APPENDIX A
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ID RECAP, INC.,
A DELAWARE CORPORATION
AND
INTERDENT, INC.
A DELAWARE CORPORATION
DATED AS OF OCTOBER 22, 1999
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is entered into as of October 22, 1999 by
and between ID Recap, Inc., a Delaware corporation ('Recap') wholly owned by
Green Equity Investors III, L.P. ("GEI"), and InterDent, Inc., a Delaware
corporation (together with its Subsidiaries from time to time (except as the
context may otherwise require), the "Company"), with respect to the following
facts and circumstances:
A. The Special Committee of the Company, the Board of Directors of the
Company and the Board of Directors of Recap have each determined that it is
advisable and in the best interests of its respective stockholders to effect the
Merger of Recap with and into the Company upon the terms and subject to the
conditions set forth herein.
B. Pursuant to the Merger, all shares of capital stock of the Company
(other than Dissenting Shares and shares held by Recap or in the Company's
treasury) shall be cancelled and converted automatically into the right to
receive an amount in cash per share, without interest, as set forth in Section
2.2 of this Agreement.
C. Concurrently with the execution and delivery of this Agreement and in
order to induce Recap to enter into this Agreement, Recap and certain Rollover
Holders (defined below) are entering into Voting Agreements in the form attached
hereto as EXHIBIT A, pursuant to which, among other things, the Rollover Holders
will agree to vote their shares of the Company in favor of the Merger.
D. In connection with the transactions contemplated by the Merger, certain
members of management of and certain investors in the Company (the "Rollover
Holders") have entered into Exchange and Subscription Agreements in the form
attached hereto as EXHIBIT B (the "Exchange Agreement") with Recap, pursuant to
which the Rollover Holders will exchange a portion of their Existing Shares (the
"Rollover Shares") of the Company for shares of Recap prior to the closing of
the Merger (the "Recapitalization").
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants contained herein and intending to be
legally bound, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1. CERTAIN TERMS. For all purposes of this Agreement, except as
otherwise expressly provided:
(a) the terms defined in this Article I have the meanings assigned to
them in this Article I and include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the meanings
assigned under GAAP;
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of the body of this Agreement;
(d) pronouns of either gender or neuter shall include, as appropriate,
the other pronoun forms;
(e) the words "include," "includes" and "including" shall be deemed in
each case to be followed by the words "without limitation";
(f) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision; and
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(g) the term "party" or "parties" when used herein refer to Recap, on
the one hand, and the Company, on the other.
1.2. DEFINITIONS. As used in this Agreement and the Exhibits and Schedules
delivered pursuant to this Agreement, the following definitions shall apply:
(a) "Acquisition Proposal" has the meaning set forth in Section 7.5
hereof.
(b) "Action" means any action, complaint, petition, investigation,
suit, litigation or other proceeding, whether civil or criminal, in law or
in equity, or before any court, tribunal, arbitrator or Governmental Entity.
(c) "Affiliate" means, with respect to any person or entity, any person
or entity directly or indirectly controlling, controlled by or under common
control with such person or entity.
(d) "Agreement" means this Agreement, as amended or supplemented,
together with all Exhibits and Schedules attached or incorporated by
reference, in each case as amended or supplemented.
(e) "Approval" means any approval, authorization, consent,
qualification or registration, or any waiver of any of the foregoing,
required to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental
Entity or any other Person.
(f) "Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such Person's
business, directly or indirectly, in whole or in part, whether or not
carried on the books and records of such Person, and whether or not owned in
the name of such Person or any Affiliate of such Person and wherever
located.
(g) "Balance Sheet" has the meaning set forth in Section 5.12.
(h) "Business Day" means any day that is not a Saturday, Sunday or
legal holiday in the State of California.
(i) "Certificate" has the meaning set forth in Section 4.1 hereof.
(j) "Certificate of Merger" has the meaning set forth in Section 2.1(b)
hereof.
(k) "Closing" has the meaning set forth in Section 3.1 hereof.
(l) "Closing Date" means the date and time of the Closing.
(m) "Code" means the Internal Revenue Code of 1986, as amended.
(n) "Common Stock" means the Company's common stock, no par value.
(o) "Company" means InterDent, Inc., a Delaware corporation (together
with its Subsidiaries from time to time (except as the context may otherwise
require)).
(p) "Company Benefit Plans" has the meaning set forth in Section
5.14(a).
(q) "Company Board" means, as applicable, the Board of Directors and/or
the Special Committee of the Board of Directors of the Company.
(r) "Company Computer System" has the meaning set forth in Section
5.16.
(s) "Company Employees" has the meaning set forth in Section 5.14(a).
(t) "Company Pension Plan" has the meaning set forth in Section
5.14(b).
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(u) "Company Performance Shares" has the meaning set forth in Section
5.3.
(v) "Company Plans" has the meaning set forth in Section 5.14(b).
(w) "Company Proxy Statement" has the meaning set forth in Section 7.9
hereof.
(x) "Company SEC Reports" means all of the forms, statements,
schedules, reports and other documents filed or required to be filed by the
Company or any Subsidiary with the SEC since December 31, 1996.
(y) "Convertible Notes" means the Company's 7% convertible subordinated
notes issued on May 18, 1998 and June 3, 1998 pursuant to the Securities
Purchase Agreement dated May 12, 1998.
(z) "DGCL" means the Delaware General Corporation Law.
(aa) "Dissenting Shares" has the meaning set forth in Section 2.4.
(bb) "Earn Out Shares" means the shares of capital stock of the Company
that the Company is obligated to issue to a third party in connection with
or arising from any earn out payments, including but not limited to those
parties and obligations identified on Schedule 5.3.
(cc) "Effective Time" has the meaning set forth in Section 2.1(b)
hereof.
(dd) "Encumbrance" means any charge, encumbrance, security interest,
lien, option, equity, adverse claim or restriction, except for any
restrictions on transfer generally arising under any applicable Law.
(ee) "Environmental Law" has the meaning set forth in Section 5.17(b)
hereof.
(ff) "ERISA" means the Employee Retirement Income Security Act of 1934,
as amended.
(gg) "ERISA Affiliate" has the meaning set forth in Section 5.14(c)
hereof.
(hh) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(ii) "Exchange Agreement" means the exchange and subscription agreement
in the form attached hereto as EXHIBIT B.
(jj) "Exchange Ratio" has the meaning set forth in Section 2.2(h)
hereof.
(kk) "Existing Shares" means all of the Company's issued and
outstanding Common Stock, Series A Preferred Stock, Series B Preferred Stock
(if any), Series C Preferred Stock (if any) and Series D Preferred Stock.
(ll) "Expenses" has the meaning set forth in Section 9.3 hereof.
(mm) "Financing" has the meaning set forth in Section 6.5.
(nn) "Financing Letters" has the meaning set forth in Section 6.5.
(oo) "GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time, consistently applied.
(pp) "GEI" has the meaning set forth in the preamble.
(qq) "Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
(rr) "Hazardous Substance" has the meaning set forth in Section 5.17(b)
hereof.
(ss) "H-S-R Act" has the meaning set forth in Section 7.6(a) hereof.
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(tt) "Indebtedness" means all obligations for borrowed money and
accounts payable, however evidenced, including principal and interest.
(uu) "Indemnified Party" has the meaning set forth in Section 7.13.
(vv) "Insurance Policies" has the meaning set forth in Section 5.20.
(ww) "Xxxx-Xxxxx Act" has the meaning set forth in Section 8.3.14.
(xx) "Law" means any statute, rule, regulation, administrative requirement,
code or ordinance of any Governmental Entity.
(yy) "Leased Real Estate" has the meaning set forth in Section 5.24(b).
(zz) "Liabilities" means all liabilities, obligations, debts and
expenses whatsoever of the business of the Company, whether matured or
unmatured, liquidated or unliquidated, fixed or contingent.
(aaa) "Material Adverse Effect" means a material adverse effect on (i)
the ability of the subject Person to perform its obligations under, and
consummate the transactions contemplated by this Agreement on a timely basis
or (ii) the condition (financial or otherwise), results of operations,
assets, liabilities, prospects or business of the subject Person and its
Subsidiaries taken as a whole.
