecting the
Transaction Documents and the transactions contemplated
thereby; (C) a certificate respecting the incumbency and true
signatures of the Apple officers who execute the Transaction
Documents on behalf of Apple; (D) a specimen certificate
evidencing shares of Apple Common Stock; (E) the prospectus
included in the Registration Statement when it became
effective; and (F) a facsimile copy of the Underwriting
Agreement as executed and delivered by Apple and the
Underwriter;
(iv) the Registration Rights Agreement duly executed and delivered
by Apple; and
(v) a certificate, dated as of a Current Date, duly issued by the
Secretary of State of the State of Delaware, showing Apple to
be in good standing and authorized to do business in that
State.
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Section 7.04 CONDITIONS TO THE OBLIGATIONS OF APPLE . (a) The obligations
of Apple with respect to actions to be taken by them at or before the Closing
are subject to the satisfaction on or before the date of the Closing of, in
addition to the conditions specified in Section 7.02 (a), (i) all the conditions
set forth in Section 7.01(c), if any, and (ii) all the following conditions:
(A) REPRESENTATIONS AND WARRANTIES. All the representations and
warranties of the Owners and the Seller in Articles III and IV shall be true and
correct as of the Closing as though made at that time;
(B) DELIVERY OF DOCUMENTS. The Owners and the Seller shall have
delivered to Apple:
(1) a Seller officer's certificate, signed by a Responsible
Officer, respecting the representations and warranties of the
Owners and the Seller in Articles III and IV and compliance
with the covenants of the Owners and the Seller in Article VI
and in the form thereof attached as an exhibit to the Closing
Memorandum;
(2) opinions dated the IPO Closing Date and addressed to Apple and
Counsel for Apple from Counsel for the Seller and the Owners,
substantially in the form thereof attached as exhibits to the
Closing Memorandum;
(3) a certificate of the secretary or any assistant secretary of
the Seller in the form thereof (without attachments thereto)
attached as an exhibit to the Closing Memorandum and
respecting, and to which is attached, (a) the Charter
Documents of the Seller; (b) the resolutions of the board of
directors of the Seller respecting the Transaction Documents
and the transactions contemplated thereby; and (c) a
certificate respecting the incumbency and true signatures of
the Responsible Officers who execute the Transaction Documents
on behalf of the Seller;
(4) [Intentionally Left Blank]
(5) from each Owner, an executed certificate to the effect that no
withholding is required under Section 1445 of the Code, in the
form of Exhibit 7.04(a)(ii)(B)(5), with the blanks
appropriately filled;
(6) for each of the Seller and the Seller Subsidiaries, a
certificate, dated as of a Current Date, duly issued by the
appropriate Governmental Authorities in its Organization State
and, unless waived by Apple, in each other jurisdiction listed
for it in Section 4.02 of the Disclosure Statement, showing it
to be in good standing and authorized to do business in its
Organization State
43
and those other jurisdictions and that all state franchise
and/or income tax returns and taxes due by it in its
Organization State and those other jurisdictions for all
periods prior to the Closing have been filed and paid; and
(7) from the Seller, a bill of sale and deeds, assignments and any
other necessary instruments, satisfactory in form and content
and approved prior to the Closing by Apple, conveying, free
and clear of any Liens, all the Acquired Assets to Apple.
(C) DUE DILIGENCE. Apple's due diligence investigation of the
Seller and any Owner shall have been completed to the satisfaction of Apple in
its sole discretion.
(b) The obligations of Apple with respect to the actions to be taken on
the IPO Closing Date are subject to the satisfaction on that date of (i) all the
conditions set forth in Section 7.01(d), if any, and (ii) the condition that all
the representations and warranties of the Owners and the Seller in Articles III
and IV shall be true and correct as of the IPO Closing Date as though made on
that date.
ARTICLE VIII
COVENANTS FOLLOWING THE IPO CLOSING DATE
Section 8.02 DISCLOSURE. If, subsequent to the IPO Pricing Date and prior
to the 25th day after the date of the Final Prospectus, Seller or any Owner
becomes aware of any fact or circumstance which would change (or, if after the
IPO Closing Date, would have changed) a representation or warranty of the Seller
or any Owner in this Agreement or would affect any document delivered pursuant
hereto in any material respect, Seller or that Owner will promptly give notice
of that fact or circumstance to Apple.
