1
Exhibit 2.1
AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
BETWEEN
EMBASSY ACQUISITION CORP.
AND
ORTHODONTIX, INC.
DATED AS OF OCTOBER 30, 1997
2
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION dated as of October
30, 1997 (the "Agreement") by and among Embassy Acquisition Corp., a Florida
corporation ("Embassy") and Orthodontix, Inc., a Florida corporation
("Orthodontix").
R E C I T A L S
The respective Boards of Directors of Embassy and Orthodontix deem it
desirable and in the best interests of their respective corporations, and of
their respective shareholders, that prior to the Closing (as defined in Section
6.1), Embassy form a wholly owned subsidiary corporation, namely, Orthodontix
Acquisition Corp., a Florida corporation ("Acquisition") and that at the
Closing, subject to, among other things, the approval of the shareholders of
Embassy and Orthodontix, Acquisition merge with and into Orthodontix; as a
result of which Orthodontix will become a wholly owned subsidiary corporation
of Embassy, and the holders of shares of capital stock of Orthodontix will, in
the aggregate, receive the consideration hereinafter set forth (collectively,
the "Merger"). Upon the terms and subject to the conditions of this Agreement,
at the Effective Date (as defined in Section 2.3 of this Agreement) in
accordance with the Florida Business Corporation Act ("BCA"), Acquisition shall
be merged with and into Orthodontix and the separate existence of Acquisition
shall thereupon cease. Orthodontix shall be the surviving corporation in the
Merger and is hereinafter sometimes referred to as the "Surviving Corporation."
As a result of the Merger, among other things, Orthodontix will become a wholly
owned subsidiary corporation of Embassy.
NOW, THEREFORE, in consideration of the terms, conditions, agreements
and covenants contained herein, and in reliance upon the representations and
warranties contained in this Agreement, the parties hereto agree as follows:
I. RECITALS; TRUE AND CORRECT
The above stated recitals are true and correct and are incorporated
into this Agreement.
II. MERGER
2.1 MERGER. In the manner and subject to the terms and
conditions set forth herein, Embassy shall cause Acquisition to merge with and
into Orthodontix, and Orthodontix shall be the surviving corporation after the
Merger and shall continue to exist as a corporation created and governed by the
laws of Florida.
2.2 NAME CHANGE. Upon the Closing of the Merger, Embassy shall
change its name to Orthodontix, Inc. and Orthodontix, Inc. shall change its
name to Orthodontix Subsidiary, Inc. (the "Name Change").
1
3
2.3 EFFECTIVE DATE. If all of the conditions precedent to the
obligations of each of the parties hereto as hereinafter set forth shall have
been satisfied or shall have been waived, the Merger shall become effective on
the date (the "Effective Date") the Articles of Merger, together with Plans of
Merger reflecting the Merger, shall be accepted for filing by the Secretary of
State of Florida.
2.4 SECURITIES OF THE CORPORATIONS. The authorized capital
stock of Orthodontix is comprised of 100,000,000 shares of Common Stock, par
value $.0001 per share (the "Orthodontix Stock"), of which 1,300,000 shares are
issued and outstanding, excluding the approximately 2,000,000 shares of
Orthodontix Stock, assuming an Embassy share value of $8.00 per share,
issuable in connection with the Practice Acquisitions (as defined in Section
2.7 of this Agreement). The authorized capital stock of Embassy is comprised
of 100,000,000 shares of Common Stock, par value $.0001 per share (the "Embassy
Stock"), of which 2,540,000 shares are issued and outstanding. In addition,
Embassy has issued and outstanding, warrants to purchase 120,000 shares of
Embassy Stock for a period of five years at any time and from time to time
commencing April 2, 1996 at a purchase price of $7.80 per share (the "Embassy
Warrants").
2.5 SHARES OF THE CONSTITUENT AND SURVIVING CORPORATIONS. The
manner and basis of converting the shares of Orthodontix Stock into shares of
Embassy Stock shall be as follows:
Consideration. At the Effective Date, by virtue of the Merger and
without any action on the part of any holder of any capital stock of either
Embassy or Orthodontix, each share of Orthodontix Stock issued and outstanding
shall be converted into the right to receive one share of Embassy Stock (the
"Exchange Ratio"). In connection with the consummation of the Practice
Acquisitions, Embassy shall issue shares of Embassy Stock as required under the
agreements regarding the Practice Acquisitions.
2.6 EFFECT OF THE MERGER. As of the Effective Date, all of the
following shall occur:
(a) The separate existence and corporate organization of
Acquisition shall cease (except insofar as it may be continued by statute), and
Orthodontix shall continue to exist as the surviving corporation, a wholly
owned subsidiary corporation of Embassy, which shall also continue to exist as
a surviving corporation.
(b) Except as otherwise specifically set forth herein,
the corporate identity, existence, purposes, powers, franchises, rights and
immunities of Orthodontix shall continue unaffected and unimpaired by the
Merger, and the corporate identity, existence, purposes, powers, franchises and
immunities of Acquisition shall be merged with and into Orthodontix as the
surviving corporation, shall be fully vested therewith.
(c) Neither the rights of creditors nor any liens upon
or security interests in the property of any of Acquisition or Orthodontix
shall be impaired by the Merger.
(d) All corporate acts, plans, policies, agreements
approvals and authorizations of the shareholders and Board of Directors of
Acquisition and of its respective officers, directors and agents, which were
valid and effective immediately prior to the Effective Date, shall be the acts,
plans,
2
4
policies, agreements, approvals and authorizations of Orthodontix and shall be
as effective and binding on Orthodontix as the same were on Acquisition.
(e) Orthodontix shall be liable for all of the
obligations and liabilities of Acquisition.
(f) The rights, privileges, goodwill, inchoate rights,
franchises and property, real, personal and mixed, and debts due on whatever
account and all other things in action belonging to Acquisition, shall be, and
they hereby are, bargained, conveyed, granted, confirmed, transferred, assigned
and set over to and vested in Orthodontix, without further act or deed.
(g) No claim pending at the Effective Date by or against
any of Acquisition or Orthodontix, or any stockholder, officer or director
thereof, shall xxxxx or be discontinued by the Merger, but may be enforced,
prosecuted, settled or compromised as if the Merger had not occurred.
(h) All rights of employees and creditors and all liens
upon the property of each of Acquisition and Orthodontix shall be preserved
unimpaired, limited in lien to the property affected by such liens at the
Effective Date, and all the debts, liabilities and duties of each of
Acquisition shall attach to Orthodontix and shall be enforceable against
Orthodontix, respectively, to the same extent as if all such debts, liabilities
and duties had been incurred or contracted by Orthodontix.
(i) The Articles of Incorporation of Embassy, as in
effect on the Effective Date, shall continue to be the Articles of
Incorporation of Embassy without change or amendment, except (i) to change the
name of Embassy to "Orthodontix, Inc."; and (ii) to authorize the issuance of
100,000,000 shares of Preferred Stock, par value $.0001 per share (the
"Preferred Stock"), with rights, preferences and designations to be determined
by the Board of Directors of Embassy until such time, if ever, as it is amended
thereafter in accordance with the provisions thereof and applicable laws. The
Articles of Incorporation of Orthodontix, as in effect on the Effective Date,
shall continue to be the Articles of Incorporation of Orthodontix without
change or amendment, except to change the name of Orthodontix to "Orthodontix
Subsidiary, Inc."
(j) The Bylaws of Embassy, as in effect on the Effective
Date, shall continue to be the Bylaws of Embassy without change or amendment
until such time, if ever, as it is amended thereafter in accordance with the
provisions thereof and applicable laws.
(k) Upon the Effective Date, the Board of Directors of
Embassy shall consist of four designees of Orthodontix, Xxxxxxx X. Xxxxxxxx
("Dresnick"), Xxxxx X. Xxxxxxx ("Xxxxxxx"), and one designee of Embassy to be
specified in the Proxy Statement hereinafter referred to, and the officers of
Embassy shall be the officers specified by Orthodontix to hold such offices, as
set forth in the Proxy Statement hereinafter defined. Subsequent to the
Effective Date, the management of Embassy shall be conducted in accordance with
that certain Agreement attached hereto as Schedule 2.6(k).
2.7 DISCLOSURE SCHEDULES. Prior to the execution of this
Agreement, (a) Orthodontix delivered to Embassy a schedule relating to
Orthodontix and the several pending acquisitions of
3
5
orthodontic practices (the "Practices") contemplated to be consummated on or
prior to the Effective Date (the "Practice Acquisitions") as well as other due
diligence information (collectively, the "Orthodontix Disclosure Schedule")
incorporated by reference hereby; and (b) Embassy delivered to Orthodontix,
Embassy's (i) Annual Report on Form 10-KSB for the fiscal year ended December
31, 1996; (ii) Quarterly Report on Form 10-QSB for the quarters ended June 30,
1997, March 31, 1997, June 30, 1996 and September 30, 1996; and (iii)
Prospectus dated April 2, 1996 (collectively, the "Embassy Disclosure Schedule"
and together with the Orthodontix Disclosure Schedule (the "Disclosure
Schedules", referred to as Exhibit "A") setting forth the matters required to
be set forth in the Disclosure Schedules as described elsewhere in this
Agreement. The Disclosure Schedules shall be deemed to be a part of this
Agreement.
2.8 PRACTICE ACQUISITIONS. On the Effective Date, the Practice
Acquisitions shall be consummated, which practices had generated, gross cash
collections, in the aggregate, no less than $15 million for the twelve month
period ended December 31, 1996 (unaudited). Pursuant to the terms of the
various agreements regarding the Practice Acquisitions, in connection with the
Practice Acquisitions, at the Closing, Embassy shall (i) provide to Orthodontix
sufficient cash (the "Cash Consideration") for the purpose of consummating the
Practice Acquisitions; and (ii) issue that aggregate number of shares of
Embassy Stock equal to the quotient of (x) the difference between the aggregate
purchase price of the Practices less the Cash Consideration divided by (y) the
Share Value. The term Share Value shall mean the average of the closing bid
and ask price, as reported on the OTC Electronic Bulletin Board or similar
quotation board of Embassy Stock for the 15 trading days immediately preceding
the date of the Closing.