(bbb) "Merger" has the meaning set forth in Section 2.1(a) of this
Agreement.
(ccc) "Merger Consideration" means all of the cash paid to the holders
of the Existing Shares and the holders of Convertible Notes, Options and
Warrants pursuant to Article II hereof.
(ddd) "New Financing Letters" has the meaning set forth in Section 6.5.
(eee) "Notice of Superior Proposal" has the meaning set forth in
Section 7.5(b).
(fff) "Options" means the options to purchase shares of capital stock
of the Company.
(ggg) "Order" means any decree, injunction, judgment, order, ruling,
arbitration award, assessment or writ issued by any Governmental Entity.
(hhh) "Owned Real Estate" has the meaning set forth in Section 5.24(a).
(iii) "Paying Agent" has the meaning set forth in Section 2.3(a)
hereof.
(jjj) "Permit" means any license, permit, franchise or authorization.
(kkk) "Permitted Acquisitions" has the meaning set forth in Section
7.1(d) hereof.
(lll) "Permitted Encumbrances" means (i) Encumbrances disclosed on
SCHEDULE 1.2(lll) hereto, (ii) liens for Taxes, assessments, governmental
charges or levies or mechanics' and other statutory liens which are not
material in amount relative to the property affected, and which are not yet
delinquent or can be paid without penalty or are being contested in good
faith and by appropriate proceedings in respect thereof, and (iii)
imperfections of title which are not substantial in amount relative to the
property affected and which do not materially interfere with the present use
of the property subject thereto or affected thereby.
(mmm) "Person" means an association, a corporation, an individual, a
partnership, a limited liability company or limited liability partnership, a
trust or any other entity or organization, including a Governmental Entity.
(nnn) "Preferred Stock" means the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred
Stock.
(ooo) "Preliminary Termination Fee" has the meaning set forth in
Section 9.3.
(ppp) "Recap" means ID Recap, Inc., a Delaware corporation.
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(qqq) "Recapitalization" has the meaning set forth in the recitals.
(rrr) "Representatives" means Persons acting on behalf of another
Person, including such Person's officers, directors, employees,
representatives, agents, independent accountants, investment bankers and
counsel.
(sss) "Rollover Holders" has the meaning set forth in the recitals.
(ttt) "Rollover Options" means the Options issued under the Stock
Options Plans set forth on SCHEDULE 1.2(ttt), that will continue in the
Surviving Corporation; provided, however, the excess of the aggregate cash
amount that would be paid with respect to the Existing Shares subject to
such Options, if the Options were exercised, over the aggregate exercise
price with respect to such Options shall not exceed $2,330,000.
(uuu) "Rollover Shares" has the meaning set forth in the recitals.
(vvv) "SEC" means the United States Securities and Exchange Commission.
(www) "SEC Reports" has the meaning set forth in Section 5.6(a).
(xxx) "Securities Act" means the Securities Act of 1933, as amended.
(yyy) "Series A Preferred Stock" means the Series A Preferred Stock, no
par value of the Company.
(zzz) "Series B Preferred Stock" means the Series B Preferred Stock, no
par value of the Company.
(aaaa) "Series C Preferred Stock" means the Series C Preferred Stock,
no par value of the Company.
(bbbb) "Series D Preferred Stock" means the Series D Preferred Stock,
no par value of the Company.
(cccc) "Service" means the Internal Revenue Service or any successor
entity.
(dddd) "Special Committee" means the special committee of the Board of
Directors of the Company established to consider the fairness of the
transaction as contemplated by this Agreement.
(eeee) "Special Meeting" has the meaning set forth in Section 7.10
hereof.
(ffff) "Stock Option Plans" means, collectively, the InterDent, Inc.
1999 Stock Incentive Plan, the InterDent, Inc. Employee Stock Purchase Plan
of 1999, the InterDent, Inc. Dental Professional Stock Purchase Plan of
1999, Gentle Dental Service Corporation 1993 Stock Incentive Plan, as
amended on June 4, 1998, Dental Care Alliance, Inc. 1997 Executive Incentive
Compensation Plan, Dental Care Alliance, Inc. 1997 Non-Qualified Stock
Option Plan, GMS Dental Group, Inc. 1996 Stock Option Plan and GMS Dental
Group, Inc. 1996 Performance Stock Option Plan.
(gggg) "Subsidiary" of a company means any Person in which such company
has a direct or indirect equity or ownership interest by vote or value of in
excess of 50%. Subsidiaries of the Company shall include, but not be limited
to, Gentle Dental Service Corporation, a Delaware corporation, and Dental
Care Alliance, Inc., a Delaware corporation, for all purposes except where
the context otherwise requires; provided, however, that dental practices
managed (but not owned) by InterDent, Inc. or any of its Subsidiaries shall
not be included within the definition of a "Subsidiary" for purposes of the
Agreement.
(hhhh) "Superior Proposal" has the meaning set forth in Section 7.5(d)
hereof.
(iiii) "Surviving Corporation" has the meaning set forth in Section
2.1(a) hereof.
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(jjjj) "Takeover Statute" has the meaning set forth in Section 7.15
hereof.
(kkkk) "Tax" or "Taxes", as the context may require, include: (i) any
income, alternative or add-on minimum tax, gross income, gross receipts,
franchise, profits, sales, use, ad valorem, business license, withholding,
payroll, employment, excise, stamp, transfer, recording, occupation,
premium, property, value added, custom duty, severance, windfall profit or
license tax, governmental fee, including estimated taxes relating to any of
the foregoing, or other similar tax or other like assessment or charge of
similar kind whatsoever together with any interest and any penalty, addition
to tax or additional amount imposed by any Governmental Entity responsible
for the imposition of any such Tax; or (ii) any liability of a Person for
the payment of any taxes, interest, penalty, addition to tax or like
additional amount resulting from the application of Treas. Reg. Section
1.1502-6 or comparable provisions of any Governmental Entity in respect of a
consolidated or combined return.
(llll) "Tax Return" means any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Entity in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Law
relating to any Tax.
(mmmm) "Termination Fee" shall have the meaning set forth in Section
9.3 hereof.
(nnnn) "Update Statements" has the meaning set forth in Section 7.7
hereof.
(oooo) "Voting Agreement" means the voting agreement in the form
attached hereto as EXHIBIT A.
(pppp) "Warrants" means the warrants to purchase shares of capital
stock of the Company.
(qqqq) "Year 2000 Compliant" has the meaning set forth in Section 5.16.
ARTICLE II.
THE MERGER
2.1. THE MERGER.
(a) At the Effective Time, Recap shall be merged with and into the
Company in accordance with DGCL and the terms and conditions hereof (the
"Merger"). Upon consummation of the Merger, the separate existence of Recap
shall cease and the Company shall be the surviving corporation (the "Surviving
Corporation").
(b) As soon as practicable after the Closing, the Company will file a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware in accordance with DGCL and make all other filings or
recordings required by Law in connection with the Merger. The Merger shall
become effective at such time as the Certificate of Xxxxxx is filed with the
Secretary of State of the State of Delaware or at such later time as is
specified in the Certificate of Merger (the "Effective Time").
(c) The Merger shall have the effects set forth in Sections 251, 259
and 261 of DGCL.
