ASSET PURCHASE AGREEMENT
between
GENTLE DENTAL SERVICE CORPORATION,
GENTLE DENTAL MANAGEMENT, INC.
and
TG3 DENTAL SERVICES
Dated June 30, 1998
TABLE OF CONTENTS
Page
----
ARTICLE I - Purchase and Sale of Assets............................... 2
1.01 Purchase and Sale................................... 2
1.02 Excluded Assets..................................... 3
1.03 Assumption of Liabilities........................... 3
1.04 Purchase Price...................................... 4
1.05 Purchase Price Adjustment........................... 5
1.06 Instruments of Conveyance and Transfer.............. 6
1.07 Further Assurances.................................. 6
1.08 Closing............................................. 6
1.09 Sales Tax........................................... 6
1.10 Allocation of Purchase Price........................ 6
ARTICLE II - Representations and Warranties of GD Sub and GDSC........ 7
2.01 Authorization....................................... 7
2.02 Capitalization...................................... 7
2.03 Compliance.......................................... 7
2.04 Consents............................................ 8
2.05 Accuracy of Representations & Warranties............ 8
2.06 Rule 144............................................ 8
ARTICLE III - Representations and Warranties of TG3 and Partners...... 8
3.01 Corporate Existence; Authority...................... 8
3.02 No Adverse Consequences............................. 9
3.03 Brokers and Finders................................. 9
3.04 Litigation.......................................... 9
3.05 Compliance with Laws................................ 10
3.06 Employment Matters.................................. 10
3.07 Financial Statements................................ 11
3.08 Receivables......................................... 12
3.09 Prepaid Expenses and Other.......................... 12
3.10 Personal Property................................... 12
3.11 Payables............................................ 12
3.12 Indebtedness........................................ 12
3.13 Other Liabilities................................... 12
3.14 Absence of Certain Changes or Events................ 12
3.15 Leases ........................................... 13
3.16 Certain Contracts and Arrangements.................. 13
3.17 Status of Contracts and Leases...................... 14
3.18 Title and Condition of Tangible Assets.............. 15
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Page
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3.19 Insurance........................................... 15
3.20 Taxes ........................................... 16
3.21 No Restrictions..................................... 16
3.22 Permits and Licenses................................ 16
3.23 Certain Payments.................................... 16
3.24 Environmental Conditions............................ 17
3.25 Consents and Approvals.............................. 17
3.26 Records............................................. 17
3.27 Investment Representations.......................... 17
3.28 Access to Information............................... 18
3.29 Sophistication...................................... 18
3.30 Accredited Investor................................. 18
3.31 Reliance............................................ 18
3.32 Accuracy of Representations and Warranties.......... 18
ARTICLE IV - Covenants of TG3 and Partners............................ 19
4.01 Access to Properties, Books and Records............. 19
4.02 Negative Covenants.................................. 19
4.03 Affirmative Covenants............................... 20
4.04 No Negotiations With Others......................... 21
4.05 Employees........................................... 21
ARTICLE V - Joint Covenants........................................... 21
5.01 Governmental Consents............................... 21
5.02 Best Efforts; No Inconsistent Action................ 21
ARTICLE VI - Conditions to Obligations of GD Sub...................... 22
6.01 Governmental Approvals.............................. 22
6.02 Consents............................................ 22
6.03 Representations, Warranties and Covenants........... 22
6.04 Adverse Proceedings................................. 22
6.05 No Adverse Change................................... 23
6.06 Management Agreement................................ 23
6.07 Shares Acquisition Agreement........................ 23
6.08 Dentist Employment Agreements....................... 23
6.09 Closing of Related Transactions..................... 23
6.10 Actions Satisfactory to GD Sub's Counsel............ 23
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Page
----
ARTICLE VII - Conditions to Obligations of TG3........................ 23
7.01 Representations, Warranties and Covenants........... 23
7.02 Adverse Proceedings................................. 24
7.03 Stock Price......................................... 24
ARTICLE VIII - Termination............................................ 24
8.01 Right of Parties to Terminate....................... 24
8.02 Effect of Termination............................... 24
ARTICLE IX - Survival; Indemnification................................ 25
9.01 Survival............................................ 25
9.02 Indemnification by TG3 and Partners................. 25
9.03 Indemnification by GD Sub........................... 26
9.04 Indemnification Procedure........................... 26
9.05 Right of Offset..................................... 27
9.06 Rights Not Exclusive................................ 28
ARTICLE X - Confidentiality; Press Releases........................... 28
10.1 Confidentiality..................................... 28
10.2 Press Releases...................................... 29
ARTICLE XI - Other Provisions......................................... 29
11.01 Benefit and Assignment.............................. 29
11.02 Entire Agreement.................................... 29
11.03 Fees and Expenses................................... 29
11.04 Amendment, Waiver, etc.............................. 29
11.05 Headings............................................ 29
11.06 Governing Law....................................... 30
11.07 Notices............................................. 30
11.08 Breach; Equitable Relief............................ 30
11.09 Attorneys' Fees..................................... 30
11.10 Guarantee........................................... 30
11.11 Counterparts........................................ 31
iii
INDEX OF DEFINED TERMS
Term Location of Definition
---- ----------------------
1933 Act............................................ 2.06
Adjusted Stock Consideration Amount................. 1.04-2
Admin Charge........................................ 1.04-4
Administrative Office............................... 1.04-4
Assets.............................................. 1.01
Assumed Liabilities................................. 1.04-3
Cash Consideration.................................. 1.04-1
Closing............................................. 1.08
Closing Date........................................ 1.08
Code................................................ 3.06-2
Contracts........................................... 1.01-6
Current Balance Sheet............................... 3.07-1
DDS................................................. 6.09
Damages............................................. 9.02-1
Dental Practice..................................... Introduction
Earnout Consideration............................... 1.04-4
Earnout Period...................................... 1.04-4
EBITDA.............................................. 1.04-4
ERISA............................................... 3.06-2
ERISA Plans......................................... 3.06-2
Environmental Law................................... 3.24-2(a)
Excess Cap-ex Charge................................ 1.04-4
Excess EBITDA....................................... 1.04-4
Financial Statements................................ 3.07-1
GD Sub.............................................. Introduction
GD Sub's Indemnified Persons........................ 9.02-1
GDSC................................................ Introduction
GDSC Common Stock................................... 1.04-2
Ghazal.............................................. Introduction
Hazardous Substance................................. 3.24-2(b)
Leases.............................................. 1.01-5
Material Adverse Change............................. Article III Introduction
Material Adverse Effect............................. Article III Introduction
Net Current Assets.................................. 1.05-3
Partners............................................ Introduction
PDS................................................. 1.04-4
Permits............................................. 3.22
Policies............................................ 3.19
Prevailing Party.................................... 11.09
iv
Professional Corporation............................ Introduction
Purchase Price...................................... 1.04
Purchase Price Adjustment........................... 1.05-1
Real Property....................................... 3.15
Registration Statement.............................. 2.02
Related Documents................................... 9.01
Returns............................................. 3.20-1
Shares.............................................. 2.06
Stock Consideration Amount.......................... 1.04-2
Stock Price......................................... 1.04-2
Tangible Personal Property.......................... 3.10
Taxes............................................... 3.20-3
TG3................................................. Introduction
TG3 Assignable Option Agreement..................... Introduction
TG3 Management Agreements........................... Introduction
TG3's Indemnified Persons........................... 9.03-1
Third Party Claims.................................. 9.04-1(a)
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LIST OF EXHIBITS
Exhibit Item First Reference
------- ---- ---------------
A Assumption Agreement 1.04-3
B Assignment and Xxxx of Sale 1.06
C Management Agreement 6.06
D Shares Acquisition Agreement 6.07
E Dentist Employment Agreement 6.08
LIST OF SCHEDULES
Schedule Content
-------- -------
1.02-2 Excluded Assets
1.10 Purchase Price Allocation
3.04 Litigation
3.06-2 Employee Benefits
3.06-3 Employment Manuals and Policies
3.06-4 Compensation
3.07 Financial Statements
3.08 Receivables
3.09 Prepaid Expenses and Other
3.10 Tangible Personal Property
3.11 Payables
3.12 Indebtedness
3.13 Other Liabilities
3.15 Leases
3.16 Contracts
3.19 Insurance
3.22 Permits and Licenses
3.25 Consents and Approvals
vi
ASSET PURCHASE AGREEMENT
DATED: June 30, 1998
BETWEEN: GENTLE DENTAL SERVICE CORPORATION,
a Washington corporation
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000 "GDSC"
GENTLE DENTAL MANAGEMENT, INC.
a Delaware corporation
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000 "GD Sub"
AND: TG3 DENTAL SERVICES
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Telecopy No.: (000) 000-0000 "TG3"
AND: Xxxxxxx X. Xxxxxx XX ("Xxxxxx")
and Xxxxxxx X. Xxxxxx, D.D.S. ("Ghazal") artners"
Partners are the owners of all of the partnership interests of TG3. TG3
provides management services to Riverside Dental Practice, the dental practice
located at 0000 Xxxxxxx Xxxxxx, Xxxxx 0, Xxxxxxxxx, Xxxxxxxxxx 00000 (the
"Dental Practice"). The Dental Practice is conducted by Xxxxxxx X. Xxxxxx,
D.D.S., Inc., a California professional corporation (the "Professional
Corporation"). TG3 is party to a management agreement with the Professional
Corporation (the "TG3 Management Agreement") and to an assignable option
agreement with the Professional Corporation and Ghazal, its sole shareholder
(the "TG3 Assignable Option Agreement"). TG3 desires to sell, and GD Sub desires
to purchase, substantially all of the assets associated with the Dental Practice
on the terms and conditions set forth in this Agreement.