III. CONDUCT OF BUSINESS PENDING CLOSING; STOCKHOLDER APPROVAL
Orthodontix and Embassy covenant that between the date hereof and the
date of the Closing:
3.1 ACCESS TO ORTHODONTIX. Orthodontix shall (a) give to
Embassy and to Embassy's counsel, accountants and other representatives
reasonable access, during normal business hours, throughout the period prior to
the Closing Date (as defined in Section 6.1), to all of the books, contracts,
commitments and other records of Orthodontix and shall furnish Embassy during
such period with all information concerning Orthodontix that Embassy may
reasonably request; and (b) afford to Embassy and to Embassy's representatives,
agents, employees and independent contractors reasonable access, during normal
business hours, to the properties of Orthodontix, in order to conduct
inspections at Embassy's expense to determine that Orthodontix is operating in
compliance with all applicable federal, state, local and foreign statutes,
rules and regulations, and all material building, fire and zoning laws or
regulations and that the assets of Orthodontix, including any assets to be
acquired in connection with the Practice Acquisitions, are substantially in the
condition and of the capacities represented and warranted in this Agreement;
provided, however, that in every instance described in (a) and (b), Embassy
shall make arrangements with Orthodontix reasonably in advance and shall use
its best efforts to avoid interruption and to minimize interference with the
normal business and operations of Orthodontix. Any such investigation or
inspection by Embassy shall not be deemed a waiver of, or otherwise limit, the
representations, warranties or covenants of Orthodontix contained herein.
4
6
3.2 CONDUCT OF BUSINESS. During the period from the date hereof
to the Closing Date, Orthodontix shall and shall use reasonable efforts, to the
extent such efforts are within Orthodontix s control, to cause the practices to
be acquired in connection with the Practice Acquisitions (the "Practices") to
be operated in the usual and ordinary course of business and in material
compliance with the terms of this Agreement. Without limiting the generality
of the foregoing:
(a) Orthodontix shall and shall use reasonable efforts,
to the extent such efforts are within Orthodontix s control, to cause the
Practices to use reasonable efforts consistent with past practices to preserve
the respective businesses and organizations of Orthodontix and the Practices,
respectively, including using reasonable efforts to cause the Practice
Acquisitions to close, so as to (i) keep available the services of their
present employees and agents; (ii) complete or maintain all of the Orthodontix
Contracts (as hereinafter defined) in full force and effect in accordance with
their existing terms, materially unimpaired by litigation; (iii) maintain the
integrity of all confidential information; (iv) maintain in full force and
effect the existing insurance policies (or policies providing substantially the
same coverage, copies of which shall be made available to Embassy) insuring the
business and properties of Orthodontix and the Practices, respectively; and (v)
preserve the goodwill of, and business and contractual relationships with,
suppliers, customers and others having business relationships with Orthodontix
and the Practices respectively; except for such changes which, in the
aggregate, would not have a material adverse effect on the business, prospects
or financial condition of Orthodontix and the Practices, respectively, taken as
a whole; and
(b) Orthodontix shall not and shall use reasonable
efforts, to the extent such efforts are within Orthodontix s control, to cause
the Practices not to (i) sell or transfer any of their material assets or
property except (A) as set forth in the Orthodontix Disclosure Schedule, or (B)
in the usual and ordinary course of business; or, (ii) except for cash applied
in payment of liabilities or credits given in the usual and ordinary course of
business, make any distribution, whether by dividend or otherwise, to any of
its shareholders or employees except for (A) compensation to employees in the
usual and ordinary course of business; (B) payments on the Orthodontix
Indebtedness (as hereinafter defined). Without limiting the generality of the
foregoing, Orthodontix shall: (i) comply in all material respects with all laws
applicable to it; and (ii) except as provided above or otherwise in this
Agreement, not declare any dividend or other distribution, redeem or otherwise
acquire any shares of its capital stock or other securities, sell or issue any
shares of its capital stock or other securities or agree to do any of the
foregoing.
3.3 EXCLUSIVITY TO EMBASSY. Neither Orthodontix nor its
respective officers, directors, representatives or agents, as appropriate, from
the date hereof until the Closing or the earlier termination of this Agreement,
shall solicit any inquiries, proposals or offers to purchase the business of
Orthodontix or the shares of capital stock of Orthodontix, from any person
other than Embassy. Any person inquiring as to the availability of the
business or shares of capital stock of Orthodontix or making an offer therefor
shall be told that Orthodontix is bound by the provisions of this Agreement.
Orthodontix as well as its officers, directors, representatives or agents
further agree to advise Embassy promptly of any such inquiry or offer.
3.4 ACCESS TO EMBASSY. Embassy shall (a) give to Orthodontix
and to Orthodontix's counsel, accountants and other representatives reasonable
access, during normal business hours,
5
7
throughout the period prior to the Closing Date, to all of the books,
contracts, commitments and other records of Embassy and shall furnish
Orthodontix during such period with all information concerning Embassy that
Orthodontix may reasonably request; and (b) afford to Orthodontix and to
Orthodontix's representatives, agents, employees and independent contractors
reasonable access, during normal business hours, to the properties of Embassy
in order to conduct inspections at Orthodontix's expense to determine that
Embassy is operating in compliance with all applicable federal, state, local
and foreign statutes, rules and regulations, and all material building, fire
and zoning laws or regulations and that the assets of Embassy are substantially
in the condition and of the capacities represented and warranted in this
Agreement; provided, however, that in every instance described in (a) and (b),
Orthodontix shall make arrangements with Embassy reasonably in advance and
shall use its best efforts to avoid interruption and to minimize interference
with the normal business and operations of Embassy. Any such investigation or
inspection by Orthodontix shall not be deemed a waiver of, or otherwise limit,
the representations, warranties or covenants of Embassy contained herein.
3.5 CONDUCT OF BUSINESS. During the period from the date hereof
to the Closing Date, the business of Embassy shall be operated by Embassy in
the usual and ordinary course of such business and in material compliance with
the terms of this Agreement. Without limiting the generality of the foregoing:
(a) Embassy shall (i) comply in all material respects
with all laws applicable to it; (ii) not declare any dividend or other
distribution, redeem or otherwise acquire any shares of its capital stock or
other securities, sell or issue any shares of its capital stock or other
securities other than with respect to the Embassy Warrants, or agree to do any
of the foregoing; (iii) not make any payments to any of its employees other
than reimbursement of accountable expenses in the ordinary course of business
in accordance with past practices; (iv) not make any payments, loans or other
distribution to any officer, director, employee or agent or prepay any
obligations due to any of the foregoing; and (v) not expend nor incur any
liabilities or indebtedness, direct or indirect, or enter into any agreements
or commitments with respect to same, aggregating more than $30,000 during the
period between the date hereof and the Closing Date exclusive of (i) costs and
expenses relating to the consummation of the transactions contemplated by this
Agreement; (ii) any understandings relating to funding the purchase of shares
of Embassy Stock offered for redemption to Embassy by its non-affiliated
shareholders in the manner contemplated by the Proxy Statement; and (iii)
liabilities based on applications for directors' and officers' liability
insurance; and
(b) Embassy shall timely file all reports required to be
filed by it with the Securities and Exchange Commission (the "SEC").
3.6 EXCLUSIVITY TO ORTHODONTIX. Embassy and its officers,
directors, representatives or agents, as appropriate, shall not, from the date
hereof until the Closing or the earlier termination of this Agreement, solicit
any inquiries, proposals or offers to purchase the business of Embassy or the
shares of capital stock of Embassy from any person other than Orthodontix. Any
person inquiring as to the availability of the business or shares of capital
stock of Embassy or making an offer therefor shall be told that Embassy is
bound by the provisions of this Agreement. Each of Embassy and its
6
8
officers, directors, representatives or agents further agree to advise
Orthodontix promptly of any such inquiry or offer.
3.7 STOCKHOLDER APPROVAL.
(a) As promptly as reasonably practicable following the
date of this Agreement, Embassy shall take all action reasonably necessary in
accordance with the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the laws of the State of Florida and its Articles of Incorporation and
Bylaws to call, give notice of and convene a meeting (the "Meeting") of its
shareholders to consider and vote upon the approval and adoption of (i) the
Merger; (ii) the amendment to Embassy's Articles of Incorporation effectuating
the Name Change and the authorization to issue the Preferred Stock; (iii) the
1997 Embassy Acquisition Corp. Stock Option Plan (the "Stock Option Plan"); and
(iv) such other matters as shall properly come before the Meeting in connection
with this Agreement. The approval and adoption of this Agreement and the
Merger by the Board of Directors and the shareholders of Orthodontix in
accordance with the laws of the State of Florida, Articles of Incorporation and
Bylaws and the receipt of the approvals and consents referred to in Section 7.9
is a condition precedent to the undertaking and obligation of Embassy to mail
its definitive Proxy Statement (as hereinafter defined) subject to, among other
things, approval by the shareholders of Embassy to its shareholders and to hold
the Meeting. The Board of Directors of Embassy shall unanimously recommend
that Embassy's shareholders vote to approve and adopt the Merger, this
Agreement and any other matters to be submitted to Embassy's shareholders in
connection therewith. Embassy shall, subject as aforesaid, use its best
efforts to solicit and secure from shareholders of Embassy such approval and
adoption.
(b) Certain shareholders of Embassy, as evidenced by
their signature on the signature page of this Agreement, agree that if a
majority of the non-affiliated shareholders of Embassy approve and adopt the
Merger and this Agreement, they will each vote all of their respective shares
of Embassy Stock for the approval and adoption of the Merger and this
Agreement.
(c) As promptly as reasonably practicable following the
date of this Agreement, Embassy shall prepare and file with the SEC under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated by the SEC thereunder: a registration statement on Form
S-4 (or other form of registration statement as agreed by the parties) covering
(i) all shares of Embassy Stock issuable as a consequence of the Merger,
including the shares issuable in connection with the Practice Acquisitions (the
"Initial Registration Statement"). Prior to such filing, Orthodontix shall
supply to Embassy, for inclusion in the Initial Registration Statement, the
Financial Statements (as hereinafter defined). Concurrent with the filing of
the Initial Registration Statement, Embassy shall also prepare and file with
the SEC under the Securities Act and the rules and regulations promulgated by
the SEC thereunder, a preliminary proxy statement (the "Proxy Statement"; the
Proxy Statement and the Initial Registration Statement are collectively
referred to as the "Registration Statement") pertaining to the Merger.
Orthodontix shall cooperate fully with Embassy in the preparation and filing of
the Registration Statement and any amendments and supplements thereto,
including, without limitation, the furnishing to Embassy of such information
regarding Orthodontix as shall be required by each of the Securities Act and
the Exchange Act and the respective rules and regulations promulgated by the
SEC thereunder. The Registration Statement
7
9
shall not be filed, and no amendment or supplement thereto shall be made by
Embassy, without prior consultation with and the consent of Orthodontix, which
consent shall not be unreasonably withheld or delayed. As promptly as
reasonably practicable following the date of this Agreement, Embassy shall
cause to be mailed a definitive Proxy Statement to its shareholders entitled to
vote at the Meeting promptly following completion of any review by, or in the
absence of such review, the termination of any applicable waiting period of,
the SEC and the SEC's declaration of effectiveness of the Registration
Statement under the Securities Act.