2.2. MERGER CONSIDERATION AND CANCELLATION OF EXISTING SHARES AND
CONVERTIBLE NOTES. At the Effective Time, pursuant to this Agreement and by
virtue of the Merger and without any action on the part of Recap, the Company,
or the holders of any of the following securities:
(a) Each share of Common Stock issued and outstanding immediately prior
to the Effective Time (including shares of Common Stock issued upon exercise of
options, warrants and other convertible securities of the Company, including the
Company's convertible securities pursuant to that certain Securities Purchase
Agreement dated May 12, 1998, by and among Gentle Dental Service Corporation and
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the Purchasers set forth on SCHEDULE 1 to that agreement), other than any
Dissenting Shares and shares to be cancelled pursuant to Section 2.2(g), shall
be cancelled and shall be converted automatically into the right to receive an
amount equal to $9.50 in cash, without interest, payable to the holder thereof
upon surrender of the certificate formerly representing such share of Common
Stock in the manner provided in Section 2.3;
(b) Each share of Series A Preferred Stock issued and outstanding
immediately prior to the Effective Time, other than any Dissenting Shares and
shares to be cancelled pursuant to Section 2.2(g), shall be cancelled and shall
be converted automatically into the right to receive $1 in cash, without
interest, payable to the holder thereof upon surrender of the certificate
formerly representing such share of Series A Preferred Stock in the manner
provided in Section 2.3;
(c) Each share of Series B Preferred Stock issued and outstanding
immediately prior to the Effective Time (if any such shares are issued and
outstanding), other than any Dissenting Shares and shares to be cancelled
pursuant to Section 2.2(g), shall be cancelled and shall be converted
automatically into the right to receive an amount equal $1,031.49 in cash,
without interest, payable to the holder thereof upon surrender of the
certificate formerly representing such share of Series B Preferred Stock in the
manner provided in Section 2.3, and the right to receive certain Warrants
pursuant to the terms of such Series B Preferred Stock shall be cancelled;
(d) Each share of Series C Preferred Stock issued and outstanding
immediately prior to the Effective Time (if any such shares are issued and
outstanding), other than any Dissenting Shares and shares to be cancelled
pursuant to Section 2.2(g), shall be cancelled and shall be converted
automatically into the right to receive $1 in cash, without interest, payable to
the holder thereof upon surrender of the certificate formerly representing such
share of Series C Preferred Stock in the manner provided in Section 2.3;
(e) Each share of Series D Preferred Stock issued and outstanding
immediately prior to the Effective Time, other than any Dissenting Shares and
shares to be cancelled pursuant to Section 2.2(g), shall be cancelled and shall
be converted automatically into the right to receive an amount equal to $9.50 in
cash, without interest, payable to the holder thereof upon surrender of the
certificate formerly representing such share of Series D Preferred Stock in the
manner provided in Section 2.3, and the right to receive certain Warrants
pursuant to the terms of such Series D Preferred Stock shall be cancelled;
(f) The Company's Convertible Notes issued and outstanding immediately
prior to the Effective Time, other than any Convertible Notes to be cancelled
pursuant to Section 2.2(g), shall be cancelled and shall be converted
automatically into the right to receive prepayment equal to 101% of the
outstanding principal amount (which includes any amounts payable in a change of
control) and any accrued but unpaid interest thereon, and the right to receive a
cash payment equal to $0.29 for each share of Common Stock that would be issued
following exercise of the Warrants that would be issued in a redemption of the
Convertible Notes, in lieu of the right to receive such Warrants pursuant to the
terms of the Convertible Notes, which right to receive such Warrant shall be
cancelled;
(g) Each Existing Share and/or the Convertible Notes owned by Recap or
held in the treasury of the Company, if any, immediately prior to the Effective
Time shall be cancelled without any conversion thereof and no payment or
distribution shall be made with respect thereto.
(h) Each share of capital stock of Recap that is issued and outstanding
immediately prior to the Effective Time shall be converted into one newly
issued, fully paid and nonassessable share of capital stock, with identical
rights, preferences and privileges, of the Surviving Corporation (the 'Exchange
Ratio').
(i) If between the date of this Agreement and the Effective Time the
number of outstanding shares of capital stock of the Company shall have been
changed into a different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split-up,
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combination, exchange of shares or the like other than pursuant to the Merger,
the amount of the pro rata portion of the Merger Consideration and the Exchange
Ratio shall be correspondingly adjusted; provided, however, the aggregate amount
of the Merger Consideration shall remain unchanged.
2.3. PAYMENT OF CASH FOR EXISTING SHARES; CONVERTIBLE NOTES, OPTIONS AND
WARRANTS.
(a) At the Effective Time, the Surviving Corporation shall irrevocably
deposit or cause to be deposited with a paying agent appointed by Recap with the
Company's prior approval (the "Paying Agent"), as agent for the holders of
Existing Shares, Convertible Notes, Options and Warrants to be cancelled in
accordance with Sections 2.2, 2.5 and 2.6, cash in the aggregate amount required
to pay the Merger Consideration in respect of such securities outstanding
immediately prior to the Effective Time. Pending distribution pursuant to
Section 2.3(b) hereof of the cash deposited with the Paying Agent, such cash
shall be held in trust for the benefit of the holders of Existing Shares,
Convertible Notes, Options and Warrants cancelled in the Merger and such cash
shall not be used for any other purposes. Each holder of a certificate or
certificates representing Existing Shares cancelled and extinguished at the
Effective Time pursuant to Section 2.2 hereof may thereafter surrender such
certificate or certificates to the Paying Agent, as agent for such holder of
Existing Shares, in exchange for payment of the pro rata portion of the Merger
Consideration as set forth in Section 2.2 for a period ending six months after
the Effective Time. Each holder of Convertible Notes cancelled and extinguished
at the Effective Time pursuant to Sections 2.2 hereof may thereafter surrender
and deliver such notes to the Paying Agent, as agent for such holder of
Convertible Notes, in exchange for payment of the pro rata portion of the Merger
Consideration as set forth in Section 2.2 for a period ending six months after
the Effective Time. Each holder of Warrants cancelled and extinguished at the
Effective Time pursuant to Sections 2.2 and 2.6 hereof may thereafter surrender
and deliver such warrants to the Paying Agent, as agent for such holder of
Warrants, in exchange for payment of the pro rata portion of the Merger
Consideration as set forth in Section 2.6 for a period ending six months after
the Effective Time. Each holder of Options cancelled and extinguished at the
Effective Time pursuant to Section 2.5 hereof shall be entitled to receive from
the Paying Agent its pro rata portion of the Merger Consideration as set forth
in Section 2.5 following the Effective Time.
(b) After surrender to the Paying Agent of any certificate, note,
warrant or other instrument which prior to the Effective Time shall have
represented any Existing Shares, Convertible Notes or Warrants (as applicable),
the Paying Agent shall promptly distribute to the person in whose name such
certificate, note, warrant or other instrument shall have been registered, a
check in the amount into which such Existing Shares, Convertible Notes or
Warrants shall have been converted at the Effective Time pursuant to Sections
2.2 and 2.6 hereof. Until so surrendered and cancelled, each such certificate,
note, warrant or other instrument shall, after the Effective Time, be deemed to
represent only the right to receive its pro rata portion of the Merger
Consideration, and until such surrender and cancellation, no cash shall be paid
to the holder of such outstanding certificate, note, warrant or other instrument
in respect thereof. From and after the Effective Time, the holders of Existing
Shares, Convertible Notes and Warrants outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Existing
Shares, Convertible Notes or Warrants other than the right to receive the
portion of the Merger Consideration as provided in this Agreement. The Surviving
Corporation shall promptly after the Effective Time cause to be distributed to
such holders appropriate materials to facilitate such surrender.
(c) If payment is to be made to a Person other than the registered
holder of the Existing Shares, Convertible Notes or Warrants represented by the
certificate, note, warrant or other instrument so surrendered in exchange
therefor, it shall be a condition to such payment that the certificate, note,
warrant or other instrument so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
payment shall pay to the Paying Agent any transfer or other taxes required as a
result of such payment to a Person other than the registered holder of such
Existing Shares, Convertible Notes or Warrants or establish to the satisfaction
of the Paying Agent that such tax has been paid or is not payable.
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(d) After the Effective Time, there shall be no further transfers on
the stock transfer books of the Surviving Corporation of the Existing Shares
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing Existing Shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the cash amount
provided for, and in accordance with the procedures set forth, in this Article
II.
(e) If any cash deposited with the Paying Agent for purposes of payment
in exchange for Existing Shares, Convertible Notes, Warrants or Options remains
unclaimed six months after the Effective Time, such cash shall be returned to
the Surviving Corporation, upon demand, and any such holder who has not
converted his Existing Shares, Convertible Notes, Warrant or Options into the
cash amount or otherwise received the cash amount pursuant to this Agreement
prior to that time shall thereafter look only to the Surviving Corporation for
payment of the cash amount. Notwithstanding the foregoing, the Surviving
Corporation shall not be liable to any holder of Existing Shares, Convertible
Notes, Warrants or Options for any amount paid to a public official pursuant to
applicable unclaimed property laws. Any amounts remaining unclaimed by holders
of Existing Shares, Convertible Notes, Warrants or Options, seven (7) years
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any Governmental
Authority) shall, to the extent permitted by applicable Law, become the property
of the Surviving Corporation free and clear of any claims or interest of any
Person previously entitled thereto.