In consideration of the mutual promises and covenants contained in this
Agreement, the parties agree as follows:
ARTICLE I
Purchase and Sale of Assets
1.01 Purchase and Sale. Subject to all the terms and conditions of this
Agreement and for the consideration herein stated, on the "Closing Date," as
that term is defined in Section 1.08, TG3 agrees to sell, convey, assign,
transfer and deliver to GD Sub, and GD Sub agrees to purchase and accept from
TG3, all of the assets, properties and rights of TG3 (other than the assets
specified in Section 1.02), tangible and intangible, wherever located, that are
used or useful to maintain and operate the Dental Practice, which assets (the
"Assets") shall include without limitation:
1.01-1 All patient lists, operating data and records relating to the
Dental Practice, including without limitation financial, accounting and credit
records, correspondence, budgets, engineering and facility records and other
similar documents and records;
1.01-2 All other items of tangible personal property of TG3 used in
connection with or associated with the Dental Practice, including furniture,
fixtures, equipment, supplies, inventory and spare and replacement items
therefor, including without limitation all such items listed on Schedule 3.10
and all such items acquired by TG3 after the date hereof and on or before the
Closing Date, other than to the extent such items are disposed of by TG3 prior
to the Closing Date without breach of this Agreement;
1.01-3 All accounts receivable and other receivables of TG3 associated
with the Dental Practice, including without limitation all receivables listed on
Schedule 3.08 and all receivables generated after March 31, 1998 and on or
before the Closing Date, other than to the extent such receivables have been
collected by TG3 prior to the Closing Date;
1.01-4 All prepaid and deferred items of TG3 relating to the Dental
Practice, including prepaid rent, insurance, taxes and unbilled charges and
deposits, including without limitation all such items listed on Schedule 3.09;
1.01-5 All leases of real or personal property to which TG3 is a party
as lessee and which relate to the Dental Practice, including without limitation
all leases listed on Schedule 3.10 and Schedule 3.15 and all leases entered into
after the date hereof and on or before the Closing Date and expressly assumed by
GD Sub in writing on the Closing Date as provided in Section 1.04-3(d), other
than to the extent such leases have terminated, expired or been disposed of by
TG3 prior to the Closing Date without breach of this Agreement (collectively,
the "Leases");
1.01-6 All rights, benefits and interests of TG3 under the contracts,
agreements, commitments, understandings, purchase orders, documents and
instruments listed on Schedule 3.16 hereto, specifically including the TG3
Management Agreement and the TG3 Assignable Option Agreement, and under any
contracts, agreements, commitments, understandings, purchase orders, documents
or instruments entered into between the date hereof and the Closing Date and
expressly assumed by GD Sub in writing on the Closing Date as provided in
Section 1.04-3(d), other than to the
2
extent such items have terminated, expired or been disposed of by TG3 prior to
the Closing Date without breach of this Agreement (collectively, the
"Contracts");
1.01-7 All assignable rights to all telephone lines and numbers used
in the conduct of the Dental Practice; and
1.01-8 All right, title and interest in and to trade names of TG3
associated with the Dental Practice.
1.02 Excluded Assets. The Assets shall not include the following:
1.02-1 Any lease not listed on Schedule 3.10 or Schedule 3.15 and any
contract, agreement, commitment, understanding, purchase order, document or
instrument not listed on Schedule 3.16, unless pursuant to Section 1.04-3(d) GD
Sub expressly agrees in writing on the Closing Date to assume the obligations
under such lease, contract, agreement, commitment, understanding, purchase
order, document or instrument, in which case TG3 shall assign its rights and
benefits thereunder to GD Sub and the same shall be treated as a "Lease" or
"Contract" for purposes of this Agreement; and
1.02-2 The assets identified on Schedule 1.02-2.
1.03 Assumption of Liabilities. Except for the liabilities and obligations
to be assumed by GD Sub pursuant to Section 1.04-3, GD Sub will not assume and
will not be liable for any liabilities of TG3, known or unknown, contingent or
absolute, accrued or other, and the Assets shall be free of all liabilities,
obligations, liens and encumbrances. Without limiting the generality of the
foregoing and except as otherwise provided above, GD Sub will not be responsible
for any of the following:
1.03-1 Liabilities, obligations or debts of TG3, whether fixed,
contingent or mixed and whether based on events occurring before or after the
Closing Date, including without limitation those based on tort, contract,
statutory or other claims or involving fines or penalties payable to any
governmental authority;
1.03-2 Liabilities, obligations or debts of TG3 for any federal, state
or local tax, including without limitation federal income taxes, state income
and excise taxes, state and local real and personal property taxes and federal,
state and local withholding and payroll taxes;
1.03-3 Liabilities or obligations of TG3 to employees for salaries,
bonuses or health and welfare benefits or with respect to any profit sharing,
stock bonus, pension, retirement, stock purchase, option, bonus or deferred
compensation plan or for any other benefits or compensation (including without
limitation accrued vacation or sick leave); and
1.03-4 Liabilities or obligations of TG3 for employee severance
payments or arrangements resulting from termination of TG3's employees.
3
1.04 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be the following:
1.04-1 $840,000 (the "Cash Consideration"), payable by check on the
Closing Date with the portion of such amount representing the Closing Date
payoff amounts for the lenders as listed under the heading "debt to be paid off"
on Schedule 3.12 being payable by check to such lenders and the balance of such
amount payable by check to TG3.
1.04-2 A number of shares of GDSC's Common Stock ("GDSC Common Stock")
determined by dividing the Adjusted Stock Consideration Amount (as defined
below) by a number (the "Stock Price") equal to the average of the closing
prices of GDSC Common Stock reported by NASDAQ for the five trading days prior
to the date of this Agreement. The "Stock Consideration Amount" equals $360,000.
The "Adjusted Stock Consideration Amount" shall equal the Stock Consideration
Amount reduced by the principal amount of any debt or capital lease obligations
of TG3 assumed by GD Sub. The shares of GDSC Common Stock to be delivered under
this Agreement shall be issued by GDSC to GD Sub for transfer by GD Sub to TG3.
1.04-3 The assumption by GD Sub on the Closing Date, pursuant to the
terms of an Assumption Agreement in substantially the form attached hereto as
Exhibit A, of the following liabilities of TG3 (the "Assumed Liabilities"):
1.04-3(a) the accounts payable and accrued liabilities of TG3
associated with the Dental Practice to the extent and in the amounts identified
on Schedule 3.11 (to the extent such liabilities are not paid or discharged
prior to the Closing Date);
1.04-3(b) all liabilities of TG3 associated with the Dental
Practice of a type identified on Schedule 3.11 and incurred in the ordinary
course of business after March 31, 1998 and on or before the Closing Date (to
the extent such liabilities are not paid or discharged prior to the Closing
Date), but specifically excluding any liabilities for brokers' and attorneys'
fees and other expenses of this transaction and accrued liabilities for taxes
based on the income or revenues of TG3;
1.04-3(c) all obligations of TG3 under any of the Leases or
Contracts listed on Schedule 3.10, Schedule 3.15 or Schedule 3.16 hereto or
under any of the items listed under the heading "debt to be assumed" on Schedule
3.12; and
1.04-3(d) all obligations of TG3 under any lease, contract,
agreement, commitment, understanding, purchase order, document or instrument
entered into by TG3 between the date of this Agreement and the Closing Date that
GD Sub, in its sole discretion, elects on the Closing Date to assume.
1.04-4 Additional payments (the "Earnout Consideration") to be paid
based on the EBITDA (as defined below) for the 24-month period (the "Earnout
Period") beginning on the first day of the first calendar month following the
Closing Date. The first payment of Earnout Consideration shall equal 6.0
multiplied by the EBITDA for the first 12 months of the Earnout Period, reduced
by the sum of the Cash Consideration and the Stock Consideration Amount. The
second payment of
4
Earnout Consideration shall equal 6.0 multiplied by the EBITDA for the second 12
months of the Earnout Period, reduced by the sum of the Cash Consideration and
the Stock Consideration Amount and further reduced by the amount of the first
payment of Earnout Consideration. The "EBITDA" shall mean the combined net
income of (a) the Professional Corporation and (b) GD Sub from the provision of
services to the Professional Corporation, before any reduction for interest,
income taxes, depreciation or amortization, and excluding any allocation of GD
Sub corporate overhead expense, but after the Excess Cap-ex Charge (as defined
below) and the Admin Charge (as defined below), as reflected on a combined
income statement for the practice location prepared in conformity with generally
accepted accounting principles applied in a manner consistent with the
application of such principles to the preparation of GD Sub's audited financial
statements. The "Excess Cap-ex Charge" shall be an annual charge equal to 25% of
the total accumulated capital expenditures by GD Sub at the Dental Practice
after the Closing Date which in any 12-month period exceeds 2% of the net
revenue of the Dental Practice for such period. The "Admin Charge" shall equal a
pro rata portion of the sum of (a) rent reimbursed by GD Sub to Pacific Dental
Services, Inc. ("PDS") for the administrative office acquired by GD Sub from PDS
(the "Administrative Office"), and (b) all unreimbursed costs incurred by GD Sub
at the Administrative Office, including but not limited to employee compensation
and benefits, based on the ratio of the net revenue of the Dental Practice to
the combined net revenue of all dental practices managed by GD Sub from the
Administrative Office for the relevant period. Eighty percent of the first
payment of Earnout Consideration shall be paid by check. The remaining 20% of
the first payment of Earnout Consideration shall be paid in shares of GDSC
Common Stock. To determine the number of shares of GDSC Common Stock to be
issued as part of the first payment of Earnout Consideration, a share of GDSC
Common Stock shall be valued at the average of the closing prices of GDSC Common
Stock reported by NASDAQ for the five trading days prior to the 60th day after
the end of the first 12 months of the Earnout Period. All of the second payment
of Earnout Consideration shall be paid by check. The calculation and payment of
each payment of Earnout Consideration shall be completed within 90 days of the
completion of the applicable 12-month portion of the Earnout Period.
1.05 Purchase Price Adjustment. The Cash Consideration may be subject to
adjustment after Closing as set forth in this Section 1.05.
1.05-1 As soon as reasonably possible after Closing, the amount of the
"Net Current Assets" (as defined in Section 1.05-3) shall be determined as
provided in Section 1.05-4. If the amount of Net Current Assets is $50,000 more
or less than the Target Amount (as defined below), the Cash Consideration shall
be adjusted by the full amount of the difference (the "Purchase Price
Adjustment"). If the difference between Net Current Assets and the Target Amount
does not exceed $50,000, there shall be no Purchase Price Adjustment. The
"Target Amount" shall mean $0 plus the amount of the accounts receivable of TG3
associated with the Dental Practice, net of contractual allowances and bad debt
reserve, at June 30, 1998.