(d) As promptly as practicable but in no event later
than the Effective Date, Embassy shall prepare and file with the NASDAQ Small
Cap Market ("Nasdaq"), an application to have the Embassy Stock listed for
trading on Nasdaq.
(e) As promptly as practicable, Embassy shall prepare
and file with the SEC under the Securities Act and the rules and regulations
promulgated by the SEC thereunder, a Registration Statement on Form S-8
covering the Embassy Stock issuable upon the exercise of certain stock options
to be granted under the Stock Option Plan (the "S-8 Registration Statement").
3.8 FORMATION AND ACTS OF ACQUISITION. No later than the date
of the Meeting, Embassy shall cause Acquisition to be incorporated under the
laws of Florida. Prior to the Closing Date, Embassy shall cause Acquisition to
engage in no activity other than activity in anticipation of the Merger. At
the Closing, following satisfaction of the conditions precedent set forth in
this Agreement, Embassy shall cause Acquisition to execute Articles of Merger
referred to in Section 2.1.
IV. REPRESENTATIONS AND WARRANTIES OF ORTHODONTIX
Orthodontix represents and warrants to Embassy as follows, with the
knowledge and understanding that Embassy is relying materially upon such
representations and warranties:
4.1 ORGANIZATION AND STANDING. Orthodontix is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Florida. Orthodontix has all requisite corporate power to carry on
its business as it is now being conducted and is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where
such qualification is necessary under applicable law, except where the failure
to qualify (individually or in the aggregate) does not have any material
adverse effect on the assets, business or financial condition of Orthodontix,
and all states in which each is qualified to do business as of the date hereof,
are listed in the Orthodontix Disclosure Schedule. The copies of the Articles
of Incorporation and Bylaws of Orthodontix, as amended to date, delivered to
Embassy, are true and complete copies of these documents as now in effect.
Except as otherwise set forth in the Orthodontix Disclosure Schedule,
Orthodontix does not own any interest in any other corporation, business trust
or similar entity. The minute book of Orthodontix contains accurate records of
all meetings of its respective Board of Directors and shareholders since its
incorporation.
4.2 CAPITALIZATION. The authorized capital stock of
Orthodontix, the number of shares of capital stock which are issued and
outstanding and par value thereof are as set forth in the
8
10
Orthodontix Disclosure Schedule. All of such shares of capital stock are duly
authorized, validly issued and outstanding, fully paid and nonassessable, and
were not issued in violation of the preemptive rights of any person. There are
no subscriptions, options, warrants, rights or calls or other commitments or
agreements to which Orthodontix is a party or by which it is bound, calling for
any issuance, transfer, sale or other disposition of any class of securities of
Orthodontix. There are no outstanding securities convertible or exchangeable,
actually or contingently, into shares of common stock or any other securities
of Orthodontix. Orthodontix has no subsidiaries.
4.3 AUTHORITY. This Agreement constitutes, and all other
agreements contemplated hereby will constitute, when executed and delivered by
Orthodontix in accordance therewith (and assuming due execution and delivery by
the other parties hereto), the valid and binding obligation of Orthodontix,
enforceable in accordance with their respective terms, subject to general
principles of equity and bankruptcy or other laws relating to or affecting the
rights of creditors generally.
4.4 PROPERTIES. Except as set forth on the Orthodontix
Disclosure Schedule, Orthodontix has good title to all of the assets and
properties which it purports to own as reflected on the balance sheet included
in the Financial Statements (as hereinafter defined), or thereafter acquired.
Orthodontix has a valid leasehold interest in all material property of which it
is the lessee and each such lease is valid, binding and enforceable against
Orthodontix, as the case may be, and, to the knowledge of Orthodontix, the
other parties thereto in accordance with its terms. Neither Orthodontix nor
the other parties thereto are in material default in the performance of any
material provisions thereunder. Neither the whole nor any material portion of
the assets of Orthodontix is subject to any governmental decree or order to be
sold or is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, nor, to the
knowledge of Orthodontix, any such condemnation, expropriation or taking been
proposed. None of the assets of Orthodontix is subject to any restriction
which would prevent continuation of the use currently made thereof or
materially adversely affect the value thereof.
4.5 CONTRACTS LISTED; NO DEFAULT. All contracts, agreements,
licenses, leases, easements, permits, rights of way, commitments, and
understandings, written or oral, connected with or relating in any respect to
present or proposed future operations of Orthodontix (except employment or
other agreements terminable at will and other agreements which, in the
aggregate, are not material to the business, properties or prospects of
Orthodontix and except governmental licenses, permits, authorizations,
approvals and other matters referred to in Section 4.17), which would be
required to be listed as exhibits to a Registration Statement on Form S-4 or an
Annual Report on Form 10-K if Orthodontix were subject to the reporting
requirements of the Exchange Act (individually, the "Orthodontix Contract" and
collectively, the "Orthodontix Contracts"), are listed and described in the
Orthodontix Disclosure Schedule. Orthodontix is the holder of, or party to,
all of the Orthodontix Contracts. To the knowledge of Orthodontix, the
Orthodontix Contracts are valid, binding and enforceable by the signatory
thereto against the other parties thereto in accordance with their terms.
Neither Orthodontix nor any signatory thereto is in default or breach of any
material provision of the Orthodontix Contracts. Orthodontix's operation of
its business has been, is, and will, between the date hereof and the Closing
Date, continue to be, consistent with the material terms and conditions of the
Orthodontix Contracts. Attached hereto as Schedule 4.5 is a list of those
9
11
Orthodontix Contracts regarding the Practice Acquisitions which contain
termination dates earlier than the Termination Date (as defined in Section 10.1
of this Agreement).
4.6 LITIGATION. Except as disclosed in the Orthodontix
Disclosure Schedule, there is no claim, action, proceeding or investigation
pending or, to the knowledge of Orthodontix, threatened against or affecting
Orthodontix before or by any court, arbitrator or governmental agency or
authority which, in the reasonable judgment of Orthodontix, could have any
materially adverse effect on Orthodontix. There are no decrees, injunctions or
orders of any court, governmental department, agency or arbitration outstanding
against Orthodontix.
4.7 TAXES. For purposes of this Agreement, (A) "Tax" (and, with
correlative meaning, "Taxes") shall mean any federal, state, local or foreign
income, alternative or add-on minimum, business, employment, franchise,
occupancy, payroll, property, sales, transfer, use, value added, withholding or
other tax, levy, impost, fee, imposition, assessment or similar charge,
together with any related addition to tax, interest, penalty or fine thereon;
and (B) "Returns" shall mean all returns (including, without limitation,
information returns and other material information), reports and forms relating
to Taxes or to any benefit plans.
Orthodontix has duly filed all Returns required by any law or
regulation to be filed by it, except for extensions duly obtained. All such
Returns were, when filed, and to the knowledge of Orthodontix are, accurate and
complete in all material respects and were prepared in conformity with
applicable laws and regulations in all material respects. Orthodontix has paid
or will pay in full or has adequately reserved against all Taxes otherwise
assessed against it through the Closing Date, and the assessment of any
material amount of additional Taxes in excess of those paid and reported is not
reasonably expected.
Orthodontix is not a party to any pending action or proceeding by any
governmental authority for the assessment of any Tax, and no claim for
assessment or collection of any Tax has been asserted against Orthodontix that
has not been paid. There are no Tax liens upon the assets (other than the lien
of property taxes not yet due and payable) of Orthodontix. There is no valid
basis, to the knowledge of Orthodontix, except as set forth in the Orthodontix
Disclosure Schedule, for any assessment, deficiency, notice, 30-day letter or
similar intention to assess any Tax to be issued to Orthodontix by any
governmental authority.
4.8 COMPLIANCE WITH LAWS AND REGULATIONS. To its knowledge,
Orthodontix is in compliance, in all material respects, with all laws, rules,
regulations, orders and requirements (federal, state and local) applicable to
it in all jurisdictions where the business of Orthodontix is currently
conducted or to which Orthodontix is currently subject which has a material
impact on Orthodontix, including, without limitation, all applicable civil
rights and equal opportunity employment laws and regulations, and all state and
federal antitrust and fair trade practice laws and the Federal Occupational
Health and Safety Act. Orthodontix knows of no assertion by any party that
Orthodontix is in violation of any such laws, rules, regulations, orders,
restrictions or requirements with respect to its current operations, and no
notice in that regard has been received by Orthodontix. To the knowledge of
Orthodontix, there is not presently pending any proceeding, hearing or
investigation with respect to the adoption of amendments or modifications to
existing laws, rules,
10
12
regulations, orders, restrictions or requirements which, if adopted, would
materially adversely affect the current operations of Orthodontix.
4.9 COMPLIANCE WITH LAWS.
(a) To its knowledge, the business, operations, property
and assets of Orthodontix and the Practices (and, to the knowledge of
Orthodontix, the business of any sub-tenant or licensee which is occupying or
has occupied any space on any premises of Orthodontix and the activities of
which could result in any material adverse liability to Orthodontix) (i)
conform with and are in compliance in all material respects with all, and are
not in material violation of any applicable federal, state and local laws,
rules and regulations, including, but not limited to, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended
(including the 1986 Amendments thereto and the Superfund Amendments and
Reauthorization Act) ("CERCLA"), and the Resource Conservation and Recovery Act
("RCRA"), as well as any other laws, rules or regulations relating to tax,
product liability, controlled substances, product registration, environmental
protection, hazardous or toxic waste, employment, or occupational safety
matters; and (ii) have been conducted and operated in a manner such that, to
Orthodontix's knowledge, Orthodontix has foreseeable potential liabilities for
environmental clean-up under CERCLA, RCRA or under any other law, rule,
regulation or common or civil law doctrine.
(b) To its knowledge, no predecessor-in-title to any
real property now or previously owned or operated by Orthodontix, nor any
predecessor operator thereof conducted its business or operated such property
in violation of CERCLA and RCRA or any other applicable federal, state and
local laws, rules and regulations relating to environmental protection or
hazardous or toxic waste matters.
(c) Except as disclosed in the Orthodontix Disclosure
Schedule, no suit, action, claim, proceeding, nor investigation, review or
inquiry by any court or federal, state, county, municipal or local governmental
department, commission, board, bureau, agency or instrumentality, including,
without limitation, any state or local health department (all of the foregoing
collectively referred to as "Governmental Entity") concerning any such possible
violations by Orthodontix is pending or, to the knowledge of Orthodontix,
threatened, including, but not limited to, matters relating to diagnostic tests
and products and product liability, environmental protection, hazardous or
toxic waste, controlled substances, employment, occupational safety or tax
matters. Orthodontix does not know of any reasonable basis or ground for any
such suit, claim, investigation, inquiry or proceeding. For purposes of this
Section 4.9, the term "inquiry" includes, without limitation, all pending
regulatory issues (whether before federal, state, local or inter-governmental
regulatory authorities) concerning any regulated product, including, without
limitation, any diagnostic drugs and products.