(f) Any portion of the Merger Consideration made available to the
Paying Agent pursuant to Section 2.4 to pay for Existing Shares for which
dissenter's rights have been perfected shall be returned to the Surviving
Corporation, upon demand.
(g) No dividends or other distributions with respect to capital stock
of the Surviving Corporation with a record date after the Effective Time shall
be paid to the holder of any unsurrendered certificate for Existing Shares.
(h) In the event that any certificate, note, warrant or other
instrument representing the Existing Shares, Convertible Notes, or Warrants
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such certificate, note, warrant or other
instrument to be lost, stolen or destroyed and, if required by the Company, the
posting by such holder of a bond in such reasonable amount as the Company may
direct as indemnity against any claim that may be made against it with respect
to such certificate, note, warrant or other instrument, the Paying Agent will
issue in exchange for and in lieu of such lost, stolen or destroyed Existing
Share certificate the cash amount, and unpaid dividends and distributions on
Existing Shares deliverable in respect thereof pursuant to this Agreement and
the Merger.
2.4. DISSENTING SHARES. Notwithstanding Section 2.2, Existing Shares which
are issued and outstanding immediately prior to the Effective Time and which are
held by a holder who has not voted such shares of capital stock of the Company
in favor of the Merger and who has delivered a written demand for relief as a
dissenting stockholder in the manner provided by DGCL and who, as of the
Effective Time, shall not have effectively withdrawn or lost such right to
relief as a dissenting stockholder ("Dissenting Shares") shall not be converted
into a right to receive the pro rata portion of the Merger Consideration. The
holders thereof shall be entitled only to such rights as are granted by Section
262 of DGCL. Each holder of Dissenting Shares who becomes entitled to payment
for such Dissenting Shares pursuant to Section 262 of DGCL shall receive payment
therefor from the Surviving Corporation in accordance with DGCL; PROVIDED,
HOWEVER, that if any such holder of Dissenting Shares (i) shall have failed to
establish his entitlement to relief as a dissenting stockholder as provided in
Section 262 of DGCL, (ii) shall have effectively withdrawn his demand for relief
as a dissenting stockholder with respect to such Dissenting Shares or lost his
right to relief as a dissenting stockholder and payment for his Dissenting
Shares under Section 262 of DGCL or (iii) shall have failed to file a complaint
with the appropriate court seeking relief as to determination of the value of
all Dissenting Shares within the time
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provided in Section 262 of DGCL, such holder shall forfeit the right to relief
as a dissenting stockholder with respect to such Dissenting Shares and each such
Dissenting Share shall be converted into the right to receive the appropriate
cash amount, without interest thereon, from the Surviving Corporation as
provided in Section 2.2. The Company shall give Recap prompt notice of any
demands received by the Company prior to the Effective Time for relief as a
dissenting stockholder, and Recap shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Recap, make any payment with
respect to, or settle or offer to settle, any such demands.
2.5. STOCK OPTIONS.
(a) Except as may be otherwise agreed to in writing between Recap and
the holder of any Rollover Options, each Option that has an exercise price of
equal to or greater than the cash amount payable in the Merger per share of
Common Stock shall be cancelled at the Effective Time without any payment or
other consideration therefor.
(b) At the Effective Time, all other Options (other than the Rollover
Options) shall be cancelled and, in lieu thereof, as soon as reasonably
practicable after the Effective Time, each holder of such Options shall receive
a cash payment from the Paying Agent equal to the excess of the aggregate cash
amount that would be paid with respect to the shares of Common Stock subject to
such Options, if the Options were exercised, over the aggregate exercise price
with respect to such Options, as reduced by any required withholding of taxes.
The Rollover Options at the Effective Time shall survive the Closing and the
Surviving Corporation shall assume all the rights, liabilities and obligations
of such Rollover Options in accordance with the respective Stock Option Plan or
any successor or replacement stock option plan of the Surviving Corporation.
(c) Prior to the Effective Time, the Company shall (i) take all
reasonable steps necessary to make any amendments to the terms of such Stock
Option Plans, individual Option agreement or Option that are necessary to give
effect to the transactions contemplated by this Agreement, and (ii) use all
reasonable and necessary efforts to obtain at the earliest practicable date all
written consents (if necessary) from holders of Options to effect the
cancellation of such holder's Options to take effect at the Effective Time.
(d) At or prior to the Effective Time, the Company shall take all
reasonable and necessary action to fully advise the holders of Options of their
respective rights under this Agreement, the Options and the respective Stock
Option Plan, to facilitate the timely exercise of such rights and obligations to
effectuate the provisions of this Section 2.5. From and after the Effective
Time, other than as expressly set forth in this Section 2.5 or any written
agreement between Recap and the holder of the Rollover Options, no holder of
Options shall have any rights in respect of such Options, other than to receive
the pro rata portion of the Merger Consideration for such Options in the manner
described in this Section 2.5. The surrender of any Option or the receipt of the
pro rata portion of the Merger Consideration by such holder of an Option shall
be deemed a release of any and all rights the holder of such Option had or may
have had in respect of such Option.
2.6. WARRANTS.
(a) Each Warrant that has an exercise price of equal to or greater than
the cash amount payable per share of Common Stock shall be cancelled at the
Effective Time without payment or other consideration.
(b) Any right to receive a Warrant pursuant to the Series B Preferred
Stock, the Series D Preferred Stock or Convertible Notes shall be cancelled at
the Effective Time.
(c) Immediately prior to the Effective Time, all other outstanding
Warrants (other than any Warrants (or right to receive a Warrant) that are
governed by Sections 2.6 (a) and (b) above), shall be
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cancelled and, in lieu thereof, as soon as reasonably practicable as of or after
the Effective Time, the holders of such Warrants shall receive a cash payment
from the Paying Agent equal to the excess of the aggregate cash amount that
would be paid with respect to the Existing Shares subject to such Warrants, if
the Warrants were exercised, over the aggregate exercise price with respect to
such Warrants, as reduced by any required withholding of taxes.
(d) Prior to the Effective Time, the Company shall (i) take all
reasonable steps necessary to cause the Warrants, if any, to be terminated on or
prior to the Effective Time and to otherwise make any amendments to the terms of
such Warrants that are necessary to give effect to the transactions contemplated
by this Agreement, and (ii) use all reasonable and necessary efforts to obtain
at the earliest practicable date all written consents from holders of Warrants
to effect the cancellation of such holder's Warrants to take effect at the
Effective Time.
(e) Notwithstanding any provision in this Section 2.6 to the contrary,
Warrants held by two members of management of the Company that do not exceed an
aggregate value of $155,000 may not be cancelled in the Merger and may remain
outstanding as continuing obligations of the Surviving Corporation.
ARTICLE III.
CLOSING
3.1. CLOSING. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Irell & Xxxxxxx LLP, 000 Xxxxx Xxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx at 9:00 A.M. (Los Angeles time) on the Business Day on which the
parties hereto designate as the closing date following the fulfillment or waiver
of the conditions set forth in Article IX hereof in accordance with this
Agreement or (ii) at such other place and time and/or on such other date as the
Company and Recap may agree.
ARTICLE IV.
CERTIFICATE OF INCORPORATION AND BYLAWS;
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
4.1. THE CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
the Company (the "Certificate") in effect at the Effective Time shall be amended
and restated as of the Effective Time and shall be the Certificate of
Incorporation of the Surviving Corporation, until duly amended in accordance
with the terms thereof and the DGCL.
4.2. THE BYLAWS. The Bylaws of Recap in effect at the Effective Time shall
be the Bylaws of the Surviving Corporation, until duly amended in accordance
with the terms thereof and the DGCL.