1.05-2 If the Net Current Assets are greater than $50,000 plus the
Target Amount, the Purchase Price Adjustment shall be paid to TG3 by check
within 10 days after TG3 delivers the certificate described in Section 1.05-4.
If the Net Current Assets are less than the Target Amount minus $50,000, the
Purchase Price Adjustment shall be paid by TG3 to GD Sub by check within 10 days
after TG3 delivers the certificate described in Section 1.05-4.
5
1.05-3 "Net Current Assets" means the sum of (a) accounts receivable
of TG3 associated with the Dental Practice, net of contractual allowances and
bad debt reserve, at the Closing Date and (b) any prepaid expenses of TG3
relating to the Dental Practice properly recordable on a balance sheet of TG3 as
of the Closing Date reduced by the sum of (x) the accounts payable of TG3
associated with the Dental Practice at the Closing Date and (y) the accrued
liabilities of TG3 associated with the Dental Practice at the Closing Date,
specifically including an accrual of payroll and payroll-related charges up to
and including the Closing Date, but only to the extent such payables and
liabilities are assumed by GD Sub, all as determined consistently with the
accounting conventions applied in determining the amounts set forth in
paragraphs 1.05-1 and 1.05-2 above.
1.05-4 At or after the Closing Date, TG3 shall execute and deliver to
GD Sub a certificate detailing the calculation of Net Current Assets and
including as schedules thereto lists of all receivables, prepaid expenses,
payables and accrued liabilities as of the Closing Date included in the
calculation. In this certificate, TG3 shall certify the accuracy and
completeness of the schedules to the certificate and the accuracy of the
calculation of Net Current Assets.
1.06 Instruments of Conveyance and Transfer. The sale of the Assets, and
the conveyance, assignment, transfer and delivery of all of the Assets shall be
effected by TG3's execution and delivery to GD Sub, on the Closing Date, of a
xxxx of sale in substantially the form of the Assignment and Xxxx of Sale
attached hereto as Exhibit B.
1.07 Further Assurances. TG3 and Partners agree that, at any time and from
time to time on and after the Closing Date, they will, upon the request of GD
Sub and without further consideration, take all steps reasonably necessary to
place GD Sub in possession and operating control of the Assets and will do,
execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all further acts, deeds, assignments, conveyances,
transfers, powers of attorney or assurances as reasonably required to sell,
assign, convey, transfer, grant, assure and confirm to GD Sub, or to aid and
assist in the collection of or reducing to possession by GD Sub of, all of the
Assets, or to vest in GD Sub good, valid and marketable title to the Assets.
1.08 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Stoel Rives LLP,
000 XX Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxx, at 10:00 a.m., Pacific time,
on October 31, 1998 or at another date, time and place agreed upon in writing by
the parties (the "Closing Date").
1.09 Sales Tax. TG3 shall pay any sales tax owing in respect of the
purchase of the Assets. TG3 shall promptly file all necessary sales tax returns,
if any, and pay all sales taxes due, if any, following the Closing Date.
1.10 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in accordance with Schedule 1.10, and GDSC and TG3 shall be
bound by that allocation in reporting the transactions contemplated by this
Agreement to any governmental authority (including without limitation the
Internal Revenue Service).
6
ARTICLE II
Representations and Warranties of GD Sub and GDSC
GD Sub and GDSC, jointly and severally, represent and warrant to TG3 as
follows:
2.01 Authorization. Each of GD Sub and GDSC is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, with all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted. Each of GD
Sub and GDSC has taken all corporate action necessary to authorize its
execution, delivery and performance of this Agreement. Each of GD Sub and GDSC
has full corporate power and authority to enter into this Agreement and carry
out the terms hereof. This Agreement has been duly executed and delivered by GD
Sub and GDSC and is binding upon and enforceable against each of them in
accordance with its terms, except as enforceability may be limited or affected
by applicable bankruptcy, insolvency, reorganization, or other laws of general
application relating to or affecting creditors' rights generally and except as
enforceability may be limited by rules of law governing specific performance,
injunctive relief or other equitable remedies.
2.02 Capitalization. The authorized capital stock of GDSC consists of
50,000,000 shares of Common Stock, of which 7,994,213 shares are issued and
outstanding, and 30,000,000 shares of Preferred Stock, of which 1,628,863 shares
are issued and outstanding. All issued and outstanding shares of GDSC capital
stock are validly issued, fully paid and nonassessable, and have been issued
without violation of any preemptive rights. There is no subscription, option,
warrant, call, right, agreement or commitment (including any right of conversion
or exchange under any outstanding security or other instrument) relating to the
issuance by GDSC of GDSC capital stock other than outstanding options under the
GDSC 1993 Stock Incentive Plan, outstanding purchase rights under the GDSC
Employee Stock Purchase Plan and the GDSC Professional Corporation Employee
Stock Purchase Plan, other options and warrants described in GDSC's Registration
Statement on Form SB-2, Registration No. 333-44037 (the "Registration
Statement"), the proposed public offering of Common Stock described in the
Registration Statement, the issuance of convertible debt and preferred stock
announced by GDSC on May 12, 1998, and outstanding offers and/or agreements to
acquire other dental practices or dental practice management companies in
exchange for Common Stock. The GDSC Common Stock to be issued under this
Agreement will, when issued, be duly and validly authorized and issued, fully
paid and nonassessable.
2.03 Compliance. The execution, delivery and performance of this Agreement
by GD Sub and GDSC, the compliance by GD Sub and GDSC with the provisions of
this Agreement and the consummation of the transactions described in this
Agreement will not conflict with or result in the breach of any of the terms or
provisions of or constitute a default under:
2.03-1 the respective articles of incorporation or bylaws of GD Sub
and GDSC;
2.03-2 any note, indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which GD Sub or GDSC is a party or by
which GD Sub or GDSC is bound; or
7
2.03-3 any statute or any order, rule, regulation or decision of any
court or regulatory authority or governmental body applicable to GD Sub or GDSC.
2.04 Consents. No consent, approval, authorization, order, designation or
declaration of any court or regulatory authority or governmental body, federal
or other, or third person is required to be obtained by GD Sub or GDSC for the
consummation of the transactions described in this Agreement.
2.05 Accuracy of Representations & Warranties. None of the representations
or warranties of GD Sub or GDSC contains or will contain any untrue statement of
any material fact or omits or misstates a material fact necessary to make the
statements contained in this Agreement not misleading. Neither GD Sub nor GDSC
knows of any fact that has resulted or that, in the reasonable judgement of GD
Sub or GDSC will result, in any material adverse change in the business, results
of operation, financial condition or prospects of GD Sub or GDSC that has not
been set forth in this Agreement or in GDSC's filings with the Securities and
Exchange Commission.
2.06 Rule 144. With a view to making available to TG3 the benefits of Rule
144 promulgated under the Securities Act of 1933 (the "1933 Act"), GDSC agrees,
during the one-year period starting on the first anniversary of the Closing Date
or such longer period as the public resale of the shares of GDSC Common Stock
issued under this Agreement ("Shares") by a nonaffiliate of GDSC is subject to
Rule 144, to file with the Securities and Exchange Commission in a timely manner
all reports and other documents required of GDSC under the Securities Exchange
Act of 1934. GDSC agrees to remove the legend described in the last sentence of
Section 3.27 from the certificates representing the Shares, upon request of the
holder, at any time after the second anniversary of the Closing Date or such
other time as the Shares may be freely sold by the holder without restriction
under Rule 144.
ARTICLE III
Representations and Warranties of TG3 and Partners
As used in this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, results of operations, financial position,
assets or prospects of TG3, the Dental Practice or any of them which shall in
any event include any adverse effect on the assets, revenue or net income of TG3
in excess of $15,000; and "Material Adverse Change" means any change that has
resulted, will result or is likely to result in a Material Adverse Effect. TG3
and Partners represent and warrant to GD Sub as follows:
3.01 Corporate Existence; Authority.
3.01-1 The Partners have full power and authority to enter into this
Agreement and carry out its terms. This Agreement has been duly and validly
executed and delivered by the Partners and is binding upon and enforceable
against each Partner in accordance with its terms, except as enforceability may
be limited or affected by applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the rights of
creditors and except as enforceability
8
may be limited by rules of law governing specific performance, injunctive relief
or other equitable remedies. The Professional Corporation is a professional
corporation duly organized, validly existing and in good standing under the laws
of the State of California, and the Professional Corporation has all necessary
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now conducted and as proposed to be
conducted.
3.01-2 TG3 is a partnership duly organized and validly existing under
the laws of California and has the power to own and lease its properties and
carry on its business as now being conducted. The Partners hold all of the
partnership interests of TG3 and no person has any right to become a partner of
TG3 or to acquire any interest in TG3. TG3 has full power and authority to enter
into this Agreement and to carry out its terms. This Agreement has been duly and
validly executed and delivered by TG3 and is binding upon and enforceable
against TG3 in accordance with its terms, except as enforceability may be
limited or affected by applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the rights of
creditors and except as enforceability may be limited by rules of law governing
specific performance, injunctive relief or other equitable remedies.
3.02 No Adverse Consequences. Neither the execution and delivery of this
Agreement by TG3 or Partners nor the consummation of the transactions
contemplated by this Agreement will
3.02-1 result in the creation or imposition of any lien, charge or
encumbrance on any of TG3's or the Professional Corporation's assets or
properties,
3.02-2 violate or conflict with any provision of TG3's organizational
documents,
3.02-3 violate any law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority applicable to TG3, Partners,
the Professional Corporation or any of them, assuming that the agreements to be
entered into between GD Sub and the Professional Corporation do not violate
applicable laws, or
3.02-4 either alone or with the giving of notice or the passage of
time or both, conflict with, constitute grounds for termination or acceleration
of, result in the breach of the terms, conditions or provisions of, result in
the loss of any benefit to TG3 or the Professional Corporation under or
constitute a default under any agreement, instrument, license or permit to which
TG3, any Partner or any Professional Corporation is a party or by which any of
them is bound, assuming that the agreements to be entered into between GD Sub
and the Professional Corporation do not violate applicable laws.