4.10 Reserved.
4.11 CONDITION OF ASSETS. The equipment, fixtures and other
personal property of Orthodontix, including the assets to be acquired in
connection with the Practice Acquisitions, taken
11
13
as a whole, is in good operating condition and repair (ordinary wear and tear
excepted) for the conduct of the business of Orthodontix as is contemplated to
be conducted.
4.12 NO BREACHES. To its knowledge, the making and performance
of this Agreement and the other agreements contemplated hereby by Orthodontix
will not (i) conflict with or violate the Articles of Incorporation or the
Bylaws of Orthodontix; (ii) violate any material laws, ordinances, rules or
regulations, or any order, writ, injunction or decree to which Orthodontix is a
party or by which Orthodontix or any of its respective assets, businesses, or
operations may be bound or affected; or (iii) result in any breach or
termination of, or constitute a default under, or constitute an event which,
with notice or lapse of time, or both, would become a default under, or result
in the creation of any encumbrance upon any asset of Orthodontix under, or
create any rights of termination, cancellation or acceleration in any person
under, any Orthodontix Contract.
4.13 EMPLOYEES. Except as set forth in the Orthodontix
Disclosure Schedule, none of the employees of Orthodontix is represented by any
labor union or collective bargaining unit and, to the knowledge of Orthodontix,
no discussions are taking place with respect to such representation.
4.14 FINANCIAL STATEMENTS. To its knowledge, the Orthodontix
Disclosure Schedule contains, as to Orthodontix, an unaudited balance sheet as
of December 31, 1996 and related statements of operations, statements of cash
flows and statements of shareholders' equity of Orthodontix for the one-year
period ended December 31, 1996 and an unaudited balance sheet as of September
30, 1997 and related statements of operations, statements of cash flows and
statement of shareholders' equity for the nine-month period ended September 30,
1997 (collectively, the "Financial Statements"). The Financial Statements
present fairly, in all respects, the consolidated financial position and
results of operations of Orthodontix as of the dates and periods indicated,
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"). The Financial Statements, when submitted to
Embassy for inclusion in the Registration Statement, will have been prepared in
accordance with Regulation S-X of the SEC and, in particular, Rules 1-02 and
3-05 promulgated thereunder. Without limiting the generality of the foregoing,
(i) there is no basis for any assertion against Orthodontix as of the date of
the Financial Statements of any debt, liability or obligation of any nature not
fully reflected or reserved against in the Financial Statements; and (ii) there
are no assets of Orthodontix as of the date of the Financial Statements, the
value of which is overstated in the Financial Statements. Except as disclosed
in the Financial Statements, Orthodontix has no known contingent liabilities
(including liabilities for Taxes), forward or long-term commitments or
unrealized or anticipated losses from unfavorable commitments other than in the
ordinary course of business. Orthodontix is not a party to any contract or
agreement for the forward purchase or sale of any foreign currency that is
material to Orthodontix taken as a whole.
4.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in the Orthodontix Disclosure Schedule, since December 31, 1996, there has not
been:
(a) any material adverse change in the financial
condition, properties, assets, liabilities or business of Orthodontix;
12
14
(b) any material damage, destruction or loss of any
material properties of Orthodontix, whether or not covered by insurance;
(c) any material change in the manner in which the
business of Orthodontix has been conducted;
(d) any material change in the treatment and protection
of trade secrets or other confidential information of Orthodontix;
(e) any material change in the business or contractual
relationship of Orthodontix with any customer or supplier which might
reasonably be expected to materially and adversely affect the business or
prospects of Orthodontix;
(f) any agreement by Orthodontix, whether written or
oral, to do any of the foregoing; and
(g) any occurrence not included in paragraphs (a)
through (f) of this Section 4.16 which has resulted, or which Orthodontix has
reason to believe, in its reasonable judgment, might be expected to result, in
a material adverse change in the business or prospects of Orthodontix.
4.16 GOVERNMENTAL LICENSES, PERMITS, ETC. To its knowledge,
Orthodontix and the Practices each have all governmental licenses, permits,
authorizations and approvals necessary for the conduct of its business as
currently conducted ("Licenses and Permits"). The Orthodontix Disclosure
Schedule includes a list of all Licenses and Permits. All Licenses and Permits
are in full force and effect, and no proceedings for the suspension or
cancellation of any thereof is pending or threatened.
4.17 EMPLOYEE AGREEMENTS.
(a) For purposes of this Agreement, the following
definitions apply:
(1) "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended, and any regulations promulgated
thereunder.
(2) "Multi-employer Plan" means a plan, as
defined in ERISA Section 3(37), to which Orthodontix contributes or is required
to contribute.
(3) "Employee Plan" means any pension,
retirement, profit sharing, deferred compensation, vacation, bonus, incentive,
medical, vision, dental, disability, life insurance or any other employee
benefit plan as defined in Section 3(3) of ERISA other than a Multi-employer
Plan to which Orthodontix contributes, sponsors, maintains or otherwise is
bound to with regard to any benefits on behalf of the employees of Orthodontix.
(4) "Employee Pension Plan" means any Employee
Plan for the provision of retirement income to employees or which results in
the deferral of income by employees extending to the termination of covered
employment or beyond as defined in Section 3(2) of ERISA.
13
15
(5) "Employee Welfare Plan" means any Employee
Plan other than an Employee Pension Plan.
(6) "Compensation Arrangement" means any plan
or compensation arrangement other than an Employee Plan, whether written or
unwritten, which provides to employees of Orthodontix, former employees,
officers, directors or shareholders of Orthodontix any compensation or other
benefits, whether deferred or not, in excess of base salary or wages,
including, but not limited to, any bonus or incentive plan, stock rights plan,
deferred compensation arrangement, life insurance, stock purchase plan,
severance pay plan and any other employee fringe benefit plan.
(b) The Orthodontix Disclosure Schedule hereto lists,
all (1) employment agreements and collective bargaining agreements to which
Orthodontix is a party; (2) Compensation Arrangements of Orthodontix; (3)
Employee Welfare Plans; (4) Employee Pension Plans; and (5) consulting
agreements under which Orthodontix has or may have any monetary obligations to
employees or consultants of Orthodontix or their beneficiaries or legal
representatives or under which any such persons may have any rights.
Orthodontix has previously made available to Embassy true and complete copies
of all of the foregoing employment contracts, collective bargaining agreements,
Employee Plans and Compensation Arrangements, including descriptions of any
unwritten contracts, agreements, Compensation Arrangements or Employee Plans,
as amended to date. In addition, with respect to any Employee Plan which
continues after the Closing Date, Orthodontix has previously delivered or made
available to Embassy (1) any related trust agreements, master trust agreements,
annuity contracts or insurance contracts; (2) certified copies of all Board of
Directors' resolutions adopting such plans and trust documents and amendments
thereto; (3) current investment management agreements; (4) custodial
agreements; (5) fiduciary liability insurance policies; (6) indemnification
agreements; (7) the most recent determination letter (and underlying
application thereof and correspondence and supplemental material related
thereto) issued by the Internal Revenue Service with respect to the
qualification of each Employee Plan under the provisions of Section 401(a) of
the Code; (8) copies of all "advisory opinion letters," "private letter
rulings," "no action letters," and any similar correspondence (and the
underlying applications therefor and correspondence and supplemental material
related thereto) that was issued by any governmental or quasi-governmental
agency with respect to the last plan year; (9) Annual Reports (Form 5500
Series) and Schedules A and B thereto for the last plan year; (10) all
actuarial reports prepared for the last plan year; (11) all certified Financial
Statements for the last plan year; and (12) all current Summary Plan
Descriptions, Summaries of Material Modifications and Summary Annual Reports.
All documents delivered by Orthodontix to Embassy as photocopies faithfully
reproduce the originals thereof, such originals are authentic and were, to the
extent execution was required, duly executed.
(c) Except as otherwise disclosed in the Orthodontix
Disclosure Schedule:
(1) It is not a party to and has, in effect or
to become effective after the date of this Agreement, any bonus, cash or
deferred compensation, severance, medical, health or hospitalization, pension,
profit sharing or thrift, retirement, stock option, employee stock ownership,
life or group insurance, death benefit, welfare, incentive, vacation, sick
leave, cafeteria, so-called "golden parachute" payment, disability or trust
agreement or arrangement.
14
16
4.18 BROKERS. Orthodontix has not made any agreement or taken
any action with any person or taken any action which would cause any person to
be entitled to any agent's, broker's or finder's fee or commission in
connection with the transactions contemplated by this Agreement.
4.19 BUSINESS LOCATIONS. Orthodontix does not nor shall it in
connection with the Practice Acquisitions own or lease any real or personal
property in any state except as set forth on the Orthodontix Disclosure
Schedule. Orthodontix does not have a place of business (including, without
limitation, Orthodontic's executive offices or place where Orthodontic's books
and records are kept) except as otherwise set forth on the Orthodontix
Disclosure Schedule.
4.20 INTELLECTUAL PROPERTY. The Orthodontix Disclosure Schedule
lists all of the Intellectual Property (as hereinafter defined) used by
Orthodontix which constitutes a material patent, trade name, trademark, service
xxxx or application for any of the foregoing. "Intellectual Property" means
all of Orthodontix's right, title and interest in and to all patents, trade
names, assumed names, trademarks, service marks, and proprietary names,
copyrights (including any registration and pending applications for any such
registration for any of them), together with all the goodwill relating thereto
and all other intellectual property of Orthodontix. Other than as disclosed in
the Orthodontix Disclosure Schedule, Orthodontix does not have any licenses
granted by or to it or other agreements to which it is a party, relating in
whole or in part to any Intellectual Property, whether owned by Orthodontix or
otherwise. All of the patents, trademark registrations and copyrights listed
in the Orthodontix Disclosure Schedule that are owned by Orthodontix are valid
and in full force and effect. To the knowledge of Orthodontix, it is not
infringing upon, or otherwise violating, the rights of any third party with
respect to any Intellectual Property. No proceedings have been instituted
against or claims received by Orthodontix, nor to its knowledge are any
proceedings threatened alleging any such violation, nor does Orthodontix know
of any valid basis for any such proceeding or claim. To the knowledge of
Orthodontix, there is no infringement or other adverse claims against any of
the Intellectual Property owned or used by Orthodontix. To the knowledge of
Orthodontix, its use of software does not violate or otherwise infringe the
rights of any third party.
4.21 WARRANTIES. The Orthodontix Disclosure Schedule sets forth
a true and complete list of the forms of all express warranties and guaranties
made by Orthodontix to third parties with respect to any services rendered by
Orthodontix.