4.3. OFFICERS AND DIRECTORS. From and after the Effective Time, the
directors of the Surviving Corporation shall be as set forth on SCHEDULE 4.3
attached hereto, and the officers of the Company at the Effective Time, shall be
the officers of the Surviving Corporation, until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections of the Disclosure
Schedules, the Company hereby represents and warrants to Recap as follows:
5.1. ORGANIZATION, STANDING AND AUTHORITY. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective state of incorporation. Each of the
Company and its Subsidiaries is duly qualified to do business and is in
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good standing in the states of the United States and any foreign jurisdictions
where its respective ownership or leasing of property or assets or the conduct
of its business requires it to be so qualified, except as set forth on SCHEDULE
5.1. The Company has made available to Recap a complete and correct copy of the
certificate of incorporation, bylaws or other organizational documents, each as
amended to date, of each of the Company and its Subsidiaries. Each of the
certificates of incorporation, bylaws or other organizational documents so made
available is in full force and effect. The corporate records and minute books of
the Company and its Subsidiaries reflect all material action taken and
authorizations made at meetings of such companies' boards of directors or any
committees thereof and at any stockholders' meetings thereof.
5.2. SUBSIDIARIES.
(a) (i) The Company has provided in SCHEDULE 5.2 a list of the true,
accurate and complete legal names, jurisdiction of incorporation or organization
and foreign qualification of each of the Company and its Subsidiaries, (ii) no
equity securities of any of its Subsidiaries are or may become required to be
issued (other than to it or its wholly-owned Subsidiaries) by reason of any
options, warrants, or otherwise, (iii) except as set forth on SCHEDULE 5.2,
there are no contracts, commitments, understandings or arrangements by which any
of such Subsidiaries is or may be bound to sell or otherwise transfer any equity
securities of any such Subsidiaries (other than to it or its wholly-owned
Subsidiaries), and (iv) except as set forth on SCHEDULE 5.2, there are no
contracts, commitments, understandings, or arrangements relating to the
Subsidiary's rights to vote or to dispose of such securities.
(b) Except as provided in SCHEDULE 5.2, the Company does not own
beneficially, directly or indirectly, any equity securities or similar interests
of any Person, or any interest in a partnership, limited liability company,
joint venture or other entity or organization, other than its Subsidiaries.
5.3. COMPANY CAPITAL STOCK. As of October 19, 1999, the authorized capital
stock of the Company consists solely of 50,000,000 shares of Common Stock, of
which 21,095,087 are issued and outstanding and 30,000,000 shares of Preferred
Stock of which the following series are authorized, issued and outstanding:
SHARES SHARES ISSUED
SERIES AUTHORIZED AND OUTSTANDING
--------------------- ---------- ---------------
A.................... 100 100
B.................... 70,000 -0-
C.................... 100 -0-
D.................... 2,000,000 1,628,663
As of the date hereof, except for such shares as may be repurchased by the
Company as contemplated by Section 7.18 of this Agreement, no shares of Common
Stock or Preferred Stock were held in treasury by the Company or otherwise
beneficially owned by the Company or its Subsidiaries. The outstanding shares of
Common Stock and Preferred Stock have been duly authorized and validly issued,
are fully paid and nonassessable, subject to no preemptive rights, and were not
issued in violation of any preemptive rights. Except as set forth in SCHEDULE
5.3, each of the outstanding shares of capital stock of each of the Company's
Subsidiaries have been duly authorized, and validly issued and are fully paid
and non-assessable and not subject to any preemptive right and owned, either
directly or indirectly, by the Company free and clear of all Encumbrances.
Except as set forth in SCHEDULE 5.3, there are no pre-emptive rights or
outstanding subscriptions, options, warrants, rights, convertible securities or
other agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of the Company or any of its
Subsidiaries. Except as disclosed in SCHEDULE 5.3, the Company does not have
shares subject to repurchase in the event certain performance targets have not
been met (the 'Company Performance Shares'). SCHEDULE 5.3 also sets forth the
number and type of the equity securities of the Company or its Subsidiaries that
will be issued, in accordance with and subject to any and all earn-out payment
or other obligations of the Company.
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5.4. CORPORATE POWER. The Company and its Subsidiaries each has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets. Except as set forth in
SCHEDULE 5.4, subject to receipt of the requisite approval of the Merger by the
holders of its capital stock and the holders of the Convertible Notes entitled
to vote thereon, this Agreement and the transactions contemplated hereby and
thereby have been authorized by all necessary corporate action of the Company
and the Company Board on or prior to the date hereof. This Agreement has been
duly executed and delivered by the Company and is a valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by general
equity principles).
5.5. CONSENTS AND APPROVALS; NO DEFAULTS.
(a) No consents or approvals of, or filings or registrations with, any
Governmental Entity or with any third party are required to be made or obtained
by the Company or any of its Subsidiaries in connection with the execution,
delivery or performance by the Company of this Agreement or to consummate the
Merger except for (i) filings of applications, registrations, statements,
reports or notices (and expiration of any applicable notice periods) with the
United States Department of Justice, the Federal Trade Commission, NASD, the SEC
and state securities authorities, (ii) the requisite approval of this Agreement
by the holders of the capital stock of the Company and the holders of the
Convertible Notes entitled to vote thereon, (iii) the filing of the Certificate
of Merger with the Delaware Secretary pursuant to the DGCL and (iv) consents,
approvals, filings, or registrations listed on SCHEDULE 5.5(a) or which would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
(b) Subject to receipt of the approvals referred to in the preceding
paragraph, and the expiration of related waiting periods, except as set forth in
SCHEDULE 5.5(b), the execution, delivery and performance of this Agreement, the
consummation of the transactions contemplated hereby, and compliance with the
provisions hereof do not and will not (i) violate, or conflict with, or result
in any breach of the terms, conditions, or provisions of the respective charter,
bylaws or other organizational documents of the Company and each of its
Subsidiaries; (ii) violate, or conflict with, or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or give rise to a right of
termination, cancellation, modification or acceleration of the performance
required by or a loss of a material benefit under, or result in the creation or
imposition of (or the obligation to create or impose) any Encumbrance (other
than Permitted Encumbrances) upon any of the properties or assets of the Company
under, any of the terms, conditions or provisions of any material agreement,
indenture, note, bond, mortgage, deed of trust, undertaking, permit, lease,
franchise, license or other instrument to which the Company is a party or by
which it or any of its properties or assets may be bound or affected; or (iii)
to the knowledge of the Company, violate any Law or Order applicable to the
Company, except for any such violation, conflict, breach, default, event, right
or Encumbrance which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(c) SCHEDULE 5.5(c) contains a list of all Approvals of Governmental
Entities that, to the knowledge of the Company, are required to be given or
obtained by the Company from any and all Governmental Entities in connection
with the consummation of the transactions contemplated by this Agreement, except
where the failure to be given or obtain such Approvals, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(d) SCHEDULE 5.5(d) contains a list of all non-governmental Approvals
that, to the knowledge of the Company, are required to be given or obtained by
the Company from any and all third parties in connection with the consummation
of the transactions contemplated by this Agreement, except where the failure to
give or obtain such Approvals, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
5.6. FINANCIAL REPORTS AND REGULATORY DOCUMENTS.
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(a) The Company has heretofore delivered or made available to Recap a
complete and correct copy of each registration statement, offering circular
relating to the offering of securities, report, proxy statement, schedule or
information statement prepared by it or any of its Subsidiaries since December
31, 1996, including, without limitation, (A) any Annual Reports on Form 10-K,
and (B) any Quarterly Reports on Form 10-Q, each in the form (including exhibits
and any amendments thereto) filed with the SEC (collectively, the "SEC
Reports"). As of their respective dates or, if amended, as of the date of the
last such amendment prior to the date of this Agreement, the Company's SEC
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. None of the Subsidiaries is required to file any forms,
reports or other documents with the SEC. Except as set forth on SCHEDULE 5.6,
each of the Company's consolidated balance sheets included in or incorporated by
reference into its SEC Reports (including the related notes and schedules)
fairly presents the consolidated financial position of the Company as of its
date and each of the consolidated statements of income, cash flows and
stockholders' equity included in or incorporated by reference into its SEC
Reports (including any related notes and schedules) fairly presents the
consolidated results of operations, retained earnings and cash flows, as the
case may be, of the Company for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments), in each
case in accordance with GAAP (except, in the case of unaudited statements, as
permitted by applicable instructions or regulations of the SEC relating to the
preparation of quarterly reports on Form 10-Q) consistently applied through the
periods indicated.