3.03 Brokers and Finders. Neither TG3 nor any Partner has employed any
broker, finder or agent or dealt with anyone purporting to act in such capacity
or agreed to pay any brokerage fee, finder's fee or commission with respect to
the transaction contemplated by this Agreement.
3.04 Litigation. Except as set forth on Schedule 3.04, there is no claim,
litigation, proceeding or investigation of any kind pending or threatened by or
against TG3, or the Professional
9
Corporation and, to the best knowledge of TG3, there is no basis for any such
claim, litigation, proceeding or investigation.
3.05 Compliance with Laws. Except as set forth on Schedule 3.22, TG3 and
the Professional Corporation have at all relevant times conducted their
businesses in compliance with their respective organizational documents and all
applicable laws and regulations. Except as set forth on Schedule 3.22, TG3 and
the Professional Corporation are not in violation of any applicable laws or
regulations, other than violations which singly or in the aggregate do not, and,
with the passage of time will not, have a Material Adverse Effect. Neither TG3
nor the Professional Corporation is subject to any outstanding order, writ,
injunction or decree, and neither TG3 nor the Professional Corporation has been
charged with, or threatened with a charge of, a violation of any provision of
federal, state or local law or regulation.
3.06 Employment Matters.
3.06-1 Labor Matters
(a) Neither TG3 nor the Professional Corporation is a party or
otherwise subject to any collective bargaining or other agreement governing the
wages, hours or terms of employment of its employees. TG3 and the Professional
Corporation are and have been in compliance with all applicable laws regarding
employment and employment practices, terms and conditions of employment, wages
and hours and are not and have not been engaged in any unfair labor practice.
(b) There is no (1) unfair labor practice complaint against TG3
or the Professional Corporation pending before the National Labor Relations
Board or any other governmental authority, (2) labor strike, slowdown or work
stoppage actually occurring or, to the best of the knowledge of TG3 threatened
against either of them, (3) representation petition respecting any of their
employees pending before the National Labor Relations Board, or (4) grievance or
any arbitration proceeding pending arising out of or under collective bargaining
agreements applicable to any of them.
(c) Neither TG3 nor the Professional Corporation has experienced
any primary work stoppage or other organized work stoppage involving its
employees in the past two years.
3.06-2 Employee Benefits. Schedule 3.06-2 lists all pension,
retirement, profit sharing, deferred compensation, bonus, commission, incentive,
life insurance, health and disability insurance, hospitalization and all other
employee benefit plans or arrangements (including, without limitation, any
contracts or agreements with trustees, insurance companies or others relating to
any such employee benefit plans or arrangements) established or maintained by
TG3 and complete and accurate copies of all those plans or arrangements have
been provided to GD Sub. The employee pension benefit plans (within the meaning
of Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) established and maintained by TG3 that are subject to ERISA
are listed separately as ERISA Plans on Schedule 3.06-2 (the "ERISA Plans"). The
ERISA Plans comply with the applicable requirements of ERISA. TG3 has received
from the Internal Revenue Service a favorable determination for each of the
ERISA
10
Plans and their related trusts that each of the ERISA Plans is qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code") and
the related trust is tax-exempt under Section 501(a) of the Code. There has been
no event subsequent to that determination that has adversely affected the tax
qualified status of the ERISA Plans or the exemption of the related trusts other
than changes in the Code that are not effective as of the Closing Date. No
"accumulated funding deficiency" as defined in Section 302(a)(2) of ERISA or
Section 412(a) of the Code exists, or has existed, with respect to any of the
ERISA Plans. The present value of all accrued benefits under each of the ERISA
Plans does not exceed the value of such plan's assets, less all liabilities
other than those attributable to accrued benefits. TG3 has no "potential
withdrawal liability," as defined in Section 4201 of ERISA. None of the ERISA
Plans, its related trusts or any trustee, investment manager or administrator
thereof has engaged in a nonexempt "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code. There are not and
have not been any excess deferrals or excess contributions under any ERISA Plan.
Each ERISA Plan is and has been operated and administered in conformance with
the requirements of all applicable laws and regulations, whether or not the
ERISA Plan documents have been amended to reflect such requirements. TG3 has no
obligation of any kind (whether under the terms of the ERISA Plans or under any
understanding with employees) to make payments under, or to pay contributions to
or in respect of, any plan or arrangement listed on Schedule 3.06-2, or any
other plan, agreement or other arrangement for deferred compensation of
employees, whether or not tax qualified, including, without limitation, a single
employer tax qualified plan, a tax qualified plan of a controlled group of
corporations, a multi-employer pension plan, a nonqualified deferred
compensation plan, an individual employment or compensation agreement or a
commitment to provide medical benefits to retirees.
3.06-3 Employment Agreements. Each of the employees of TG3 and the
Professional Corporation is an "at-will" employee and, except as listed on
Schedule 3.06-3, there are no written employment, commission or compensation
agreements of any kind between TG3 or the Professional Corporation and any of
their respective employees. Schedule 3.06-3 lists and includes all of TG3's
employment or supervisory manuals, employment or supervisory policies, and
written information generally provided to employees (such as applications or
notices), and true and complete copies of those manuals, policies and written
information have been provided to GD Sub. TG3 does not have any agreements or
understandings with TG3's employees except as reflected in the items listed in
Schedules 3.06-2 and 3.06-3.
3.06-4 Compensation. Schedule 3.06-4 contains a complete and accurate
list of all employees of TG3, as of June 29, 1998, specifying their names, hire
dates, the total amount paid or payable as compensation to each such person, and
the basis of such compensation.
3.07 Financial Statements.
3.07-1 Schedule 3.07 contains unaudited balance sheets of TG3 as of
March 31, 1998 (the "Current Balance Sheet") and December 31, 1997 and 1996, and
the related statements of income for the years then ended (all such balance
sheets and statements collectively, the "Financial Statements").
11
3.07-2 The Financial Statements present fairly
(a) the financial position of TG3 as of the dates indicated and
(b) the results of operations for the periods then ended.
3.08 Receivables. Schedule 3.08 separately lists all receivables of TG3
from the Dental Practice or otherwise (including management fees receivable,
accounts receivable, loans receivable and advances) as of March 31, 1998. Each
of the receivables listed on Schedule 3.08, and each of the receivables that has
arisen since March 31, 1998 has arisen only from bona fide transactions in the
ordinary course of business and is not subject to any offset or counterclaim.
3.09 Prepaid Expenses and Other. Schedule 3.09 lists all prepaid expenses
and deferred charges of TG3 and of the Dental Practice, reflected on the Current
Balance Sheet as well as the items included in the Other Assets line, if any, on
the Current Balance Sheet.
3.10 Personal Property. Section 1.01-1 and Schedule 3.10 together generally
describe all the tangible personal property owned or leased by TG3 and used in
the Dental Practice, other than excluded assets listed in Schedule 1.02-2
("Tangible Personal Property"). Schedule 3.10 lists the book value of the
Tangible Personal Property as of March 31, 1998.
3.11 Payables. Schedule 3.11 lists all accounts payable and other accrued
liabilities of TG3 as of March 31, 1998, other than payables for brokers' and
attorneys' fees and other expenses of this transaction and accrued liabilities
for taxes based on income or revenues of TG3.
3.12 Indebtedness. Schedule 3.12 lists all indebtedness of TG3 and the
Professional Corporation as of June 30, 1998 incurred in connection with the
business, operations or assets of the Dental Practice or the repayment of which
is secured by the assets of the Dental Practice. For each item of indebtedness,
Schedule 3.12 shows the name of lender and the principal balance.
3.13 Other Liabilities. Except as listed on Schedule 3.13, neither TG3 nor
the Professional Corporation has any liability or obligation (whether absolute,
accrued, contingent or other, and whether due or to become due), which is not
accrued, reserved against or disclosed in the Current Balance Sheet, other than
liabilities incurred in the ordinary course of business consistent with past
practice, which individually or in the aggregate would not have a Material
Adverse Effect.
3.14 Absence of Certain Changes or Events. Since the date of the Current
Balance Sheet, there has not been with respect to TG3 or the Dental Practice:
3.14-1 Any Material Adverse Change or any event, occurrence,
development or state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Change;
3.14-2 Any damage, destruction or casualty loss, whether insured
against or not, to any assets or properties associated with the Dental Practice;
12
3.14-3 Any increase in the rate or terms of compensation payable or to
become payable by TG3 to its key employees; any increase in the rate or terms of
any bonus, insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any such key employees; any special bonus or
remuneration paid; or any written employment contract executed or amended;
3.14-4 Any entry into any agreement, commitment or transaction
(including, without limitation, any borrowing, capital expenditure or capital
financing or any amendment, modification or termination of any existing
agreement, commitment or transaction) by TG3 or the Professional Corporation,
except agreements, commitments or transactions in the ordinary course of
business and consistent with past practices or as expressly contemplated in this
Agreement;
3.14-5 Any conduct of business which is outside the ordinary course of
business or not substantially in the manner that TG3 previously provided
management services to the Dental Practice;
3.14-6 Any purchase or other acquisition of property, any sale, lease
or other disposition of property, or any expenditure, except in the ordinary
course of business;
3.14-7 Any incurrence of any noncontract liability which, either
singly or in the aggregate is material to the business, results of operations,
financial condition or prospects of the Dental Practice;
3.14-8 Any encumbrance or consent to encumbrance of any property or
assets of TG3 except in the ordinary course of business; or
3.14-9 Any change in the assets, liabilities, licenses, permits or
franchises of TG3, or in any agreement to which TG3 is a party or is bound,
which has had or reasonably could be expected to have a Material Adverse Effect.
3.15 Leases. Schedule 3.15 contains a complete and accurate list of all
Leases of real property used or useful in the business of TG3, including the
lease at the Dental Practice location, a description of the real property
covered thereby (the "Real Property"), the term of each Lease and the monthly
payments under the Lease. Complete and accurate copies of all Leases have been
delivered to GD Sub.