4.22 SUPPLIERS. Except as set forth in the Orthodontix
Disclosure Schedule, Orthodontix knows and has no reason to believe that,
either as a result of the transactions contemplated hereby or for any other
reason (exclusive of expiration of a contract upon the passage of time), any
present material supplier of Orthodontix or the Practices will not continue to
conduct business with Orthodontix or the Practices, as the case may be as
applicable, after the Closing Date in substantially the same manner as it has
conducted business prior thereto.
4.23 ACCOUNTS RECEIVABLE. The accounts receivable reflected on
the balance sheets included in the Financial Statements, or thereafter acquired
by Orthodontix, consists, in the aggregate in all material respects, of items
which are collectible in the ordinary and usual course of business.
15
17
4.24 GOVERNMENTAL APPROVALS. To its knowledge, other than as set
forth herein, no authorization, license, permit, franchise, approval, order or
consent of, and no registration, declaration or filing by Orthodontix with, any
governmental authority, federal, state or local, is required in connection with
Orthodontix's execution, delivery and performance of this Agreement.
4.25 NO OMISSIONS OR UNTRUE STATEMENTS. None of the information
relating to Orthodontix supplied or to be supplied in writing by it
specifically for inclusion in the Registration Statement, at the respective
times that the Registration Statement becomes effective (or any registration
statement included therein), the Proxy Statement is first mailed to Embassy's
shareholders and the meeting of Embassy's shareholders takes place, as the case
may be, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Embassy shall give
notice to Orthodontix in advance of the dates of such effectiveness, mailing
and meeting sufficient to permit Orthodontix to fulfill its obligations under
the second sentence of this Section.
4.26 ORTHODONTIX DISCLOSURE SCHEDULE COMPLETE. Orthodontix
shall promptly supplement the Orthodontix Disclosure Schedule if events occur
prior to the Closing Date that would have been required to be disclosed had
they existed at the time of executing this Agreement. The Orthodontix
Disclosure Schedule, as supplemented prior to the Closing Date, will contain a
true, correct and complete list and description of all items required to be set
forth therein. The Orthodontix Disclosure Schedule, as supplemented prior to
the Closing Date, is expressly incorporated herein by reference.
Notwithstanding the foregoing, any such supplement to the Orthodontix
Disclosure Schedule following the date hereof shall not in any way affect
Embassy's right not to consummate the transactions contemplated hereby as set
forth in Section 8.2 hereof.
V. REPRESENTATIONS AND WARRANTIES OF EMBASSY
Embassy represents and warrants to Orthodontix as follows, with the
knowledge and understanding that Orthodontix is relying materially on such
representations and warranties:
5.1 ORGANIZATION AND STANDING OF EMBASSY. Embassy is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Florida, and has the corporate power to carry on its
business as now conducted and to own its assets and it not required to qualify
to transact business as a foreign corporation in any state or other
jurisdiction. The copies of the Articles of Incorporation and Bylaws of
Embassy, delivered to Orthodontix, are true and complete copies of those
documents as now in effect. Embassy does not own any capital stock in any
other corporation, business trust or similar entity, and is not engaged in a
partnership, joint venture or similar arrangement with any person or entity.
The minute books of Embassy contain accurate records of all meetings of its
incorporator, shareholders and Board of Directors since its date of
incorporation.
5.2 ACQUISITION. Acquisition when formed by Embassy for the
purposes hereinabove set forth, will be a corporation duly organized, validly
existing and in good standing under the laws of Florida, respectively, and will
have the corporate power to carry on its business as herein
16
18
contemplated and to own its assets. True and correct copies of the Articles of
Incorporation and Bylaws of Acquisition will be delivered to Orthodontix prior
to the Closing. The authorized capital stock of Acquisition will consist of
1,000 shares of Common Stock, par value $.0001 per share of which 100 shares of
Acquisition will be issued and outstanding on the Closing Date and owned of
record and beneficially by Embassy. Other than as stated in this section, on
the Closing Date there will be no outstanding securities convertible or
exchangeable, actually or contingently, into shares of Common Stock or other
stock of Acquisition. Prior to the Merger Acquisition will not engage in any
business other than to serve as a vehicle to implement the Merger, and will
have no assets, operations or liabilities of any kind.
5.3 EMBASSY'S AUTHORITY. Embassy's Board of Directors has
approved and adopted this Agreement and the Merger and has resolved to
recommend approval and adoption of this Agreement and the Merger by Embassy's
shareholders. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by Embassy in
accordance herewith (and assuming due execution and delivery by the other
parties hereto), the valid and binding obligations of Embassy, enforceable in
accordance with their respective terms, subject to general principles of equity
and bankruptcy or other laws relating to or affecting the rights of creditors
generally.
5.4 NO BREACHES. To its knowledge, the making and performance
of this Agreement (including, without limitation, the issuance of the Embassy
Stock) by Embassy will not (i) conflict with the Articles of Incorporation or
the Bylaws of Embassy; (ii) violate any order, writ, injunction, or decree
applicable to Embassy; or (iii) result in any breach or termination of, or
constitute a default under, or constitute an event which, with notice or lapse
of time, or both, would become a default under, or result in the creation of
any encumbrance upon any asset of Embassy under, or create any rights of
termination, cancellation or acceleration in any person under, any agreement,
arrangement or commitment, or violate any provisions of any laws, ordinances,
rules or regulations or any order, writ, injunction or decree to which Embassy
is a party or by which Embassy or any of its assets may be bound.
5.5 CAPITALIZATION. The Embassy Stock consists of 100,000,000
shares of common stock, par value $.0001 per share, of which 2,540,000 shares
are issued and outstanding; and Embassy Warrants to purchase 120,000 shares of
Embassy Stock for a period of five years at any time and from time to time
commencing April 2, 1996 at a purchase price of $7.80 per share. All of the
outstanding Embassy Stock is duly authorized, validly issued, fully paid and
nonassessable, and was not issued in violation of the preemptive rights of any
person. The Embassy Stock to be issued upon effectiveness of the Merger, when
issued in accordance with the terms of this Agreement, as well as the Embassy
Stock to be issued upon the exercise of Embassy's outstanding Embassy Warrants,
when issued in accordance with the terms of the agreements governing each
issuance, shall be duly authorized, validly issued, fully paid and
nonassessable. Other than as stated in this Section 5.5, there are no
outstanding subscriptions, options, warrants, calls or rights of any kind
issued or granted by, or binding upon, Embassy, to purchase or otherwise
acquire any shares of capital stock of Embassy, or other equity securities or
equity interests of Embassy or any debt securities of Embassy. There are no
outstanding securities convertible or exchangeable, actually or contingently,
into shares of Embassy Stock or other stock of Embassy, and as to the Embassy
Warrants, there are
17
19
no additional shares of Embassy Stock issuable upon exercise thereof as a
result of Embassy's issuance of its shares delivered in connection with the
Merger. Notwithstanding the foregoing, the parties acknowledge that the
Options granted hereunder contain certain anti-dilution provisions.
5.6 BUSINESS. Embassy, since its formation, has engaged in no
business other than to seek to serve as a vehicle for the acquisition of an
operating business, and, except for this Agreement, is not a party to any
contract or agreement for the acquisition of an operating business.
5.7 GOVERNMENTAL APPROVAL; CONSENTS. To its knowledge, except
for the reports required to be filed in the future by Embassy, as a reporting
company, under the Exchange Act, and under the Securities Act with respect to
the shares of Embassy Stock issuable upon exercise of the Embassy Warrants, the
filing of the Registration Statement under the Securities Act, the Proxy
Statement under the Exchange Act for the purpose of seeking stockholder
approval of the Merger referred to in Section 2.1 and the issuance of the
Embassy Stock pursuant to the Merger and the filing of the S-4 Registration
Statement (or other form of registration statement as agreed by the parties),
no authorization, license, permit, franchise, approval, order or consent of,
and no registration, declaration or filing by Embassy with, any governmental
authority, federal, state or local, is required in connection with Embassy's
execution, delivery and performance of this Agreement. No consents of any
other parties are required to be received by or on the part of Embassy to
enable Embassy to enter into and carry out this Agreement.
5.8 FINANCIAL STATEMENTS. To its knowledge, the financial
statements of Embassy included in Embassy's SEC Reports, as hereinafter defined
(collectively, the "Embassy Financial Statements") present fairly, in all
material respects, the financial position of Embassy as of the respective dates
and the results of its operations for the periods covered in accordance with
GAAP. Without limiting the generality of the foregoing, (i) except as set
forth in the Embassy Disclosure Schedule, there is no basis for any assertion
against Embassy as of the date of said balance sheets of any material debt,
liability or obligation of any nature not fully reflected or reserved against
in such balance sheets or in the notes thereto; and (ii) there are no assets of
Embassy, the value of which (in the reasonable judgment of Embassy) is
materially overstated in said balance sheets. Except as disclosed therein,
Embassy has no known material contingent liabilities (including liabilities for
taxes), unusual forward or long-term commitments or unrealized or anticipated
losses from unfavorable commitments. Embassy is not a party to any contract or
agreement for the forward purchase or sale of any foreign currency.
5.9 ADVERSE DEVELOPMENTS. Except as expressly provided or set
forth in, or required by, this Agreement, or as set forth in the Embassy
Financial Statements, since December 31, 1995, there have been no materially
adverse changes in the assets, liabilities, properties, operations or financial
condition of Embassy, and no event has occurred other than in the ordinary and
usual course of business or as set forth in Embassy's SEC Reports or in the
Embassy Financial Statements which could be reasonably expected to have a
materially adverse effect upon Embassy, and Embassy does not know of any
development or threatened development of a nature that will, or which could be
reasonably expected to, have a materially adverse effect upon Embassy's
operations or future prospects.
18
20
5.10 EMBASSY'S U.S. SECURITIES AND EXCHANGE COMMISSION REPORTS.
The Embassy Stock was registered under Section 12 of the Exchange Act on Form
8-A. Since its inception, Embassy and each of its officers and directors has
filed all reports, registrations and other documents, together with any
amendments thereto, required to be filed under the Securities Act and the
Exchange Act, including, but not limited to, proxy statements and reports on
Form 10-KSB, Form 10-QSB and Form 8-K, and Embassy and each of its officers and
directors will file all such reports, registrations and other documents
required to be filed by it from the date of this Agreement to the Closing Date
(all such reports, registrations and documents, including registrations and
documents voluntarily filed or to be filed with the SEC, with the exception of
the Registration Statement and the Proxy Statement, are collectively referred
to as "Embassy's SEC Reports"). As of their respective dates, Embassy's SEC
Reports complied or will comply in all material respects with all rules and
regulations promulgated by the SEC and did not or will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. As part of
the Embassy Disclosure Schedule, Embassy has provided to Orthodontix a true and
complete copy of all of Embassy's SEC Reports filed on or prior to the date
hereof, and will promptly provide to Orthodontix a true and complete copy of
any such reports filed after the date hereof and on or prior to the Closing
Date.