Section 8.03 PREPARATION AND FILING OF TAX RETURNS. Each party hereto
will, and will cause its Affiliates to, provide to each of the other parties
hereto such cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund, determining a liability
for Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. This cooperation and information shall include
providing copies of all relevant portions of the relevant Returns, together with
such accompanying schedules and work papers, documents relating to rulings or
other determinations by Taxing Authorities and records concerning the ownership
and Tax bases of property as are relevant which a party possesses. Each party
will make its employees, if any, reasonably available on a mutually convenient
basis at its cost to provide an explanation of any documents or information so
provided. Subject to the preceding sentence, each party required by law to file
Returns shall bear all costs attributable to the preparation and filing of those
Returns; provided that if Apple is required to file a Return covering a period
described in Code Section 1362(e)(1)(A) (an S short year), such costs shall be
reimbursed by the Owners.
44
Section 8.04 DIRECTORS. Apple will use its best efforts to cause each of
the persons, if any, who are named in the Final Prospectus as persons who will
become members of the board of directors of Apple following the IPO Closing Date
to be appointed to that board when that prospectus so provides.
Section 8.05 [INTENTIONALLY DELETED].
Section 8.06 ACCESS. The Seller and the Owners, if any, shall, at
reasonable times during normal business hours and on reasonable notice, permit
Apple and its authorized representatives reasonable access to, and make
available for inspection, all of the assets and records of the Orthodontic
Entity, and permit Apple and its authorized representatives to inspect and, at
Apple's sole cost and expense, make copies of all documents, records (other than
patient medical records) and information with respect to the affairs of the
Orthodontic Entity as Apple and its representatives may request.
Section 8.07 LICENSES AND PERMITS. The Seller and the Owners shall use
their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, statute, rule, regulation or ordinance,
or otherwise necessary or desirable to provide the services of the Orthodontic
Entity, the stockholders of the Orthodontic Entity and the Orthodontic Entity
Professional Employees (as defined in the Service Agreement), the Orthodontic
Entity Professional Employment Agreements (as defined in the Service Agreement),
and to conduct the intended business of the Orthodontic Entity.
Section 8.08 ORTHODONTIST EMPLOYMENT AGREEMENT. The Seller and the Owners
shall use their best efforts to cause, at or immediately prior to Closing, each
orthodontist (i) to terminate his or her employment agreement, if any, with the
Seller by mutual consent without any liability therefor on the part of Seller
and (ii) to enter into an Orthodontic Entity Professional Employment Agreement
with the Orthodontic Entity.
ARTICLE IX
INDEMNIFICATION
Section 9.02 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All the
provisions of this Agreement will survive the Closing and the IPO Closing Date
indefinitely notwithstanding any investigation at any time made by or on behalf
of any party hereto or the provision of any Supplemental Information pursuant to
Section 6.08, provided that the representations and warranties set forth in
Articles IV, V and VI and in any certificate delivered in connection herewith
with respect to any of those representations and warranties will terminate and
expire on December 31, 1999, except as follows: (a) the representations and
warranties of the Seller and any Owners which relate expressly or by necessary
implication to Taxes, ERISA or other employment or labor matters or the
Governmental Requirements referred to in clause (iii) of Section 9.03(a) will
survive until ninety (90) days after the expiration of the applicable statutes
of limitations (including all periods of extension and tolling); and (b) the
representations and warranties of the Seller and any Owners which relate
expressly or by necessary implication to
45
the environment or Environmental Laws will survive for a period of three years
from the IPO Closing Date. After a representation and warranty has terminated
and expired, no indemnification will or may be sought pursuant to this Article
IX on the basis of that representation and warranty by any Person who would have
been entitled pursuant to this Article IX to indemnification on the basis of
that representation and warranty prior to its termination and expiration,
provided that, in the case of each representation and warranty that will
terminate and expire as provided in this Section 9.02, no claim presented in
writing for indemnification pursuant to this Article IX on the basis of that
representation and warranty prior to its termination and expiration will be
affected in any way by that termination and expiration.