3.16 Certain Contracts and Arrangements. Schedule 3.16, which is organized
by type of agreement, contains a complete and accurate list of all Contracts of
the following types to which TG3 or the Professional Corporation is a party or
by which TG3 or the Professional Corporation is bound which relate to or are
associated with the Dental Practice:
3.16-1 any mortgage, note or other instrument or agreement relating to
the borrowing of money or the incurrence of indebtedness by TG3 or the
Professional Corporation or TG3's guaranty of any obligation for the borrowing
of money;
13
3.16-2 contracts, agreements, purchase orders or acknowledgment forms
for the purchase, sale, lease or other disposition of capital assets or more
than $20,000 of other equipment or materials;
3.16-3 contracts or agreements for the performance of services,
including but not limited to the TG3 Management Agreement;
3.16-4 contracts or agreements for the joint performance of work or
services and all other partnership or joint venture agreements;
3.16-5 contracts or agreements with agents, brokers, consignees, sales
representatives or distributors relating to the sale of the services of TG3; and
3.16-6 any other contract, instrument, agreement or obligation not
described on any other Schedule to which TG3 or the Professional Corporation is
a party or by which either of them is bound and which contains material
unfulfilled obligations of TG3, including but not limited to the TG3 Assignable
Option Agreement.
Complete and accurate copies of all Contracts have been delivered to GD Sub.
3.17 Status of Contracts and Leases.
3.17-1 Each of the Contracts and Leases listed on Schedules 3.10, 3.15
and 3.16 is valid, binding and enforceable by TG3 in accordance with its terms
and is in full force and effect. There is no existing default or violation by
TG3 under any Contract or Lease and no event has occurred which (whether with or
without notice, lapse of time or both) would constitute a default of TG3 under
any Contract or Lease. There is no pending or threatened proceeding which would
interfere with the quiet enjoyment of any Real Property of which TG3 is lessee
or sublessee which is used by the Dental Practice.
3.17-2 All other parties to the Contracts and Leases have consented or
prior to the Closing will have consented (where such consent is necessary) to
the consummation of the transaction contemplated by this Agreement without
requiring modification of TG3's rights or obligations under any Contract or
Lease.
3.17-3 TG3 is not aware of any default by any other party to any
Contract or Lease or of any event which (whether with or without notice, lapse
of time or both) would constitute a default by any other party with respect to
obligations of that party under any Contract or Lease, and, to the knowledge of
TG3, there are no facts that exist indicating that any of the Contracts or
Leases may be totally or partially terminated or suspended by the other parties.
3.17-4 Neither TG3 nor the Professional Corporation is a party to, nor
is it bound by, any contract or agreement that TG3 can reasonably foresee will
result in any material loss to TG3 or the Dental Practice upon the performance
thereof (including any material liability for penalties or damages, whether
liquidated, direct, indirect, incidental or consequential), unless such contract
or
14
agreement is terminable by TG3 or the Professional Corporation on 60 or fewer
days notice at any time without penalty.
3.18 Title and Condition of Tangible Assets.
3.18-1 TG3 owns all of the Tangible Personal Property except the
leased property free and clear of all mortgages, pledges, security interests,
claims, charges or other encumbrances or restrictions of any kind, except
(a) liens disclosed on the Current Balance Sheet,
(b) security interests or liens securing payment of Assumed
Liabilities or
(c) liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Current Balance Sheet).
3.18-2 TG3 has good and absolute title to the Tangible Personal
Property except the leased property. No Partner, Professional Corporation or
shareholder thereof, nor any other person or entity has any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
Dental Practice, other than indirectly as a partner of TG3. The immediately
preceding sentence shall not apply to patient charts, files and patient records
and contracts for the provision of dentistry services that may be owned or held
by the Professional Corporation.
3.18-3 All Tangible Personal Property has been maintained and operated
in accordance with manufacturer's specifications and prudent industry practices,
is in a good state of maintenance and repair, ordinary wear and tear excepted,
and is adequate for the conduct of TG3's business.
3.18-4 There are no developments affecting any of the Real Property or
Tangible Personal Property pending or, to the knowledge of TG3, threatened which
might materially detract from the value of such property or assets, materially
interfere with any present or intended use of any such property or assets or
materially adversely affect the marketability of such properties or assets.
3.18-5 At the Closing, GD Sub will acquire good title to all the
Assets, free and clear of all mortgages, pledges, security interests, claims,
charges or other encumbrances or restrictions of any kind, except for security
interests or liens securing payment of Assumed Liabilities.
3.19 Insurance. Schedule 3.19 contains a complete and accurate list of all
policies (other than the malpractice insurance policy in effect for the
Professional Corporation) of liability, fire, worker's compensation and other
forms of insurance insuring TG3, the Professional Corporation, their respective
employees, and assets or operations of the Dental Practice, setting forth the
applicable deductible amounts (the foregoing policies including the malpractice
insurance policy of the Professional Corporation are hereinafter collectively
referred to as the "Policies"). All the Policies are valid, enforceable and in
full force and effect, all premiums with respect to the Policies covering all
periods up to and including the date as of which this representation is being
made have been paid and no notice of cancellation or termination has been
received with respect to any Policy. The Policies are
15
sufficient for compliance with all requirements of law and of agreements to
which TG3 and the Professional Corporation are parties and provide insurance for
the risks and in the amounts and types of coverage usually obtained by persons
using or holding similar properties in similar businesses. There are no
unresolved claims for insurance payment under any of the Policies. True and
complete copies of the Policies and all endorsements thereto have been delivered
to GD Sub.
3.20 Taxes.
3.20-1 Returns. TG3 has filed all federal, state and other returns,
reports and information returns required to be filed by it with respect to Taxes
(as defined below) (collectively, the "Returns") and has timely paid all Taxes
shown to be due on the Returns. All Returns filed are complete and accurate in
all material respects, and no additional Taxes are owed by TG3 with respect to
the periods covered by the Returns. TG3 has provided GD Sub with complete and
accurate copies of TG3's Returns for 1995 and 1996.
3.20-2 Taxes Paid or Reserved. All deficiencies in Taxes asserted or
assessments made by any taxing authority have been fully paid or finally
settled, excluding property taxes that are not yet due. All Taxes which TG3 or
the Professional Corporation has been required to collect or withhold have been
withheld or collected and, to the extent required, have been paid to the proper
taxing authority.
3.20-3 Definition. "Taxes" means all taxes, charges, fees, levies or
other assessments including, without limitation, income, excise, property,
sales, use and franchise taxes, imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof, and
including any interest, penalties or additions.
3.21 No Restrictions. No contract or agreement to which TG3 is a party or
is bound or to which any of its properties or assets is subject limits the
freedom of TG3 to compete in any line of business or with any person.
3.22 Permits and Licenses. Except as set forth on Schedule 3.22, TG3, the
Professional Corporation and Ghazal hold and at all times have held, all
licenses, permits, franchises, easements and authorizations (collectively,
"Permits") necessary for the lawful conduct of the Dental Practice pursuant to
all applicable statutes, laws, ordinances, rules and regulations of all
governmental bodies, agencies and other authorities having jurisdiction over it
or any part of its operations, except where the failure to hold any Permit,
singly or in the aggregate, either alone or with the giving of notice or the
passage of time or both, would not have a Material Adverse Effect. TG3, the
Professional Corporation and Ghazal are in compliance with all the terms of each
Permit, and there are no claims of violation by any such party of any Permit.
3.23 Certain Payments. Neither TG3 nor the Professional Corporation or any
Partner, directly or indirectly, on behalf of or with respect to the Dental
Practice or its operations made or received any payment that was not legal to
make or receive under federal, state or local laws of the United States or any
other country or territory.
16
3.24 Environmental Conditions.
3.24-1 Compliance. TG3 has operated the Dental Practice and maintained
the Assets, including without limitation the Real Property, in compliance with
all Environmental Laws. All wastes generated in connection with the Dental
Practice are and have been transported and disposed of off site in compliance
with all Environmental Laws. Except as otherwise required for the normal
operation of the Dental Practice, no Hazardous Substance is or has been
generated, manufactured, treated, stored, transported, used or otherwise handled
on the Real Property or in connection with the Dental Practice.
3.24-2 Definitions. As used in this Agreement,
(a) "Environmental Law" means any federal, state or local
statute, ordinance or regulation pertaining to the protection of human health or
the environment and any applicable orders, judgments, decrees, permits, licenses
or other authorizations or mandates under such statutes, ordinances or
regulations, and
(b) "Hazardous Substance" means any hazardous, toxic, radioactive
or infectious substance, material or waste as defined, listed or regulated under
any Environmental Law, and includes without limitation petroleum oil and its
fractions.
3.25 Consents and Approvals. Except as set forth on Schedule 3.25, no
consent, approval or authorization of any court, regulatory authority,
governmental body, or any other entity or person not a party to this Agreement
is required for the consummation of the transactions described in this Agreement
by TG3 or Partners. TG3 and Partners have obtained, or shall have obtained prior
to the Closing, all consents, authorizations or approvals of any third parties
required in connection with the execution, delivery or performance of this
Agreement by TG3 or Partners or the consummation of the transaction contemplated
by this Agreement. TG3 has made all registrations or filings with any
governmental authority required for the execution or delivery of this Agreement
or the consummation of the transaction contemplated hereby.
3.26 Records. The books of account of TG3 and the Professional Corporation
are complete and accurate in all material respects, and there have been no
transactions involving the business of TG3 and the Professional Corporation
which properly should have been set forth therein and which have not been
accurately so set forth. Complete and accurate copies of such books have been
made available to GD Sub.