(b) Each of the Company and its Subsidiaries has timely filed all
notices, reports, registrations, schedules and statements, together with any
amendments required to be made with respect thereto, that they were required to
file with the United States Department of Justice, the Federal Trade Commission,
NASD, the SEC and state securities authorities and all other material reports
and statements required to be filed by it with any Governmental Entity,
including, without limitation, any report or statement required to be filed
pursuant to the laws of the United States, and has paid all fees and assessments
due and payable in connection therewith, except where the failure to file or pay
such fees or expenses would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company.
(c) Since June 30, 1999, the Company and its Subsidiaries have not
incurred any material liability other than in the ordinary course of business
consistent with past practice.
(d) Except as disclosed in the Company SEC Reports, in SCHEDULE 5.6, or
as contemplated by this Agreement, since June 30, 1999 to the date hereof, the
Company's business has been conducted in the ordinary course, and there has not
been any:
(i) adverse and material change in the condition (financial or
otherwise), results of operations, assets, liabilities, prospects or
business of the Company;
(ii) amendment to the Company's or any of the Company's Subsidiaries'
charter, bylaws or other organizational documents;
(iii) sale, assignment, disposition, transfer, pledge, mortgage or
lease of any material assets primarily used or held for use in the Company's
business;
(iv) incurrence of any Indebtedness, other than accounts payable
arising in the ordinary course of business, consistent with past practice,
and other than under the existing revolving credit facility in the ordinary
course of business;
(v) material reduction in any cash or short-term investments or their
equivalent, other than to meet cash needs arising in the ordinary course of
business, consistent with past practices;
A-14
(vi) sale, assignment, disposition, transfer, pledge, mortgage or lease
of any material Owned Real Estate or Leased Real Estate;
(vii) increase in the compensation or fringe benefits payable or to
become payable to any officers or salaried employees of the Company, other
than routine increases made in the ordinary course of business and
consistent with past practice or as required by law or under any existing
agreements heretofore disclosed to Recap;
(viii) issuance, sale or disposition of any capital stock or other
equity interest in the Company or options, warrants or other rights to
purchase any such capital stock or equity interest or any securities
convertible into or exchangeable for such capital stock or equity interest
or any other change in the issued and outstanding capitalization of the
Company;
(ix) any amendment, alteration or modification in the terms of any
currently outstanding options, warrants or other rights to purchase any
capital stock or equity interest in the Company or any securities
convertible into or exchangeable for such capital stock or equity interest,
including without limitation any reduction in the exercise or conversion
price of any such rights or securities, any change to the vesting or
acceleration terms of any such rights or securities, or any change to terms
relating to the grant of any such rights or securities;
(x) declaration or payment of any dividend or other distribution, or
the transfer of any assets, by the Company to any stockholders of the
Company, or any redemption, repurchase or other acquisition by the Company
of its capital stock, except in the ordinary course of business;
(xi) change by the Company in any of its accounting principles, methods
or practices, including any change in its policies with respect to reserves
(whether for bad debts, contingent liabilities or otherwise), any change in
depreciation or amortization policies or rates or any change in the policies
pertaining to the recognition of accounts receivable or the discharge of
accounts payable;
(xii) changes in the business policies (including advertising,
investment, marketing, pricing, purchasing, production, personnel, sales or
budgeting) or organization of the Company, or the Company's relationships
with dentists, hygienists, technicians, employees, suppliers, agents,
servicers or customers that are material to the Company, except for changes
that would not, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect on the Company;
(xiii) closure, shut down or other elimination of any of the Company's
offices, franchises or any other change in the character of its business,
properties or assets, except, for closures, shut downs, or other
eliminations that would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company;
(xiv) loan or advance to or other such agreement with any of its
stockholders, officers, directors, employees, agents, consultants or other
Representatives, except in the ordinary course of business, consistent with
past practice;
(xv) damage, destruction or loss with respect to any of the properties
or assets of the Company that would have a Material Adverse Effect; or
(xvi) agreement to do, cause or suffer any of the foregoing.
5.7. DISCLOSURE DOCUMENTS. The proxy statement on Schedule 14A in respect
of the Special Meeting of the Company's stockholders to vote upon the Merger
(the "Company Proxy Statement") to be filed with the SEC in connection with the
Merger will not, at the date it is first mailed to stockholders of the Company
or at the time of the Special Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Company Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act. No
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representation is made by the Company with respect to statements made in the
Company Proxy Statement based on information supplied by Recap for inclusion
therein.
5.8. LITIGATION. Except as set forth in SCHEDULE 5.8, there are no Actions
pending or, to the knowledge of the Company, claims threatened against the
Company, at law or in equity, and there is no investigation or proceeding
pending or, to the knowledge of the Company, threatened before or by any
Governmental Entity nor is there any currently effective Order against the
Company, except for any such Actions, claims, investigations, proceedings or
Orders that would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. SCHEDULE 5.8 identifies those pending or, to
the knowledge of the Company, threatened claims listed therein which (i) may not
be covered by third party insurance or (ii) with respect to which the insurance
carrier has denied coverage or has advised the Company that it is defending such
claim under reservation of rights or (iii) for which the Company is self-
insured.
5.9. REGULATORY MATTERS.
(a) Except as set forth on SCHEDULE 5.9, neither the Company nor any of
its Subsidiaries or any of their properties is a party to or is subject to any
order, decree, agreement, memorandum of understanding or similar arrangement
with or a commitment letter or similar submission to, or extraordinary
supervisory letter from, any Governmental Entity.
(b) Except as set forth on SCHEDULE 5.9, neither the Company nor any of
its Subsidiaries has been advised by any Governmental Entity that such
Governmental Entity is contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter or similar action.
5.10. COMPLIANCE WITH LAWS.
(a) Except as set forth in SCHEDULE 5.10, the Company and each of its
Subsidiaries: (i) is in material compliance with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the business of the Company and its
Subsidiaries or to the employees conducting such businesses; (ii) has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental Entities that are
required in order to permit them to own or lease their properties and to conduct
their businesses as presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect
and, to the Company's knowledge, no suspension or cancellation of any of them is
threatened; and (iii) has not received any notification or communication from
any Governmental Entity (a) asserting that the Company or any of its
Subsidiaries is not in compliance with any of the statutes, regulations or
ordinances which such Governmental Entity enforces or (b) threatening to revoke
any license, franchise, permit or governmental authorization (nor, to the
Company's knowledge, do any grounds for any of the foregoing exist).
(b) The terms and conditions set forth in the management agreements
between the Company or its Subsidiaries and the dental practices managed by such
entities comply in all material respects with applicable laws, rules,
regulations and other applicable authorities relating to such agreements,
including but not limited to laws, rules, regulations and other applicable
authorities relating to the corporate practice of dentistry, fee-splitting,
kickbacks, referral fees, and patient brokering and those relating to such
practices.