5.11 CONTRACTS LISTED; NO DEFAULT. All material contracts,
agreements, licenses, leases, easements, permits, rights of way, commitments,
and understandings, written or oral, connected with or relating in any respect
to the present operations of Embassy are, with the exception of this Agreement,
described in Embassy's SEC Reports. All of such contracts, agreements, leases,
commitments and understandings, written or oral, and any other contract,
agreement, lease, commitment or understanding, written or oral, binding upon
Embassy, are listed in the Embassy Disclosure Schedule (the "Embassy
Contracts"). To the knowledge of Embassy, the Embassy Contracts are valid,
binding and enforceable by Embassy against the other parties thereto in
accordance with their terms. Neither Embassy nor, to the knowledge of Embassy,
any of the other parties thereto is in default or breach of any material
provision of the Embassy Contracts. Embassy has furnished Orthodontix with a
true and complete copy of each Embassy Contract, as amended.
5.12 TAXES. Embassy has duly filed all Returns required by any
law or regulation to be filed by it except for extensions duly obtained. All
such Returns were, when filed, and to the best of Embassy's knowledge are,
accurate and complete in all material respects and were prepared in conformity
with applicable laws and regulations. Embassy has paid or will pay in full or
has adequately reserved against all Taxes otherwise assessed against it through
the Closing Date, and the assessment of any material amount of additional Taxes
in excess of those paid and reported is not reasonably expected.
Embassy is not a party to any pending action or proceeding by any
governmental authority for the assessment of any Tax, and no claim for
assessment or collection of any Tax has been asserted against Embassy that has
not been paid. There are no Tax liens upon the assets of Embassy (other than
the lien of personal property taxes not yet due and payable). There is no
valid basis, to the best of Embassy's knowledge, except as set forth in the
Embassy Disclosure Schedule, for any assessment,
19
21
deficiency, notice, 30-day letter or similar intention to assess any Tax to be
issued to Embassy by any governmental authority.
5.13 LITIGATION. Except as disclosed in the Embassy Disclosure
Schedule, there is no claim, action, proceeding or investigation pending or, to
Embassy's knowledge, threatened against or affecting Embassy before or by any
court, arbitrator or governmental agency or authority which, in the reasonable
judgment of Embassy, could have a materially adverse effect on Embassy. There
are no decrees, injunctions or orders of any court, governmental department,
agency or arbitration outstanding against Embassy.
5.14 COMPLIANCE WITH LAWS AND REGULATIONS. To its knowledge,
Embassy is in compliance, in all material respects, with all laws, rules,
regulations, orders and requirements (federal, state and local) applicable to
it in all jurisdictions in which the business of Embassy is currently conducted
or to which Embassy is currently subject, which may have a material impact on
Embassy, including, without limitation, all applicable civil rights and equal
opportunity employment laws and regulations, all state and federal antitrust
and fair trade practice laws and the Federal Occupational Health and Safety
Act. Embassy does not know of any assertion by any party that Embassy is in
violation of any such laws, rules, regulations, orders, restrictions or
requirements with respect to its current operations, and no notice in that
regard has been received by Embassy. To Embassy's knowledge, there is not
presently pending any proceeding, hearing or investigation with respect to the
adoption of amendments or modifications of existing laws, rules, regulations,
orders, restrictions or requirements which, if adopted, would materially
adversely affect the current operations of Embassy.
5.15 COMPLIANCE WITH LAWS.
(a) To its knowledge, the business operations, property and
assets of Embassy (and to the knowledge of Embassy, the business of any
sub-tenant or license which is occupying or has occupied any space on any
premises of Embassy and the activities of which could result in any material
adverse liability to Embassy) (i) conform with and are in compliance in all
material respects with all, and are not in material violation of any applicable
federal, state and local laws, rules and regulations, including, but not
limited to, CERCLA and RCRA, as well as any other laws, rules or regulations
relating to tax, product liability, controlled substances, product
registration, environmental protection, hazardous or toxic waste, employment,
or occupational safety matters; and (ii) have been conducted and operated in a
manner such that, to Embassy's knowledge, Embassy has no foreseeable potential
liabilities for environmental clean-up under CERCLA, RCRA or under any law,
rule, regulation or common or civil law doctrine.
(b) To its knowledge, no predecessor-in-title to any
real property now or previously owned or operated by Embassy, nor any
predecessor operator thereof conducted its business or operated such property
in violation of CERCLA and RCRA or any other applicable, federal, state and
local laws, rules and regulations relating to environmental protection or
hazardous or toxic waste matters.
20
22
(c) Except as disclosed in the Embassy Disclosure
Schedule, no suit, action, claim, proceeding nor investigation review or
inquiry by any Government Entity (as defined in Section 4.9) concerning any
such possible violations by Embassy is pending or, to Embassy's knowledge,
threatened, including, but not limited to, matters relating to diagnostic tests
and products and product liability, environmental protection, hazardous or
toxic waste, controlled substances, employment, occupational safety or tax
matters. Embassy does not know of any reasonable basis or ground for any such
suit, claim, investigation, inquiry or proceeding.
5.16 GOVERNMENTAL LICENSES, PERMITS, ETC. To its knowledge,
Embassy has all governmental licenses, permits, authorizations and approvals
necessary for the conduct of its business as currently conducted. All such
licenses, permits, authorizations and approvals are in full force and effect,
and no proceedings for the suspension or cancellation of any thereof is pending
or threatened.
5.17 BROKERS. Embassy has not made any agreement or taken any
action with any person or taken any action which would cause any person to be
entitled to any agent's, broker's or finder's fee or commission in connection
with the transactions contemplated by this Agreement.
5.18 EMPLOYEE PLANS. Except as listed in Embassy's SEC Reports,
Embassy has no employees, consultants or agents, and Embassy has no Employee
Plans or Compensation Arrangements.
5.19 REGISTRATION STATEMENT AND PROXY STATEMENT. To its
knowledge, the Registration Statement and the Proxy Statement will comply with,
and will be distributed in accordance with, as applicable, the BCA, the
Securities Act and the Exchange Act and all rules and regulations of the SEC
promulgated under such acts, and state securities or blue sky laws. At the
time that the Registration Statement (or any registration statement included
therein) becomes effective, the Proxy Statement is first mailed to Embassy's
shareholders and the meeting of Embassy's shareholders takes place, as the case
may be, neither the Registration Statement nor the Proxy Statement will contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that this representation shall not be deemed to
apply to information included in the Registration Statement or the Proxy
Statement relating to Orthodontix which was furnished by Orthodontix to Embassy
for use in the Registration Statement and the Proxy Statement and which was
made in conformity with the information so furnished.
5.20 ACCOUNTS. Embassy has previously disclosed to Orthodontix a
list of all banks and other institutions in which Embassy maintains an account
(including checking, savings, cash management, brokerage, money market or any
other type of account) or safe deposit box, the address and telephone of such
bank or other institution, the name of Embassy's contact person with respect to
such account or safe deposit box, the account number of each such account, and
the names of all person authorized to make draws on such accounts or who have
access to such safe deposit boxes.
5.21 OTC BULLETIN BOARD. The Embassy Stock is quoted on the OTC
Bulletin Board (the "Bulletin Board") under the symbol "MBCA," and Embassy is
in compliance in all material
21
23
respects with all rules and regulations of the Bulletin Board applicable to
Embassy and the inclusion for quotation of such securities on the Bulletin
Board.
5.22 NASDAQ SMALLCAP MARKET. Embassy shall prepare and file with
the Nasdaq Small Cap Market no later than the Effective Date, an application to
have the Embassy Stock listed for trading on Nasdaq SmallCap.
5.23 NO OMISSIONS OR UNTRUE STATEMENTS. No representations or
warranties made by Embassy to Orthodontix in this Agreement or in any
certificate of a Embassy officer required to be delivered to Orthodontix
pursuant to the terms of this Agreement contains or will contain any untrue
statement of a material fact, omits or will omit to state a material fact
necessary to make the statement contained herein or therein not misleading as
of the date hereof and as of the Closing Date.
5.24 EMBASSY DISCLOSURE SCHEDULE COMPLETE. Embassy shall
promptly supplement the Embassy Disclosure Schedule if events occur prior to
the Closing Date that would have been required to be disclosed had they existed
at the time of executing this Agreement. The Embassy Disclosure Schedule, as
supplemented prior to the Closing Date, will contain a true, correct and
complete list and description of all items required to be set forth therein.
The Embassy Disclosure Schedule, as supplemented prior to the Closing Date, is
expressly incorporated herein by reference. Notwithstanding the foregoing, any
such supplement to the Embassy Disclosure Schedule following the date hereof
shall not in any way affect Orthodontix s right not to consummate the
transactions contemplated hereby as set forth in Section 6.2 hereof.
VI. STOCKHOLDER APPROVAL; CLOSING DELIVERIES
6.1 STOCKHOLDER APPROVAL. Embassy shall submit the Merger and
this Agreement to its shareholders for approval and adoption at the Meeting to
be held as soon as practicable following the date or this Agreement in
accordance with Section 3.7 hereof. Subject to the Merger and this Agreement
receiving all approvals of Embassy and Orthodontix shareholders and regulatory
approvals and the absence of 30% or more of the non-affiliated shareholders of
Embassy (i) voting against the Merger; and (ii) requesting redemption of their
shares of Embassy Stock in the manner to be set forth in the Proxy Statement,
and subject to the other provisions of this Agreement, the parties shall hold a
closing (the "Closing") no later than the fifth business day (or such later
date as the parties hereto may agree) following the later of (a) the date of
the Meeting of Shareholders of Embassy to consider and vote upon the Merger and
this Agreement and the Name Change or (b) the business day on which the last of
the conditions set forth in Articles VII and VIII hereof is fulfilled or waived
(such later date, the "Closing Date"), at 10:00 A.M. at the offices of Xxxxxx
Xxxxx & Xxxxxxx, P.A., or at such other time and place as the parties may agree
upon.