3.27 Investment Representations. TG3 is acquiring the Shares and each
Partner is acquiring beneficial ownership of the Shares for investment for its,
his or her own account, and not with a view to, or for resale in connection
with, any distribution of the Shares, other than a possible distribution of the
Shares from TG3 to Partners. Neither TG3 nor any Partner is a party to any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to any such person or any third party with
respect to the Shares. TG3 and Partners acknowledge and understand that the
Shares are being offered and sold without registration under the 1933 Act or any
state securities law based on exemptions provided under such laws, and that the
representations
17
contained in this Agreement are being relied upon by GD Sub and GDSC in
connection with those exemptions. TG3 and Partners further acknowledge and agree
that the Shares are "restricted securities" under federal securities laws and as
such may not be sold or disposed of unless they are registered under the 1933
Act and all applicable state securities laws or unless, in the opinion of
counsel acceptable to GD Sub and GDSC, exemptions from the registration
requirements of the 1933 Act and all applicable state securities laws are
available. In this regard, TG3 and Partners acknowledge that GDSC is under no
obligation to register the Shares, that the Shares will not be eligible for
resale in the public market pursuant to Rule 144 under the 1933 Act until one
year after the Closing Date, and that TG3 and Partners will bear the economic
risk of ownership of the Shares at least until that time. TG3 and Partners
consent to having appropriate legends placed on the certificates representing
the Shares relating to this restriction on transfer.
3.28 Access to Information. Each Partner has received and carefully
reviewed GDSC's Annual Report on Form 10-KSB for the year ended December 31,
1997, GDSC's Quarterly Report on Form 10-QSB for the quarter ended March 31,
1998, and the Registration Statement. Each Partner believes it or she has
received all of the information it or she considers necessary or appropriate for
deciding whether to acquire shares of GDSC Common Stock. Each Partner further
represents that he or she has had an opportunity to ask questions and receive
answers from GDSC regarding GDSC, its business and financial condition, and the
terms and conditions of the Agreement.
3.29 Sophistication. Partners, and each of them, together with their
purchaser representative, if any, have such knowledge and experience in
financial and business matters that they are capable of evaluating the merits
and risks of an investment in the Shares and have the capacity to protect their
own interests in connection with the transaction.
3.30 Accredited Investor. Ghazal and Xxxxxx either (a) have an individual
net worth, or joint net worth with his or her spouse, of in excess of $1
million, or (b) had an individual income in excess of $200,000 in each of the
two most recent years or joint income with his or her spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching the
same income level in the current year and in the next year, and therefore is an
"accredited investor" within the meaning of Rule 501 of Regulation D under the
1933 Act. Partners are the sole equity owners of TG3, and therefore TG3 is also
an "accredited investor" within the meaning of Rule 501 of Regulation D under
the 0000 Xxx.
3.31 Reliance. TG3 and Partners recognize and agree that, notwithstanding
any investigation by GD Sub, GD Sub is relying upon the representations and
warranties made by TG3 and Partners in this Agreement.
3.32 Accuracy of Representations and Warranties. None of the
representations or warranties of TG3 and Partners contains or will contain any
untrue statement of any material fact or omits or misstates a material fact
necessary to make the statements contained in this Agreement not misleading. TG3
and Partners do not know of any fact that has resulted or that, in the
reasonable judgment of TG3 or Partners will result, in any material adverse
change in TG3's business, results of operation, financial condition or prospects
that has not been set forth in this Agreement.
18
ARTICLE IV
Covenants of TG3 and Partners
4.01 Access to Properties, Books and Records. Prior to the Closing Date,
TG3 shall, at GD Sub's request, afford or cause to be afforded to the agents,
attorneys, accountants and other authorized representatives of GD Sub reasonable
access during normal business hours to all employees, properties, books and
records of TG3 and the Professional Corporation and shall permit such persons,
at GD Sub's expense, to make copies of such books and records. TG3 shall deliver
to GD Sub monthly financial statements of TG3 promptly after they become
available. GDSC and GD Sub shall treat, and shall cause all of their agents,
attorneys, accountants and other authorized representatives to treat, all
information obtained pursuant to this Section 4.01 as confidential in accordance
with Section 10.01 hereof. No investigation by GDSC or GD Sub or any of their
authorized representatives pursuant to this Section 4.01 shall affect any
representation, warranty or closing condition of any party hereto or GD Sub's
rights to indemnification pursuant to Section 9.02 hereof.
4.02 Negative Covenants. Except as otherwise permitted by this Agreement or
with the prior written consent of GD Sub, prior to the Closing Date, TG3 shall
not, in connection with the Dental Practice:
4.02-1 Incur additional debt for borrowed money (including without
limitation obligations under leases for real or personal property whether or not
required to be capitalized under generally accepted accounting principles),
incur or increase any obligation or liability (fixed, contingent or other,
including without limitation liabilities as a guarantor or otherwise with
respect to obligations of others) except in the ordinary and usual course of
business and consistent with past practices, forgive or release any debt or
claim, give any waiver of any right of material value or voluntarily suffer any
extraordinary loss;
4.02-2 Make any payment to discharge or satisfy any lien or
encumbrance or pay any obligation or liability (fixed or contingent) other than
(a) current liabilities (including the current portion of any long-term
liabilities) included in the Financial Statements and (b) current liabilities
incurred or maturing since the date of the Current Balance Sheet in the ordinary
course of business;
4.02-3 Admit any new or additional partner or declare, pay or make any
distribution of money or property to the Partners other than ordinary
distributions consistent with past practices;
4.02-4 Mortgage, pledge, otherwise encumber or subject to lien any of
its assets or properties, tangible or intangible, or commit itself to do any of
the foregoing;
4.02-5 Except in the ordinary and usual course of its business and in
each case for fair consideration, dispose of, or agree to dispose of, any of its
assets or lease or license to others, or agree so to lease or license, any of
its assets;
4.02-6 Acquire any assets which would be material to the Dental
Practice other than assets acquired in the ordinary and usual course of business
and consistent with past practices;
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4.02-7 Enter into any transaction or contract or make any commitment
to do the same, except in the ordinary and usual course of business and not
requiring the payment in any case of an amount in excess of $15,000 annually;
4.02-8 Increase the wages, salaries, compensation, pension or other
benefits payable, or to become payable by it, to any of its employees or agents,
including without limitation any bonus payments or severance or termination pay,
other than increases in wages and salaries required by employment arrangements
existing on the date hereof or otherwise in the ordinary and usual course of its
business;
4.02-9 Implement or agree to any implementation of or amendment or
supplement to any employee profit sharing, pension, bonus, commission,
incentive, retirement, medical reimbursement, life insurance, deferred
compensation or any other employee benefit plan or arrangement;
4.02-10 Change its accounting methods, policies or practices; or
4.02-11 Agree or commit to do any of the foregoing.
4.03 Affirmative Covenants. Except as otherwise permitted by this Agreement
or with the prior written consent of GD Sub, prior to the Closing Date, TG3
shall:
4.03-1 Operate the Dental Practice, including collecting receivables
and paying payables, as presently operated and only in the ordinary course and
consistent with past practices;
4.03-2 Advise GD Sub in writing of any litigation or administrative
proceeding that challenges or otherwise materially affects the transactions
contemplated hereby and of any Material Adverse Change or any event, occurrence
or circumstance which is likely to cause a Material Adverse Change;
4.03-3 When the consent of any third party to the transactions
contemplated by this Agreement is required under the terms of any contract or
agreement material to the Dental Practice to which TG3 is a party or by which
TG3 is bound, use its best efforts to obtain such consent on terms and
conditions not materially less favorable than those in effect on the date
hereof;
4.03-4 Use its best efforts to maintain all of the Tangible Personal
Property in good operating condition, reasonable wear and tear excepted,
consistent with past practices, and take all steps reasonably necessary to
maintain its intangible assets;
4.03-5 Not cancel or change any policy of insurance (including
self-insurance) or fidelity bond or any policy or bond providing substantially
the same coverage;
4.03-6 Maintain, consistent with past practices, all inventories,
spare parts, office supplies and other expendable items;
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4.03-7 Use its best efforts to retain all employees;
4.03-8 Maintain its books and records in accordance with past
practices;
4.03-9 Pay and discharge all taxes, assessments, governmental charges
and levies imposed upon it, its income or profits or upon any property belonging
to it, in all cases prior to the date on which penalties attach thereto; and
4.03-10 Comply with all laws, rules and regulations applicable to it
and to the Dental Practice.
4.04 No Negotiations With Others. Except as otherwise permitted by this
Agreement or with the prior written consent of GD Sub, TG3 and Partners shall
refrain, and shall cause TG3's employees and any investment banker, attorney,
accountant or other agent retained by either of them to refrain, from initiating
or soliciting any inquiries or making any proposals with respect to, or engaging
in negotiations concerning, or providing any confidential information or data to
or having any discussions with any person relating to, any acquisition, business
combination or purchase of all or any significant portion of the assets of, or
any equity interest in, TG3. TG3 and Partners will immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
4.05 Employees. Effective as of the close of business on the Closing Date,
TG3 shall terminate all of its employees at the Dental Practice. Except as
expressly assumed by GD Sub under this Agreement, TG3 shall be responsible for
and shall pay and discharge all obligations to such employees arising out of or
in connection with their employment prior to Closing.
ARTICLE V
Joint Covenants
GD Sub, TG3 and Partners covenant and agree that they will act in
accordance with the following:
5.01 Governmental Consents. Promptly following the execution of this
Agreement, the parties will proceed to prepare and file with the appropriate
governmental authorities any requests for approval or waiver, if any, that are
required from governmental authorities in connection with the transactions
contemplated hereby, and the parties shall diligently and expeditiously
prosecute and cooperate fully in the prosecution of such requests for approval
or waiver and all proceedings necessary to secure such approvals and waivers.
5.02 Best Efforts; No Inconsistent Action. Each party will use its best
efforts to effect the transactions contemplated by this Agreement and to fulfill
the conditions to the obligations of the other parties set forth in Article 6 or
7 of this Agreement. No party will take any action inconsistent with its
obligations under this Agreement or that could hinder or delay the consummation
of the transactions
21
contemplated by this Agreement, except that nothing in this Section 5.02 shall
limit the rights of the parties under Articles 6, 7 and 8.
ARTICLE VI
Conditions to Obligations of GD Sub
The obligations of GD Sub under Article 1 are, at its option, subject to
satisfaction, at or prior to the Closing, of each of the following conditions:
6.01 Governmental Approvals. All authorizations, consents and approvals of
all governmental agencies and authorities required to be obtained in order to
permit consummation of the transactions contemplated by this Agreement shall
have been obtained and be satisfactory in form and content to GD Sub.