5.11. MATERIAL CONTRACTS; DEFAULTS.
(a) SCHEDULE 5.11 lists (a) all contracts or commitments that provide
for the aggregate payments to or from the Company in excess of Five Hundred
Thousand Dollars ($500,000) per contract per annum which cannot or in reasonable
probability will not be completed within ninety (90) days from the Closing Date
or cannot be terminated within ninety (90) days from the Closing Date without
the
A-16
payment of a penalty or the equivalent thereof in excess of Two Hundred Fifty
Thousand Dollars ($250,000) or can be terminated by the other party thereto
within ninety (90) days from the Closing Date; (b) all contracts or commitments
affecting ownership of, title to, use of, or any interest in material real
property; (c) all bonuses, incentive compensation, pension, group insurance, or
employee welfare plans of any nature whatsoever that provides for aggregate
payments from the Company in excess of Five Hundred Thousand Dollars ($500,000)
per annum; (d) all documents evidencing any Indebtedness in excess of Two
Hundred Fifty Thousand Dollars ($250,000) to or from the Company; (e) all other
contracts or commitments providing for payments based in any manner upon the
sales, fees, services, purchases or profits in excess of Five Hundred Thousand
Dollars ($500,000) per annum; (f) all contracts or commitments, whether in the
ordinary course of business or not, which involve future payments, earnouts,
performance of services or delivery of goods, equipment or supplies to or by the
Company of an aggregate amount or value in excess of Two Hundred Fifty Thousand
Dollars ($250,000); (g) all business acquisition agreements, merger agreements
(whether by sale of assets, consolidation, reorganization or otherwise),
management services agreements, agency, dealership, license or royalty
agreements, nondisclosure agreements, non-compete agreements, partnership,
joint-venture agreements and commission agreements that require continuing or
future payments by the Company in excess of Two Hundred Fifty Thousand Dollars
($250,000) entered into since January 1, 1999; (h) all agreements between the
Company and any five percent (5%) or greater stockholder, any executive officer,
director, Affiliate or any member of the immediate family of any of the
foregoing persons of the Company; (i) all other material agreements and
commitments with respect to intellectual property; (j) all material contracts to
indemnify or share tax liability or sharing of fees, rebating charges or similar
arrangements; and (k) all other agreements and commitments the absence or
termination of which would have a Material Adverse Effect on the Company;
PROVIDED THAT SCHEDULE 5.11 shall not include any leases for tangible personal
property requiring monthly payments of less than Fifty Thousand Dollars
($50,000) or any contract between a Subsidiary of the Company and any provider
or third party payor regarding payment for the provisions of professional dental
services that are made in the ordinary course of business. Copies of all of the
agreements, contracts and arrangements referred to in this Section have been
heretofore made available to Recap.
(b) Except as set forth in SCHEDULE 5.11, (i) the Company is not, and
to the knowledge of the Company no other party is, in violation of any contract
listed on said SCHEDULE 5.11 or in default with respect thereto, except for such
violation or default that would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect on the Company; (ii) each
contract listed on said Disclosure Schedule is a valid, binding and enforceable
obligation of the Company and, to the knowledge of the Company, the other
parties thereto and is in full force and effect, except where the failure to be
valid, binding, enforceable and in full force and effect would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company, and (iii) none of the contracts listed on such SCHEDULE 5.11
contains provisions that upon a change in control of the Company would have a
Material Adverse Effect on the Company.
5.12. NO BROKERS. No action has been taken by the Company that would give
rise to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions contemplated
by this Agreement.
5.13. ABSENCE OF UNDISCLOSED LIABILITIES. Except as accrued on the balance
sheet of the Company and/or its Subsidiaries at December 31, 1998 included in
Form 10-K (the "Balance Sheet") or set forth in the notes thereto, and except as
set forth in SCHEDULE 5.13, the Company and its Subsidiaries do not have any
liability (whether absolute, accrued, contingent, or otherwise, matured or
unmatured, and whether due or to become due), which liability is required (or
would be required had such liabilities existed at December 31, 1998) to be
reflected on the Balance Sheet or the notes thereto in accordance with GAAP,
except for liabilities and obligations incurred since December 31, 1998 in the
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ordinary course of business and consistent with past practice which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
5.14. EMPLOYEE BENEFIT PLANS.
(a) All benefit and compensation plans, contracts, policies or
arrangements covering current employees or former employees of the Company and
its Subsidiaries (collectively, the "Company Employees") and current or former
directors of the Company, including, but not limited to, "employee benefit
plans" within the meaning of Section 3(3) of ERISA, and deferred compensation,
stock option, stock purchase, stock appreciation rights, stock based, incentive
and bonus plans (collectively, the "Company Benefit Plans"), are disclosed in
SCHEDULE 5.14. True and complete copies of all the Company Benefit Plans,
including, but not limited to, any trust instruments and insurance contracts
forming a part of any the Company Benefit Plans, and all amendments thereto have
been provided or made available to the other parties hereto.
(b) Except as set forth in SCHEDULE 5.14, all employee benefit plans,
other than "multiemployer plans" within the meaning of Section 3(37) of ERISA,
covering the Company Employees (the "Company Plans"), have been administered in
all material respects in compliance with their terms and with all applicable
laws, to the extent subject to ERISA, including without limitation, ERISA and
the Code. The Company is not a party to any "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA (the "Company Pension Plan") and
which is a defined benefit plan as defined in Section 3(35) of ERISA. With
respect to the employee benefit plan intended to qualify under Section 401 of
the Code, the Internal Revenue Service has issued a favorable determination
letter, a true and correct copy of which has been provided to Recap, that such
plan is, and each such plan in fact is, qualified and exempt from federal income
taxes. Except as set forth in SCHEDULE 5.14, there is no pending or, to the
knowledge of the Company, threatened litigation relating to any Company Plan.
Except as set forth in SCHEDULE 5.14, there are no audits, inquiries, reviews,
proceedings, claims or demands pending with any governmental or regulatory
agency. Neither the Company nor any of its Subsidiaries has engaged in a
transaction with respect to any Company Plan that, assuming the taxable period
of such transaction expired as of the date hereof, could subject the Company or
any of its Subsidiaries to a material tax or penalty imposed by either Section
4975 of the Code or Section 502(i) of ERISA.
(c) No material liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by the Company or any of its Subsidiaries
with respect to any ongoing, frozen or terminated 'single-employer plan', within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
any of them, or the single-employer plan of any entity which is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the Code
(an "ERISA Affiliate"). Neither the Company, any of its Subsidiaries nor an
Affiliate has contributed to a "multiemployer plan", within the meaning of
Section 3(37) of ERISA. No notice of a "reportable event", within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any the Company Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof or will be
required to be filed in connection with the transactions contemplated by this
Agreement.
(d) All contributions required to be made under the terms of any the
Company Plan have been timely made or have been reflected on the consolidated
financial statements of the Company referred to in Section 5.6. Neither any the
Company Pension Plan nor any single-employer plan of an ERISA Affiliate has an
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA, and no ERISA Affiliate has an
outstanding funding waiver. Neither the Company nor any of its Subsidiaries has
provided, or is required to provide, security to any Company Pension Plan or to
any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of
the Code.
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(e) Under each Company Pension Plan which is a single-employer plan, as
of the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Company Plan's most recent actuarial
valuation), did not exceed then current value of the assets of such Company
Plan, and there has been no material change in the financial condition of such
Company Plan since the last day of the most recent plan year.
(f) Neither the Company nor any of its Subsidiaries has any material
obligations for retiree health and life benefits under any Company Benefit Plan.
The Company or its Subsidiaries may amend or terminate any such Company Benefit
Plan at any time without incurring any material liability thereunder.
(g) Except as contemplated by this Agreement, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any employees
of the Company or any of its Subsidiaries to severance pay, (ii) accelerate the
time of payment or vesting or trigger any payment of compensation or benefits
under, increase the amount payable or trigger any other material obligation
pursuant to, any of the Company Benefit Plans or (iii) result in any breach or
violation of, or a default under, any of the Company Benefit Plans. Without
limiting the foregoing, as a result of the consummation of the transactions
contemplated by this Agreement, neither the Company nor any of its Subsidiaries
will be obligated to make a payment to an individual that would be a "parachute
payment" to a "disqualified individual" as those terms are defined in Section
280G of the Code, without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the future.
Except as set forth on SCHEDULE 5.14, there is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company or any of
its affiliates that would obligate the Company to make any payments that will
not be fully deductible by virtue of Section 162(m) of the Code.
5.15. LABOR AND EMPLOYMENT MATTERS.
(a) Except as set forth on SCHEDULE 5.15, neither the Company nor any
of its Subsidiaries is a party to or is bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is the Company or any of its Subsidiaries the subject of
a proceeding asserting that it or any such Subsidiary has committed an unfair
labor practice (within the meaning of the National Labor Relations Act) or
seeking to compel the Company or any such Subsidiary to bargain with any labor
organization as to wages or conditions of employment, nor is there any strike or
other labor dispute involving it or any of its Subsidiaries pending or, to the
Company's knowledge, threatened, nor is the Company aware of any activity
involving its or any of its Subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in other organizational activity.