6.2 CLOSING DELIVERIES OF ORTHODONTIX. At the Closing,
Orthodontix shall deliver, or cause to be delivered, to Embassy:
(a) a certificate dated as of the Closing Date, to the
effect that the representations and warranties of Orthodontix contained in this
Agreement are true and correct in all material respects at and as of the
Closing Date and that Orthodontix has complied with or performed
22
24
in all material respects all terms, covenants and conditions to be complied
with or performed by Orthodontix on or prior to the Closing Date;
(b) an opinion of Orthodontix's counsel, Atlas,
Xxxxxxxx, Trop & Borkson, P.A., in form and substance reasonably satisfactory
to Embassy, in a form to be mutually agreed to prior to the Closing;
(c) a certificate, dated as of the Closing Date,
certifying as to the Articles of Incorporation and Bylaws of Orthodontix, the
incumbency and signatures of the officers of each of Orthodontix and copies of
the directors' and shareholders' resolutions of Orthodontix approving and
authorizing the execution and delivery of this Agreement, and the consummation
of the transactions contemplated hereby;
(d) the First Union Consent (as defined in Section 7.9)
as well as any other applicable consents contemplated by the Orthodontix
Disclosure Schedule;
(e) an agreement, in a form reasonably satisfactory to
Orthodontix and to Embassy and in substantially the form as Exhibit "B" (the
"Orthodontix Lock-Up Agreement"), prohibiting, for a period of fifteen months
from the Effective Date, all holders of the outstanding shares of Orthodontix
Stock, exclusive of the shares issuable in connection with the Practice
Acquisitions, from selling, transferring or otherwise disposing of the Embassy
Stock received by each of them pursuant to the Merger (the "Embassy Acquired
Stock");
(f) a letter executed by an authorized representative of
Orthodontix listing those persons who may be deemed "affiliates" of Orthodontix
within the meaning of Rule 145 under the Securities Act of 1933; and
(g) such other documents, at the Closing or
subsequently, as may be reasonably requested by Embassy as necessary for the
implementation and consummation of this Agreement and the transactions
contemplated hereby.
6.3 CLOSING DELIVERIES OF EMBASSY. At the Closing, Embassy
shall deliver to Orthodontix:
(a) a certificate of Embassy, dated as of the Closing
Date, to the effect that the representations and warranties of Embassy
contained in this Agreement are true and correct in all material respects and
that Embassy has complied with or performed in all material respects all terms,
covenants and conditions to be complied with or performed by Embassy on or
prior to the Closing Date;
(b) a certificate, dated as of the Closing Date,
executed by the Secretary of Embassy, certifying the Articles of Incorporation,
Bylaws, incumbency and signatures of officers of Embassy and copies of
Embassy's directors' and shareholders' resolutions approving and authorizing
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
23
25
(c) an opinion of Embassy's counsel, Xxxxxx Xxxxx &
Xxxxxxx, P.A., in form and substance reasonably satisfactory to Orthodontix, in
a form to be mutually agreed to prior to the Closing;
(d) the written resignations of all officers, and all
directors of Embassy other than Halpryn and Dresnick.
(e) certificates representing the Embassy Stock issuable
upon consummation of the Merger;
(f) agreements, in form reasonably satisfactory to
Orthodontix and to Embassy and in substantially the form of Exhibits "C" and
"D" attached hereto (the "Embassy Lock-Up Agreements") prohibiting, for a
period of six months from the Effective Date (the "Six Month Period"),
Dresnick, Halpryn, Xxxxxx X. Xxxxx, Xxxxx X. Xxxxxxxxx and Xxxxxx X. Xxxxxxx
from selling, transferring or otherwise disposing their shares of Embassy
Common Stock, and limiting the transfer or other disposition of the Embassy
Common Stock by Dresnick and Halpryn for a period of nine months following the
Six Month Period;
(g) the books and records of Embassy; and
(h) documentation satisfactory to Orthodontix evidencing
the fact that the signatories on all relevant bank accounts of Embassy have
been changed to signatories designated by Orthodontix.
VII. CONDITIONS TO OBLIGATIONS OF ORTHODONTIX
The obligation of Orthodontix to consummate the Closing is subject to
the following conditions, any of which may be waived by Orthodontix in its sole
discretion:
7.1 COMPLIANCE BY EMBASSY. Embassy shall have performed and
complied in all material respects with all agreements and conditions required
by this Agreement to be performed or complied with by Embassy prior to or on
the Closing Date.
7.2 ACCURACY OF EMBASSY' REPRESENTATIONS. Embassy's
representations and warranties contained in this Agreement (including the
Embassy Disclosure Schedule) or any schedule, certificate or other instrument
delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true and correct in all material
respects at and as of the Closing Date (except for such changes permitted by
this Agreement) and shall be deemed to be made again as of the Closing Date.
7.3 MATERIAL ADVERSE CHANGE. No material adverse change shall
have occurred subsequent to December 31, 1996 in the financial position,
results of operations, assets, liabilities or prospects of Embassy, nor shall
any event or circumstance have occurred which would result in a
24
26
material adverse change in the financial position, results of operations,
assets, liabilities or prospects of Embassy within the reasonable discretion of
Orthodontix.
7.4 DOCUMENTS. All documents and instruments delivered by
Embassy to Orthodontix at the Closing shall be in form and substance reasonably
satisfactory to Orthodontix and its counsel.
7.5 CAPITALIZATION. At the Closing Date, Embassy shall have,
other than with respect to the issuance of shares underlying the Embassy
Warrants, not more than 2,540,000 shares of Embassy Stock issued and
outstanding.
7.6 EFFECTIVENESS OF REGISTRATION STATEMENT; NO STOP ORDER. The
Registration Statement shall be effective under the Securities Act and shall
not be subject to a stop order or any threatened stop order.
7.7 REORGANIZATION. The Merger shall qualify as a tax-free
reorganization under Section 368 of the Code.
7.8 LITIGATION. No litigation seeking to enjoin the
transactions contemplated by this Agreement or to obtain damages on account
hereof shall be pending or, to Orthodontix's knowledge, be threatened.
7.9 CERTAIN CONSENTS. Orthodontix shall have received from
First Union Bank (the "First Union Consent") (and any other applicable consents
contemplated by the Embassy Disclosure Schedule) a consent in writing, in form
and substance reasonably satisfactory to Embassy and its counsel, to
Orthodontix's entry into this Agreement and consummation of the Merger.
7.10 NASDAQ SMALLCAP MARKET. An application to have the shares
of Embassy Stock quoted for trading on the Nasdaq SmallCap Stock Market shall
have been filed by Embassy.
7.11 CASH ASSETS. Embassy shall have cash assets of no less than
$7.2 million at the Closing, exclusive of any amounts payable in connection
with the Practice Acquisitions and inclusive of any redemption amounts payable
to Embassy shareholders.
VIII. CONDITIONS TO EMBASSY'S OBLIGATIONS
Embassy's obligation to consummate the closing is subject to the
following conditions, any of which may be waived by Embassy in its sole
discretion:
8.1 COMPLIANCE BY ORTHODONTIX. Orthodontix shall have performed
and complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with prior to or on the
Closing Date.
25
27
8.2 ACCURACY OF ORTHODONTIX' REPRESENTATIONS. Orthodontix's
representations and warranties contained in this Agreement (including the
exhibits hereto and the Embassy Disclosure Schedule) or any schedule,
certificate or other instrument delivered pursuant to the provisions hereof or
in connection with the transactions contemplated hereby shall be true and
correct in all material respects at and as of the Closing Date (except for such
changes permitted by this Agreement) and shall be deemed to be made again as of
the Closing Date.
8.3 MATERIAL ADVERSE CHANGE. No material adverse change shall
have occurred subsequent to December 31, 1996 in the financial position,
results of operations, assets, liabilities or prospects of Orthodontix taken as
a whole, nor shall any event or circumstance have occurred which would result
in a material adverse change in the business, assets or condition, financial or
otherwise, of Orthodontix taken as a whole, within reasonable discretion of
Embassy.
8.4 LITIGATION. No litigation seeking to enjoin the
transactions contemplated by this Agreement or to obtain damages on account
hereof shall be pending or, to Embassy's knowledge, be threatened.
8.5 REORGANIZATION. The Merger shall qualify as a tax-free
reorganization under Section 368 of the Code and there are no material adverse
tax consequences to the Merger.
8.6 DOCUMENTS. All documents and instruments delivered by
Orthodontix to Embassy at the Closing shall be in form and substance reasonably
satisfactory to Embassy and its counsel.
8.7 PRACTICE ACQUISITIONS. Immediately after the Merger has
been effected, on the Effective Date, Orthodontix shall have consummated the
acquisition of certain tangible and intangible assets of certain orthodontic
practices, which, in the aggregate, generated no less than $15.0 million in
gross revenues for the twelve month period ended December 31, 1996 (the
"Practice Gross Revenue Amount") in consideration for the delivery of cash (the
"Practice Acquisition Cash Amount"); and (ii) that number of shares of
Orthodontix Stock equal to the quotient obtained by (x) the difference between
1.2 times the Practice Gross Revenue Amount and the Practice Cash Amount
divided by (y)the Embassy Share Value. For purposes of this calculation, the
Embassy Share Value shall mean the average over a period of 15 trading days of
the closing prices of Embassy Stock as reflected on the OTC Bulletin Board.
8.8 LIABILITIES. At the Closing Date, Orthodontix shall have no
more than $500,000 in total liabilities, exclusive of the Practice Acquisition
Cash Amount.
IX. INDEMNIFICATION
9.1 BY ORTHODONTIX. Subject to Section 9.4, Orthodontix shall
indemnify, defend and hold Embassy, its directors, officers, shareholders,
attorneys, agents and affiliates, harmless from and against any and all losses,
costs, liabilities, damages, and expenses (including legal and other expenses
incident thereto) of every kind, nature and description, including any
undisclosed liabilities (collectively, "Losses") that result from or arise out
of (i) the breach of any representation or warranty of Orthodontix set forth in
this Agreement or in any certificate delivered to Embassy pursuant hereto;
26
28
or (ii) the breach of any of the covenants of Orthodontix contained in or
arising out of this Agreement or the transactions contemplated hereby.
9.2 BY EMBASSY. Subject to Section 9.4, Embassy shall
indemnify, defend, and hold Orthodontix its directors, officers, shareholders,
attorneys, agents and affiliates harmless from and against any and all Losses
that arise out of (i) the breach of any representation or warranty of Embassy
set forth in this Agreement or in any certificate delivered to Orthodontix
pursuant hereto; or (ii) the breach of any of the covenants of Embassy
contained in or arising out of this Agreement or the transactions contemplated
hereby.
9.3 CLAIMS PROCEDURE. Should any claim covered by Sections 9.1
or 9.2 be asserted against a party entitled to indemnification under this
Article (the "Indemnitee"), the Indemnitee shall promptly notify the party
obligated to make indemnification (the "Indemnitor"); provided, however, that
any delay or failure in notifying the Indemnitor shall not affect the
Indemnitor's liability under this Article if such delay or failure was not
prejudicial to the Indemnitor. The Indemnitor upon receipt of such notice
shall assume the defense thereof with counsel reasonably satisfactory to the
Indemnitee and the Indemnitee shall extend reasonable cooperation to the
Indemnitor in connection with such defense. No settlement of any such claim
shall be made without the consent of the Indemnitor and Indemnitee, such
consent not to be unreasonably withheld or delayed, nor shall any such
settlement be made by the Indemnitor which does not provide for the absolute,
complete and unconditional release of the Indemnitee from such claim. In the
event that the Indemnitor shall fail, within a reasonable time, to defend a
claim, the Indemnitee shall have the right to assume the defense thereof
without prejudice to its rights to indemnification hereunder.