Section 9.03 INDEMNIFICATION OF APPLE INDEMNIFIED PARTIES. (a) Subject to
the applicable provisions of Sections 9.02 and 9.07, the Seller and the Owners
covenant and agree that they, jointly and severally, will indemnify each Apple
Indemnified Party against, and hold each Apple Indemnified Party harmless from
and in respect of, all Damage Claims that arise from, are based on or relate or
otherwise are attributable to (i) any breach of the representations and
warranties of the Owners or the Seller set forth herein (other than Article III)
or in certificates delivered in connection herewith (other than in respect of
certificates relating only to the representations and warranties in Article
III), (ii) any nonfulfillment of any covenant or agreement on the part of the
Owners or the Seller under this Agreement, (iii) all Taxes of the Owner that
arise or result from the consummation of the transactions contemplated by this
Agreement or any agreement ancillary hereto (including, without limitation,
sales, use and other transfer Taxes and income Taxes), (iv) any liability under
the Securities Act, the Exchange Act or other applicable Governmental
Requirement which arises out of or is based on (A) any untrue statement or
alleged untrue statement of a material fact relating to the Seller and the
Seller Subsidiaries, or any of them, which is (1) provided to Apple or its
counsel by the Seller or the Owners and (2) contained in the Private Placement
Memorandum, any preliminary prospectus relating to the IPO, the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or (B) any omission or alleged omission to state therein a
material fact relating to the Seller and the Seller Subsidiaries, or any of
them, required to be stated therein or necessary to make the statements therein
not misleading, and not provided to Apple or its counsel by the Seller or the
Owners (v) the litigation described in Section 4.12 of the Disclosure Statement,
or (vi) any debts, liabilities or obligations of the Owner, direct or indirect,
fixed, contingent or otherwise, that are not expressly assumed by Apple in this
Agreement (each such Damage Claim described in Section 9.03(b) being an "Apple
Indemnified Loss"); provided, however, that no Owner shall be obligated to
indemnify any Apple Indemnified Party against any Apple Indemnified Loss to the
extent that such untrue statement (or alleged untrue statement) was made in, or
such omission (or alleged omission) occurred in, any preliminary prospectus and
the Owner timely provided, in writing, corrected or the necessary additional
information to Apple and its counsel for inclusion in the Final Prospectus.
(b) Each Owner, severally and not jointly with any other Person, covenants
and agrees that he will indemnify each Apple Indemnified Party against, and hold
each Apple Indemnified Party harmless from and in respect of, all Damage Claims
that arise from, are based on or relate or otherwise are attributable to (i) any
breach of the representations and warranties of that Owner solely as to that
Owner set forth in Article III or in certificates delivered by that Owner and
relating to those representations and warranties, (ii) any nonfulfillment of any
46
several, and not joint and several, agreement on the part of that Owner under
this Agreement or (iii) any liability under the Securities Act, the Exchange Act
or other applicable Governmental Requirement which arises out of or is based on
(A) any untrue statement or alleged untrue statement of a material fact relating
solely to that Owner which is (1) provided to Apple or its counsel by that Owner
and (2) contained in any preliminary prospectus relating to the IPO, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or (B) any omission or alleged omission
to state therein a material fact relating solely to that Owner required to be
stated therein or necessary to make the statements therein not misleading, and
not provided to Apple or its counsel by that Owner; provided, however, that no
Owner shall be obligated to indemnify any Apple Indemnified Party against any
Apple Indemnified Loss to the extent that such untrue statement (or alleged
untrue statement) was made in, or such omission (or alleged omission) occurred
in, any preliminary prospectus and the Owner timely provided, in writing,
corrected or the necessary additional information to Apple and its counsel for
inclusion in the Final Prospectus.
Section 9.04 INDEMNIFICATION OF SELLER INDEMNIFIED PARTIES. Apple
covenants and agrees that it will indemnify each Seller Indemnified Party
against, and hold each Seller Indemnified Party harmless from and in respect of,
all Damage Claims (that arise from, are based on or relate or otherwise are
attributable to (i) any breach by Apple of their representations and warranties
set forth herein or in their certificates delivered to the Seller or the Owners
in connection herewith, (ii) any nonfulfillment of any covenant or agreement on
the part of Apple under this Agreement or (iii) any liability under the
Securities Act, the Exchange Act or other applicable Governmental Requirement
which arises out of or is based on (A) any untrue statement or alleged untrue
statement of a material fact relating to Apple or any of the Other Founding
Companies contained in the Private Placement Memorandum, any preliminary
prospectus relating to the IPO, the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or (B)
any omission or alleged omission to state therein a material fact relating to
Apple or any of the Other Founding Companies, or any of them, required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made (each such Damage Claim
being a "Seller Indemnified Loss").
Section 9.05 CONDITIONS OF INDEMNIFICATION. (a) All claims for
indemnification under this Agreement shall be asserted and resolved as follows
in this Section 9.05.