6.02 Consents. TG3 shall have obtained the third-party consents required
under the terms of the Contracts and Leases, except for those Contracts and
Leases for which the necessity of obtaining consent to assignment is waived by
GD Sub as indicated on Schedule 3.25, and such consents shall not have required
any change to the terms and conditions of the Contracts and Leases other than
changes consented to in writing by GD Sub.
6.03 Representations, Warranties and Covenants.
6.03-1 All representations and warranties of TG3 and Partners made in
this Agreement, or in any certificate delivered pursuant hereto, shall in all
material respects be true and complete on and as of the Closing Date with the
same force and effect as if made on and as of that date.
6.03-2 All of the terms, covenants and conditions to be complied with
and performed by TG3 and Partners at or prior to the Closing shall in all
material respects have been complied with or performed thereby.
6.03-3 GD Sub shall have received a certificate of Partners, dated as
of the Closing Date, to the effect that the representations and warranties of
TG3 and Partners contained in this Agreement are in all material respects true
and complete on and as of the Closing Date as though made on and as of the
Closing Date and that TG3 and Partners have in all material respects complied
with or performed all terms, covenants and conditions to be complied with or
performed by him at or prior to the Closing.
6.04 Adverse Proceedings. No suit, action, claim or governmental proceeding
shall have been instituted or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered against, GDSC, GD Sub, TG3 or either Partner to restrain or prohibit,
or obtain damages in respect of, this Agreement or the transactions contemplated
by this Agreement.
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6.05 No Adverse Change. There shall not have been any Material Adverse
Change.
6.06 Management Agreement. The TG3 Management Agreement assigned by TG3 to
GD Sub pursuant to Section 1.01-6 shall have been amended and restated as a
Management Agreement with GD Sub in the form attached hereto as Exhibit C, and
the Professional Corporation shall have executed and delivered such a Management
Agreement.
6.07 Shares Acquisition Agreement. The TG3 Assignable Option Agreement
assigned by TG3 to GD Sub pursuant to Section 1.01-6 shall have been amended and
restated as a Shares Acquisition Agreement relating to the stock of the
Professional Corporation in the form attached hereto as Exhibit D, and the
Professional Corporation and Ghazal shall have executed and delivered such
Shares Acquisition Agreement.
6.08 Dentist Employment Agreements. Ghazal shall have executed and
delivered a Dentist Employment Agreement with the Professional Corporation in
the form attached hereto as Exhibit E.
6.09 Closing of Related Transactions. The transactions contemplated by the
following agreements shall have closed prior to the Closing: Asset Purchase
Agreement dated June 30, 1998 by and among GDSC, GD Sub, PDS and the
shareholders of PDS; Asset Purchase Agreement dated June 30, 1998 by and among
GDSC, GD Sub, Orange Dental Services and the partners of Orange Dental Services;
and Asset Purchase Agreement dated June 30, 1998 by and among GDSC, GD Sub and
Xxxxx Xxxxxxxx D.D.S., Inc.
6.10 Actions Satisfactory to GD Sub's Counsel. All actions, proceedings,
instruments and documents required to be carried out by this Agreement, or
incidental hereto, and all other relevant legal matters shall be reasonably
satisfactory to counsel for GD Sub.
ARTICLE VII
Conditions to Obligations of TG3
The obligations of TG3 under Article I are, at its option, subject to
satisfaction, at or prior to the Closing, of each of the following conditions:
7.01 Representations, Warranties and Covenants.
7.01-1 All representations and warranties of GDSC and GD Sub made in
this Agreement and in any certificate delivered pursuant hereto shall in all
material respects be true and complete on and as of the Closing Date with the
same force and effect as if made on and as of that date.
7.01-2 All of the terms, covenants and conditions to be complied with
and performed by GDSC and GD Sub on or prior to the Closing shall in all
material respects have been complied with or performed by GDSC and GD Sub.
23
7.01-3 TG3 shall have received a Certificate of GDSC and GD Sub, dated
as of the Closing Date, executed by the President or other authorized officer of
GDSC and GD Sub, to the effect that the representations and warranties of GDSC
and GD Sub contained in this Agreement are in all material respects true and
complete on and as of the Closing Date as though made on and as of the Closing
Date and that GDSC and GD Sub have in all material respects complied with or
performed all terms, covenants and conditions to be complied with or performed
by them at or prior to the Closing.
7.02 Adverse Proceedings. No suit, action, claim or governmental proceeding
shall have been instituted or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered against, GDSC, GD Sub, TG3 or any Partner to restrain or prohibit this
Agreement or the transactions contemplated by this Agreement.
7.03 Stock Price. The Stock Price shall not be less than $4.00 per share of
GDSC Common Stock.
ARTICLE VIII
Termination
8.01 Right of Parties to Terminate. This Agreement may be terminated:
8.01-1 by GD Sub, if any of the authorizations, consents, approvals,
filings or registrations described in Section 6.01 hereof, other than as may
pertain to those Contracts and Leases for which the necessity of obtaining
consent to assignment is waived by GD Sub as indicated on Schedule 3.25, shall
have been denied, not permitted to go into effect or obtained on terms not
reasonably satisfactory to GD Sub and all reasonable final appeals shall have
been exhausted;
8.01-2 by GD Sub, if TG3 or Partners shall have breached any of their
obligations hereunder in any material respect;
8.01-3 by TG3, if GD Sub shall have breached any of its obligations
hereunder in any material respect; or
8.01-4 by either TG3 or GD Sub, by written notice to the other party,
if the Closing shall not have occurred on or prior to March 31, 1999; provided,
however, that the right to terminate this Agreement under this Section 8.01-4
shall not be available to any party whose failure to fulfill or perform any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date.
8.02 Effect of Termination. If either GD Sub or TG3 decides to terminate
this Agreement pursuant to Section 8.01, such party shall promptly give written
notice to the other party to this Agreement of such decision. In the event of a
termination pursuant to Section 8.01, the parties hereto shall be released from
all liabilities and obligations arising under this Agreement (other than those
described in Article 10 hereof) with respect to the matters contemplated by this
Agreement, other than for damages arising from a breach of this Agreement.
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ARTICLE IX
Survival; Indemnification
9.01 Survival. All representations, warranties, covenants and agreements
made in this Agreement or in any schedule, certificate or assignment delivered
in accordance with this Agreement (collectively, the "Related Documents") shall
survive any investigation by or on behalf of any party, the execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and any termination or expiration of this Agreement for a period of three
and one-half years following the Closing Date and after such period shall be
terminated and extinguished, except insofar as the damaged party shall have
asserted in writing a claim setting forth with reasonable specificity facts and
circumstances relating thereto prior to the expiration of such period in which
event the party liable shall remain liable with respect to such claim.
9.02 Indemnification by TG3 and Partners.
9.02-1 Notwithstanding any investigation by GDSC or GD Sub, from and
after the Closing, TG3 and Partners shall indemnify, hold harmless and, to the
extent provided in Section 9.04-1, defend GDSC, GD Sub, and their respective
subsidiaries, shareholders, affiliates, officers, directors, employees, agents,
successors and assigns (collectively, "GD Sub's Indemnified Persons") from and
against, and reimburse each of GD Sub's Indemnified Persons with respect to, any
and all losses, damages, liabilities, costs and expenses, including interest
from the date of such loss to the time of payment, penalties and reasonable
attorneys' fees (collectively, "Damages") incurred by any of GD Sub's
Indemnified Persons by reason of or arising out of or in connection with:
(a) any material breach or inaccuracy of any representation or
warranty of TG3 or Partners made in this Agreement or any Related Document;
(b) any failure by TG3 or Partners to perform any covenant
required to be performed by them pursuant to this Agreement or any Related
Document after reasonable opportunity to cure; or
(c) any liability or obligation of TG3 or Partners arising out of
or in connection with the ownership, use, condition, maintenance or operation of
the Dental Practice or the Assets by TG3 on or prior to the Closing, in either
case not expressly assumed by GD Sub in accordance with the terms of this
Agreement, and specifically including any liability to pay cash to a terminated
employee on account of accrued vacation time.
9.02-2 This indemnification extends to any Damages suffered by any of
GD Sub's Indemnified Persons, whether or not a claim is made against any of GD
Sub's Indemnified Persons by any third party.
25
9.03 Indemnification by GD Sub.
9.03-1 Notwithstanding any investigation by TG3 or Partners, from and
after the Closing, GDSC and GD Sub shall indemnify, hold harmless and, to the
extent provided in Section 9.04-1, defend TG3, Partners, and their respective
partners, affiliates, officers, employees, agents, successors and assigns
(collectively, "TG3's Indemnified Persons") from and against, and reimburse each
of TG3's Indemnified Persons with respect to, any and all Damages incurred by
any of TG3's Indemnified Persons by reason of or arising out of or in connection
with:
(a) any material breach or inaccuracy of any representation or
warranty of GDSC or GD Sub made in this Agreement or any Related Document;
(b) any failure by GDSC or GD Sub to perform any covenant
required to be performed by them pursuant to this Agreement or any Related
Document after reasonable opportunity to cure; or
(c) any liability or obligation of TG3 to any third party
expressly assumed by GD Sub in accordance with the terms of this Agreement.
9.03-2 This indemnification extends to any Damages suffered by any of
TG3's Indemnified Persons whether or not a claim is made against any of TG3's
Indemnified Persons by any third party.
9.04 Indemnification Procedure.
9.04-1 Third Party Claims.
(a) Each indemnified party shall, with reasonable promptness
after obtaining knowledge thereof, provide any indemnifying party against whom a
claim for indemnification is to be made under this Article 9 with written notice
of all third party actions, suits, proceedings, claims, demands or assessments
that may be subject to the indemnification provisions of this Article 9
(collectively, "Third Party Claims"), including, in reasonable detail, the basis
for the claim, the nature of Damages and a good faith estimate of the amount of
Damages.
(b) Each indemnifying party shall have 15 days after its receipt
of the claim notice to notify the indemnified party in writing whether the
indemnifying party agrees that the claim is subject to this Article 9 and, if
so, whether the indemnifying party elects, jointly with any other indemnifying
party notified under Section 9.04-1(a), to undertake, conduct and control,
through counsel of its or their choosing (subject to the consent of the
indemnified party, such consent not to be withheld unreasonably) and at its or
their sole risk and expense, the good faith settlement or defense of the Third
Party Claim.