9.4 LIMITATIONS ON LIABILITY. Neither Orthodontix nor Embassy
shall be liable hereunder as a result of any misrepresentation or breach of
such party's representations, warranties or covenants contained in this
Agreement unless and until the Losses incurred by each, as the case may be, as
a result of such misrepresentations or breaches under this Agreement shall
exceed, in the aggregate, $200,000 (in which case the party liable therefor
shall be liable for the entire amount of such claims, including the first
$200,000).
X. TERMINATION
10.1 TERMINATION PRIOR TO CLOSING.
(a) If the Closing has not occurred by March 1, 1998,
subject to a 30 day extension by Orthodontix, or any other extension as agreed
by the parties (the "Termination Date"), any of the parties hereto may
terminate this Agreement at any time thereafter by giving written notice of
termination to the other parties; provided, however, that no party may
terminate this Agreement if such party has willfully or materially breached any
of the terms and conditions hereof.
(b) Prior to the Termination Date either party to this
Agreement may terminate this Agreement following the insolvency or bankruptcy
of the other, or if any one or more of the conditions to Closing set forth in
Article VI, Article VII or Article VIII shall become incapable of
27
29
fulfillment and shall not have been waived by the party for whose benefit the
condition was established, then either party may terminate this Agreement.
(c) Notwithstanding anything contained herein to the
contrary, Embassy acknowledges that certain of the Practice Acquisitions which
in the aggregate had generated approximately no less than $5.2 million in gross
revenues for the twelve-month period ended December 31, 1996 are required to
close on or prior to March 1, 1998.
10.2 CONSEQUENCES OF TERMINATION. Upon termination of this
Agreement pursuant to this Article X or any other express right of termination
provided elsewhere in this Agreement, the parties shall be relieved of any
further obligation to the others except as specified in Section 12.3. No
termination of this Agreement, however, whether pursuant to this Article X
hereof or under any other express right of termination provided elsewhere in
this Agreement, shall operate to release any party from any liability to any
other party incurred before the date of such termination or from any liability
resulting from any willful misrepresentation made in connection with this
Agreement or willful breach hereof.
XI. ADDITIONAL COVENANTS
11.1 MUTUAL COOPERATION. The parties hereto will cooperate with
each other, and will use all reasonable efforts to cause the fulfillment of the
conditions to the parties' obligations hereunder and to obtain as promptly as
possible all consents, authorizations, orders or approvals from each and every
third party, whether private or governmental, required in connection with the
transactions contemplated by this Agreement. Without limiting the generality
of the foregoing, Orthodontix shall obtain, prior to the Closing, the consent
of all of the recipients of Orthodontix Stock in connection with the Practice
Acquisitions as a condition to closing the Practice Acquisitions.
11.2 CHANGES IN REPRESENTATIONS AND WARRANTIES OF ORTHODONTIX.
Between the date of this Agreement and the Closing Date, Orthodontix shall not,
directly or indirectly, except as contemplated in the Orthodontix Disclosure
Schedule, enter into any transaction, take any action, or by inaction permit an
event to occur, which would result in any of the representations and warranties
of Orthodontix herein contained not being true and correct at and as of (a) the
time immediately following the occurrence of such transaction or event or (b)
the Closing Date. Orthodontix shall promptly give written notice to Embassy
upon becoming aware of (i) any fact which, if known on the date hereof, would
have been required to be set forth or disclosed pursuant to this Agreement and
(ii) any impending or threatened breach in any material respect of any of the
representations and warranties of Orthodontix contained in this Agreement and
with respect to the latter shall use all reasonable efforts to remedy same.
11.3 CHANGES IN REPRESENTATIONS AND WARRANTIES OF EMBASSY.
Between the date of this Agreement and the Closing Date, Embassy shall not,
directly or indirectly, enter into any transaction, take any action, or by
inaction permit an event to occur, which would result in any of the
representations and warranties of Embassy herein contained not being true and
correct at and as of (a) the time immediately following the occurrence of such
transaction or event or (b) the Closing
28
30
Date. Embassy shall promptly give written notice to Orthodontix upon becoming
aware of (i) any fact which, if known on the date hereof, would have been
required to be set forth or disclosed pursuant to this Agreement and (ii) any
impending or threatened breach in any material respect of any of the
representations and warranties of Embassy contained in this Agreement and with
respect to the latter shall use all reasonable efforts to remedy same.
XII. MISCELLANEOUS
12.1 EXPENSES. Orthodontix and Embassy shall each pay its own
expenses incident to the negotiation, preparation and carrying out of this
Agreement, including all fees and expenses of its counsel and accountants for
all activities of such counsel and accountants undertaken pursuant to this
Agreement, whether or not the transactions contemplated hereby are consummated.
12.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
statements contained in this Agreement or in any certificate delivered by or on
behalf of Orthodontix or Embassy pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed representations, warranties
and covenants by Orthodontix or Embassy, as the case may be, hereunder. All
representations, warranties and covenants made by Orthodontix and by Embassy in
this Agreement, or pursuant hereto, shall survive through the Closing Date.
12.3 NONDISCLOSURE. Embassy will not at any time after the date
of this Agreement, without Orthodontix' consent, divulge, furnish to or make
accessible to anyone (other than to its representatives as part of its due
diligence or corporate investigation) any knowledge or information with respect
to confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable or
not, with respect to any confidential or secret aspects (including, without
limitation, customers or suppliers) ("Confidential Information") of
Orthodontix.
Orthodontix will not at any time after the date of this Agreement,
without Embassy's consent (except as may be required by law), use, divulge,
furnish to or make accessible to anyone any Confidential Information (other
than to its representatives as part of its due diligence or corporate
investigation) with respect to Embassy.
The undertakings set forth in the preceding two paragraphs of this
Section 12.3 shall lapse if the Closing takes place as to Embassy and
Orthodontix, but shall not lapse as to the officers and directors of Embassy,
individually.
Any information, which (i) at or prior to the time of disclosure by
either of Orthodontix or Embassy was generally available to the public through
no breach of this covenant, (ii) was available to the public on a non-
confidential basis prior to its disclosure by either of Orthodontix or Embassy
or (iii) was made available to the public from a third party, provided that
such third party did not obtain or disseminate such information in breach of
any legal obligation to Orthodontix or Embassy, shall not be deemed
Confidential Information for purposes hereof, and the undertakings in this
covenant with respect to Confidential Information shall not apply thereto.
29
31
12.4 SUCCESSION AND ASSIGNMENTS; THIRD PARTY BENEFICIARIES. This
Agreement may not be assigned (either voluntarily or involuntarily) by any
party hereto without the express written consent of the other party. Any
attempted assignment in violation of this Section shall be void and ineffective
for all purposes. In the event of an assignment permitted by this Section,
this Agreement shall be binding upon the heirs, successors and assigns of the
parties hereto. Except as expressly set forth in this Section, there shall be
no third party beneficiaries of this Agreement.
12.5 NOTICES. All notices, requests, demands or other
communications with respect to this Agreement shall be in writing and shall be
(i) sent by facsimile transmission, (ii) sent by the United States Postal
Service, registered or certified mail, return receipt requested, or (iii)
personally delivered by a nationally recognized express overnight courier
service, charges prepaid, to the following addresses (or such other addresses
as the parties may specify from time to time in accordance with this Section):
(a) To Embassy:
Embassy Acquisition Corp.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000Xxxx: Xxxxx Xxxxxxx,
President
With a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxx & Xxxxxxx, P.A.
NationsBank Tower At International Place
000 Xxxxxxxxx 0xx Xxxxxx, 00xx Xxxxx
Xxxxx, Xxxxxxx 00000
(b) To Orthodontix:
Orthodontix, Inc.
0000 Xxxxx xx Xxxx Xxxx., XXXxxxx Xxxxxx,
Xxxxxxx 00000
Attn: F.W. "Mort" Guilford
With a copy to:
Xxxxxxx Xxxxxxxx
Atlas, Xxxxxxxx, Trop & Borkson, P.A.
New River Center, Suite 1900
000 Xxxx Xxx Xxxx Xxxxxxxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Any such notice shall, when sent in accordance with the preceding
sentence, be deemed to have been given and received on the earliest of (i) the
day delivered to such address or sent by
30
32
facsimile transmission, (ii) the fifth (5th) business day following the date
deposited with the United States Postal Service, or (iii) twenty-four (24)
hours after shipment by such courier service.
12.6 CONSTRUCTION. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of Florida without giving
effect to the principles of conflicts of law thereof, except to the extent that
the Securities Act or the Exchange Act applies to the Registration Statements
and the Proxy Statement.
12.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
12.8 NO IMPLIED WAIVER; REMEDIES. No failure or delay on the part
of the parties hereto to exercise any right, power or privilege hereunder or
under any instrument executed pursuant hereto shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. All rights, powers and privileges granted herein shall be in
addition to other rights and remedies to which the parties may be entitled at
law or in equity.
12.9 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
Schedules attached hereto, sets forth the entire understandings of the parties
with respect to the subject matter hereof, and it incorporates and merges any
and all previous communications, understandings, oral or written, as to the
subject matter hereof, and cannot be amended or changed except in writing,
signed by the parties.
12.10 HEADINGS. The headings of the Sections of this Agreement,
where employed, are for the convenience of reference only and do not form a
part hereof and in no way modify, interpret or construe the meanings of the
parties.
12.11 SEVERABILITY. To the extent that any provision of this
Agreement shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect.
12.12 PUBLIC DISCLOSURE. From and after the date hereof through the
Closing Date, Embassy shall not issue a press release or any other public
announcement with respect to the transactions contemplated hereby without the
prior consent of Orthodontix, which consent shall not be unreasonably withheld
or delayed. It is understood by Orthodontix that Embassy is required under the
Exchange Act to make prompt disclosure of any material transaction.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, HAVE HAD THE
OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOICE, AND
UNDERSTAND EACH OF THE PROVISIONS OF THIS AGREEMENT.
31
33
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
EMBASSY ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Xxxxx X. Xxxxxxx, President
ORTHODONTIX, INC.
By: /s/ F.W. "Mort" Guilford
-------------------------------
F.W. "Mort" Guilford, President
The undersigned agree to the provisions
of Section 3.7(b) and Section 12.3 hereof:
/s/ Xxxxx X. Xxxxxxx
------------------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxx
------------------------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxxxxxx
------------------------------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxxxxx X. Xxxxxxxx, M.D.
------------------------------------------
Xxxxxxx X. Xxxxxxxx, M.D.
/s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxx
32