(b) A party claiming indemnification under this Agreement (an "Indemnified
Party") shall promptly (i) notify the party from whom indemnification is sought
(the "Indemnifying Party") of any third-party claim or claims asserted against
the Indemnified Party ("Third Party Claim") that could give rise to a right of
indemnification under this Agreement and (ii) transmit to the Indemnifying Party
a written notice ("Claim Notice") describing in reasonable detail the nature of
the Third Party Claim, a copy of all papers served with respect to that claim
(if any), an estimate of the amount of damages attributable to the Third Party
Claim to the extent feasible (which estimate shall not be conclusive of the
final amount of such claim) and the basis for the Indemnified Party's request
for indemnification under this Agreement. Except as set forth in Section 9.02,
the failure to promptly deliver a Claim Notice shall not relieve the
Indemnifying Party of its obligations to the Indemnified Party with respect to
the
47
related Third Party Claim except to the extent that the resulting delay is
materially prejudicial to the defense of that claim. Within 15 days after
receipt of any Claim Notice (the "Election Period"), the Indemnifying Party
shall notify the Indemnified Party (i) whether the Indemnifying Party disputes
its potential liability to the Indemnified Party under this Article IX with
respect to that Third Party Claim and (ii) if the Indemnifying Party does not
dispute its potential liability to the Indemnified Party with respect to that
Third Party Claim, whether the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend the Indemnified Party against that
Third Party Claim.
(c) If the Indemnifying Party does not dispute its potential liability to
the Indemnified Party and notifies the Indemnified Party within the Election
Period that the Indemnifying Party elects to assume the defense of the Third
Party Claim, then the Indemnifying Party shall have the right to defend, at its
sole cost and expense, that Third Party Claim by all appropriate proceedings,
which proceedings shall be prosecuted diligently by the Indemnifying Party to a
final conclusion or settled at the discretion of the Indemnifying Party in
accordance with this Section 9.05(c) and the Indemnified Party will furnish the
Indemnifying Party with all information in its possession with respect to that
Third Party Claim and otherwise cooperate with the Indemnifying Party in the
defense of that Third Party Claim; provided, however, that the Indemnifying
Party shall not enter into any settlement with respect to any Third Party Claim
that purports to limit the activities of, or otherwise restrict in any way, any
Indemnified Party or any Affiliate of any Indemnified Party without the prior
consent of that Indemnified Party (which consent may be withheld in the sole
discretion of that Indemnified Party). The Indemnified Party is hereby
authorized, at the sole cost and expense of the Indemnifying Party, to file,
during the Election Period, any motion, answer or other pleadings that the
Indemnified Party shall deem necessary or appropriate to protect its interests
or those of the Indemnifying Party. The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this Section 9.05(c) and will bear its own
costs and expenses with respect to that participation; provided, however, that
if the named parties to any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party, and the
Indemnified Party has been advised by counsel that there may be one or more
legal defenses available to it which are different from or additional to those
available to the Indemnifying Party, then the Indemnified Party may employ
separate counsel at the expense of the Indemnifying Party, and, on its written
notification of that employment, the Indemnifying Party shall not have the right
to assume or continue the defense of such action on behalf of the Indemnified
Party.
(d) If the Indemnifying Party (i) within the Election Period (A) disputes
its potential liability to the Indemnified Party under this Article IX, (B)
elects not to defend the Indemnified Party pursuant to Section 9.05(c) or (C)
fails to notify the Indemnified Party that the Indemnifying Party elects to
defend the Indemnified Party pursuant to Section 9.05(c) or (ii) elects to
defend the Indemnified Party pursuant to Section 9.05(c) but fails diligently
and promptly to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and
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proceedings. Notwithstanding the foregoing, if the Indemnifying Party has
delivered a written notice to the Indemnified Party to the effect that the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article IX and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this Section
9.05 or of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all reasonable costs and expenses of such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section 9.05(d),
and the Indemnifying Party shall bear its own costs and expenses with respect to
such participation.
(e) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice (the
"Indemnity Notice") describing in reasonable detail the nature of the claim, an
estimate of the amount of Damages attributable to that claim to the extent
feasible (which estimate shall not be conclusive of the final amount of such
claim) and the basis of the Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party does not notify the Indemnified
Party within 15 days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the claim specified by the Indemnified
Party in the Indemnity Notice shall be deemed a liability of the Indemnifying
Party hereunder. If the Indemnifying Party has timely disputed such claim, as
provided above, such dispute shall be resolved by proceedings in an appropriate
court of competent jurisdiction if the parties do not reach a settlement of such
dispute within 30 days after notice of a dispute is given.