(c) If within 15 days after its receipt of the claim notice an
indemnifying party notifies the indemnified party that it elects to undertake
the good faith settlement or defense of the Third Party Claim, the indemnified
party shall cooperate reasonably with the indemnifying party
26
in connection therewith including, without limitation, by making available to
the indemnifying party all relevant information material to the defense of the
Third Party Claim. The indemnified party shall be entitled to participate in the
settlement or defense of the Third Party Claim through counsel chosen by the
indemnified party, at its expense, and to approve any proposed settlement that
would impose any obligation or duty on the indemnified party, which approval
may, in the sole discretion of the indemnified party, be withheld. So long as an
indemnifying party is contesting the Third Party Claim in good faith and with
reasonable diligence, the indemnified party shall not pay or settle the Third
Party Claim. Notwithstanding the foregoing, the indemnified party shall have the
right to pay or settle any Third Party Claim at any time, provided that in such
event it waives any right to indemnification therefor by the indemnifying party.
(d) If an indemnifying party does not provide notice that it
elects to undertake the good faith settlement or defense of the Third Party
Claim, or if an indemnifying party fails to contest the Third Party Claim or
undertake or approve settlement, in good faith and with reasonable diligence,
the indemnified party shall thereafter have the right to contest, settle or
compromise the Third Party Claim at its exclusive discretion, at the risk and
expense of the indemnifying party, and the indemnifying party will thereby waive
any claim, defense or argument that the indemnified party's settlement or
defense of such Third Party Claim is in any respect inadequate or unreasonable.
(e) A party's failure to give timely notice will not constitute a
defense, in part or in whole, to any claim for indemnification by such party,
except if, and only to the extent that, such failure results in any material
prejudice to the indemnifying party.
9.04-2 Non-Third Party Claims.
(a) Each indemnified party shall, with reasonable promptness,
deliver to any indemnifying party against whom a claim for indemnification is to
be made under this Article 9 written notice of all claims for indemnification
under this Article 9, other than Third Party Claims, including, in reasonable
detail, the basis for the claim, the nature of Damages and a good faith estimate
of the amount of Damages.
(b) Each indemnifying party shall have 30 days after its receipt
of the claim notice to notify the indemnified party in writing whether or not
the indemnifying party accepts liability for all or any part of the Damages
described in the claim notice. If the indemnifying party does not so notify the
indemnified party, the indemnifying party shall be deemed to accept liability
for all the Damages described in the claim notice.
(c) A party's failure to give timely notice will not constitute a
defense, in part or in whole, to any claim for indemnification by such party,
except if, and only to the extent that, such failure results in any material
prejudice to the indemnifying party.
9.05 Right of Offset. At the election of GD Sub, any liability of TG3 or
any Partner under Section 9.02 which has been established by agreement,
litigation or in accordance with the procedure set forth in Section 9.04 may be
satisfied by offsetting such liability against any Earnout Consideration
27
then due or that subsequently becomes due. For this purpose, a liability shall
not be deemed to have been established in accordance with the procedure set
forth in Section 9.04 if TG3 or the Partner has asserted under Section 9.04-1(b)
that the liability is not subject to this Article 9 and the question has not
been resolved by agreement or litigation.
9.06 Rights Not Exclusive. An indemnified party's rights to indemnification
under this Article 9 are in addition to, and not in lieu of, any other rights to
which the indemnified party may be entitled at law or in equity.
ARTICLE X
Confidentiality; Press Releases
10.01 Confidentiality.
10.01-1 No information concerning TG3 not previously disclosed to the
public or in the public domain that has been furnished to or obtained by GDSC or
GD Sub under this Agreement or in connection with the transactions contemplated
hereby shall be disclosed to any person other than in confidence to employees,
legal counsel, financial advisers or independent public accountants of GDSC or
GD Sub or used for any purpose other than as contemplated herein. If the
transactions contemplated by this Agreement are not consummated, GDSC and GD Sub
shall hold such information in confidence for a period of four years from the
date of any termination of this Agreement, and all such information that is in
writing or embodied on a diskette, tape or other tangible medium shall be
promptly returned to TG3.
10.01-2 No information concerning GDSC or GD Sub not previously
disclosed to the public or in the public domain that has been furnished to or
obtained by TG3 or Partners under this Agreement or in connection with the
transactions contemplated hereby shall be disclosed to any person other than in
confidence to the employees, legal counsel, financial advisers or independent
public accountants of TG3 or used for any purpose other than as contemplated
herein. If the transactions contemplated by this Agreement are not consummated,
TG3 and Partners shall hold such information in confidence for a period of four
years from the date of any termination of this Agreement, and all such
information that is in writing or embodied on a diskette, tape or other tangible
medium shall be promptly returned to GD Sub.
10.01-3 Notwithstanding the foregoing, such obligations of GD Sub and
of TG3 shall not apply to information
(a) that is, or becomes, publicly available from a source other
than GD Sub or TG3, as the case may be;
(b) that was known and can be shown to have been known by GD Sub
at the time of its receipt from TG3, or by TG3 at the time of its receipt from
GD Sub, as the case may be;
28
(c) that is received by GD Sub from a third party without breach
of this Agreement by GD Sub, or is received by TG3 from a third party without
breach of this Agreement by TG3, as the case may be;
(d) that is required by law to be disclosed; or
(e) that is disclosed in accordance with the written consent of
GD Sub or of TG3, as the case may be.
10.02 Press Releases. No press releases or other public announcements
concerning the transactions contemplated by this Agreement shall be made by TG3
without the prior written consent of GD Sub; provided, however, that nothing
herein shall prevent a party from supplying such information or making
statements as required by governmental authority or in order for a party to
satisfy its legal obligations (prompt notice of which shall in any such case be
given to the other party or parties).
ARTICLE XI
Other Provisions
11.01 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. No party hereto may voluntarily or involuntarily assign such
party's interest under this Agreement without the prior written consent of the
other parties.
11.02 Entire Agreement. This Agreement and the Schedules and Exhibits
referred to herein embody the entire agreement and understanding of the parties
and supersede any and all prior agreements, arrangements and understandings
relating to matters provided for herein.
11.03 Fees and Expenses. GDSC and GD Sub shall be solely responsible for
all costs and expenses incurred by them, and TG3 shall be solely responsible for
all costs and expenses incurred by TG3, in connection with the negotiation,
preparation and performance of and compliance with the terms of this Agreement.
11.04 Amendment, Waiver, etc. The provisions of this Agreement may be
amended or waived only by an instrument in writing signed by the party against
which enforcement of such amendment or waiver is sought. Any waiver of any term
or condition of this Agreement or any breach hereof shall not operate as a
waiver of any other such term, condition or breach, and no failure to enforce
any provision hereof shall operate as a waiver of such provision or of any other
provision hereof.
11.05 Headings. The headings are for convenience only and will not control
or affect the meaning or construction of the provisions of this Agreement.
29
11.06 Governing Law. The construction and performance of this Agreement
will be governed by the laws of the State of Washington (except for the choice
of law provisions thereof).
11.07 Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing; shall be
delivered personally, including by means of telecopy, or mailed by registered or
certified mail, postage prepaid and return receipt requested; shall be deemed
given on the date of personal delivery or on the date set forth on the return
receipt; and shall be delivered or mailed to the addresses or telecopy numbers
set forth on the first page of this Agreement or to such other address as any
party may from time to time direct, with copies to:
In the case of GDSC or GD Sub:
Stoel Rives LLP
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
In the case of TG3 or Partners:
Xxxxxx & Holguin
0000 Xxxxxxx Xxxx Xxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxx Xxxxxxx
11.08 Breach; Equitable Relief. The parties acknowledge that the Dental
Practice and rights of the parties described in this Agreement are unique and
that money damages alone for breach of this Agreement would be inadequate. Any
party aggrieved by a breach of the provisions hereof may bring an action at law
or suit in equity to obtain redress, including specific performance, injunctive
relief or any other available equitable remedy. Time and strict performance are
of the essence in this Agreement.
11.09 Attorneys' Fees. If suit or action is filed by any party to enforce
the provisions of this Agreement or otherwise with respect to the subject matter
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees as fixed by the trial court and, if any appeal is taken from the
decision of the trial court, reasonable attorneys' fees as fixed by the
appellate court. For purposes of this Agreement, the term "prevailing party"
shall be deemed to include a party that successfully opposes a petition for
review filed with an appellate court.
11.10 Guarantee. GDSC irrevocably and unconditionally guarantees that GD
Sub will perform each and every obligation of GD Sub under this Agreement and
waives and agrees not to assert or take advantage of any of the following to the
extent they might apply: (a) any right to require
30
TG3 or Partners to proceed against GD Sub, it being understood and agreed that
TG3 and Partners may proceed against GDSC without first proceeding against GD
Sub or any other person or entity; (b) TG3's or Partners' failure to file or
enforce any claim in any bankruptcy or insolvency proceedings against GD Sub;
(c) any presentment, demand, protest or notice of any kind to GDSC, including
without limitation, notice of the acceptance of this guarantee, or of any action
or nonaction on the part of GD Sub under this Agreement; or (d) any right to
prior notice and approval of any extension of the time for payment of any
amounts or performance of any obligations due under this Agreement or any other
modification, alteration or change of this Agreement.
11.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
GDSC: GENTLE DENTAL SERVICE CORPORATION
By: X. X. XXX XXXXXX
-------------------------------------
Title: Executive Vice President
GD SUB: GENTLE DENTAL MANAGEMENT, INC.
By: X. X. XXX XXXXXX
-------------------------------------
Title: Executive Vice President
TG3: TG3 DENTAL SERVICES
By: XXXXXXX XXXXXX
-------------------------------------
Title: President of the Managing Partner
PARTNERS: XXXXXXX XXXXXX IV
-----------------------------------------
Xxxxxxx X. Xxxxxx XX
XXXXXXX X. XXXXXX
-----------------------------------------
Xxxxxxx X. Xxxxxx, D.D.s.
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