(f) Payments of all amounts owing by an Indemnifying Party pursuant to
this Article IX relating to a Third Party Claim shall be made within 30 days
after the latest of (i) the settlement of that Third Party Claim, (ii) the
expiration of the period for appeal of a final adjudication of that Third Party
Claim or (iii) the expiration of the period for appeal of a final adjudication
of the Indemnifying Party's liability to the Indemnified Party under this
Agreement. Payments of all amounts owing by an Indemnifying Party pursuant to
Section 9.05(e) shall be made within 30 days after the later of (i) the
expiration of the 30-day Indemnity Notice period or (ii) the expiration of the
period for appeal of a final adjudication of the Indemnifying Party's liability
to the Indemnified Party under this Agreement.
Section 9.06 REMEDIES NOT EXCLUSIVE. The remedies provided in this
Agreement shall not be exclusive of any other rights or remedies available to
one party against the other, either at law or in equity.
Section 9.07 LIMITATIONS ON INDEMNIFICATION. (a) Notwithstanding the
provisions of Section 9.03(a), neither the Seller nor any of the Owners shall be
required to indemnify or hold harmless any of the Apple Indemnified Parties on
account of any Apple Indemnified Loss under Section 9.03(a) unless the liability
of the Seller and the Owners in respect of that Apple Indemnified Loss, when
aggregated with the liability of the Seller and the Owners in respect of all
Apple Indemnified Losses under Section 9.03(a), exceeds, and only to the extent
the aggregate amount of all those Apple Indemnified Losses does exceed, the
Threshold Amount.
49
In no event shall (i) the aggregate joint and several liability of the Seller
and the Owners under this Agreement, including Section 9.03(a), exceed the
Transaction Value or (ii) the aggregate liability of Seller and each Owner under
this Agreement, including Sections 9.03(a) and 9.03(b), exceed that Owner's Pro
Rata Share of the Transaction Value. For purposes of determining the amount of
Apple Indemnified Losses, no effect will be given to any resulting Tax benefit
to any Apple Indemnified Party.
(b) Notwithstanding the provisions of Section 9.04, Apple shall not be
required to indemnify or hold harmless any of the Seller Indemnified Parties on
account of any Seller Indemnified Loss unless the liability of Apple in respect
of that Seller Indemnified Loss, when aggregated with the liability of Apple in
respect of all Seller Indemnified Losses, exceeds, and only to the extent the
aggregate amount of all those Seller Indemnified Losses does exceed, the
Threshold Amount. In no event shall Apple be liable under this Agreement,
including Section 9.04, for any amount in excess of the Transaction Value. For
purposes of determining the amount of Seller Indemnified Losses, no effect will
be given to any resulting Tax benefit to any Seller Indemnified Party.
ARTICLE XI
GENERAL PROVISIONS
Section 11.15 TREATMENT OF CONFIDENTIAL INFORMATION. (a) Each of the
Seller and the Owners, severally and not jointly with any other Person,
acknowledges that it has or may have had in the past, currently has and in the
future may have access to Confidential Information of the Seller and the Seller
Subsidiaries, the Other Founding Companies and their Subsidiaries and Apple and
its Subsidiaries. Each of the Seller and the Owner, severally and not jointly
with any other Person, agrees that it will keep confidential all such
Confidential Information furnished to it and, except with the specific prior
written consent of Apple will not disclose such Confidential Information to any
Person except (a) Representatives of Apple, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.15; and provided, further, that
Confidential Information shall not include (i) such information which becomes
known to the public generally through no fault of Seller or any Owner, (ii)
information required to be disclosed by law or the order of any governmental
authority under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Seller and each Owner shall, if possible, give
prior written notice thereof to Apple and provide Apple with the opportunity to
contest such disclosure, or (iii) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party. In the event of a breach or threatened breach by Seller or
any Owner of the provisions of this Section 11.15 with respect to any
Confidential Information, Apple shall be entitled to an injunction restraining
Seller or any such Owner from disclosing, in whole or in part, that Confidential
Information. Nothing herein shall be construed as prohibiting Apple from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
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(b) Because of the difficulty of measuring economic losses as a result of
the breach of the foregoing covenants in Section 11.15(a), and because of the
immediate and irreparable damage that would be caused to Apple for which it
would have no other adequate remedy, each of the Seller and the Owners agrees
that Apple may enforce the provisions of Section 11.01(a) by injunctions and
restraining orders against each of them who breaches any of those provisions.
(c) The obligations of Apple set forth in Section 6.02(d) are incorporated
in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.15 shall survive
the termination of this Agreement.
Section 11.16 BULK SALES. Without implication that such laws apply to the
transaction contemplated hereby, the Owner and Apple shall not comply with the
provisions of the Uniform Commercial Code and other applicable laws of any
states relating to bulk sales or transfers.
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