(b) SCHEDULE 5.15 is an accurate list of each employment contract of
the Company which provides for aggregate annual payments of more than $200,000
for personal services or employment which is not terminable on 30 days (or less)
notice by the Company without penalty or obligation to make payments related to
such termination. Except in accordance with the contracts, agreements, plans or
programs identified in SCHEDULE 5.15, no individual will accrue or receive
material additional benefits, service or accelerated rights to payment of
benefits as a result of the transactions contemplated by this Agreement (either
alone or combined with any other event or transaction).
(c) The Company is in compliance in all material respects with all
applicable Laws relating to the employment of labor, including those related to
wages, hours, occupational safety and health, plant closings and mass layoffs,
collective bargaining and the payment and withholding of taxes and other sums as
required by appropriate Governmental Entities, and there has been withheld and
paid to the appropriate Governmental Entities, or there is being held for
payment not yet due to such Governmental Entities, all amounts required to be
withheld from the employees of the Company, and the Company is not liable for
any arrears of wages, taxes, penalties or other sums for failure to comply with
any of the foregoing except for such failures which would not, individually or
in the aggregate, be expected to have a Material Adverse Effect on the Company.
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(d) As of the date hereof, and except as set forth in SCHEDULE 5.15,
there is no (i) unfair labor practice complaint against the Company pending
before the National Labor Relations Board or any other federal, state, local or
foreign agency; (ii) pending labor strike, work stoppage, work slow down or
lockout affecting the Company; (iii) pending material grievance or unfair
dismissal proceeding relating to the Company; (iv) material claim by employees
of the Company alleging discrimination under any federal, state or local law or
constitution, including claims of discrimination or retaliation based on race,
color, creed, age, sex, sexual orientation, national origin, religion or
disability; (v) other material claims affecting the Company relating to
employment, including those based on statute, contract or tort; (vi) pending
representation question or union organizing activities respecting a significant
number of the employees of the Company; or (vii) to the knowledge of the
Company, threat, investigation, charge or complaint with regard to any of the
foregoing relating to the Company.
5.16. YEAR 2000 COMPLIANCE. Except as set forth on SCHEDULE 5.16, (i) the
computer software and related hardware of the Company and its Subsidiaries (the
"Company Computer System") used for the storage and processing of data are, or
will be prior to the year 2000, Year 2000 Compliant; (ii) to the actual
knowledge of the Company, all of the suppliers, customers and third party
providers of the Company are, or will be prior to the year 2000, Year 2000
Compliant; and (iii) the Company is taking or has taken all commercially
reasonable and appropriate action to address and remedy any deficiencies in the
Company Computer System which would keep it from becoming Year 2000 Compliant.
As used herein, 'Year 2000 Compliant' shall mean the ability of the Company
Computer System, to provide the following functions, without human intervention,
individually and in combination with other products or systems: (i) consistently
handle, record, store, process and present dates and date-related information
before, during and after January 1, 2000, including but not limited to accepting
date input, performing calculations on dates or portion of dates, and providing
date output; (ii) function accurately in accordance with the published
specifications and without undue interruption, before, during, and after January
1, 2000 (including leap year computations) without any adverse change in
operation associated with the advent of the year 2000; (iii) respond to
two-digit or four-digit dates and date-related input in a way that resolves any
ambiguity as to the year 2000 in a disclosed, defined and predetermined manner,
and store and provide output of dates and date-related information in ways that
are unambiguous as to the year 2000; and (iv) suitably interact with other
software and related hardware in a way which does not compromise its year 2000
compliance capability.
5.17. ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 5.17, the Company and each of its
Subsidiaries has complied at all times in all material respects with applicable
Environmental Laws; (i) no real property (including buildings or other
structures) currently or formerly owned, leased or operated by the Company or
any of its Subsidiaries has been contaminated with, or has had any release of,
any Hazardous Substance that the Company would reasonably be expected to be
liable for any potential material investigation, clean-up, claims or material
liability from such real property; (ii) neither the Company nor any of its
Subsidiaries is subject to liability for any Hazardous Substance disposal or
contamination on any third party property; (iii) neither the Company nor any of
its Subsidiaries has received any notice, demand letter, claim or request for
information alleging any material violation of, or material liability under, any
Environmental Law; (iv) neither the Company nor any of its Subsidiaries is
subject to any order, decree, injunction or other agreement with any
Governmental Entity or any third party relating to any Environmental Law; (v) to
the best of the Company's knowledge, there are no circumstances or conditions
(including the presence of asbestos, underground storage tanks, lead products,
polychlorinated biphenyls, prior manufacturing operations, dry-cleaning, or
automotive services) involving any currently or formerly owned or operated
property of the Company or any of its Subsidiaries, that could reasonably be
expected to result in any material claims, liability or investigations against
the Company or any of its Subsidiaries or result in any material restrictions on
the ownership, use, or transfer of any property pursuant to any Environmental
Law; and (vi) the Company has delivered to Recap copies of all environmental
reports, studies, sampling
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data, correspondence, filings and other environmental information in its
possession or reasonably available to it relating to the Company, any Subsidiary
of the Company and any currently or formerly owned, leased or operated property.
(b) As used herein, the term "Environmental Law" means any federal,
state or local law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (i) the protection or restoration
of the environment, health, safety, or natural resources, (ii) the handling,
use, presence, disposal, release or threatened release of any Hazardous
Substance or (iii) noise, odor, wetlands, indoor air, pollution, contamination
or any injury or threat of injury to persons or property in connection with any
Hazardous Substance and the term "Hazardous Substance" means any substance in
any concentration that is: (i) listed, classified or regulated pursuant to any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (iii) any other substance which is or may be
the subject of regulatory action by any Governmental Entity in connection with
any Environmental Law.
5.18. TAX MATTERS.
(a) (i) All Tax Returns that are required to be filed (taking into
account any extensions of time within which to file) by or with respect to the
Company and its Subsidiaries have been duly filed, (ii) all Taxes due have been
paid in full, (iii) all deficiencies asserted or assessments made as a result of
such examinations have been paid in full, (iv) no issues that have been raised
by the relevant taxing authority in connection with the examination of any of
the Tax Returns referred to in clause (i) are currently pending, and (v) no
waivers of statutes of limitation have been given by or requested with respect
to any Taxes of the Company or its Subsidiaries. The Company has made available
to Recap true and correct copies of the United States federal income Tax Returns
filed by the Company and its Subsidiaries for each of the three most recent
fiscal years ended on or before December 31, 1998. Neither the Company nor any
of its Subsidiaries has any liability with respect to income, franchise or
similar Taxes that accrued on or before the end of the most recent period
covered by the Company SEC Reports filed prior to the date hereof in excess of
the amounts accrued with respect thereto that are reflected in the financial
statements included in the Company SEC Reports filed on or prior to the date
hereof. Except as set forth on SCHEDULE 5.18, neither the Company nor any of its
Subsidiaries is a party to any Tax allocation or sharing agreement, is or has
been a member of an affiliated group filing consolidated or combined Tax returns
(other than a group the common parent of which is or was the Company) or
otherwise has any liability for the Taxes of any person (other than the Company
and its Subsidiaries).
(b) Except as set forth on SCHEDULE 5.18, no Tax is required to be
withheld pursuant to Section 1445 of the Code as a result of the transfer
contemplated by this Agreement.
5.19. BOOKS AND RECORDS. The books and records of the Company and its
Subsidiaries have been fully, properly and accurately maintained in all material
respects, and there are no material inaccuracies or discrepancies of any kind
contained or reflected therein, and they fairly present the financial position
of the Company and its Subsidiaries.
5.20. INSURANCE. SCHEDULE 5.20 lists all of the insurance policies,
binders, or bonds maintained by the Company or its Subsidiaries ('Insurance
Policies'). The Company and its Subsidiaries are insured with reputable insurers
against such risks and in such amounts as the management of the Company
reasonably has determined to be prudent for its business, operations, properties
and assets. All the Insurance Policies are in full force and effect; the Company
and its Subsidiaries are not in material default thereunder; and all claims
thereunder have been filed in due and timely fashion. No material claim by the
Company on or in respect of an insurance policy or bond has ever been declined
or refused by the relevant insurer or insurers. Between the date hereof and the
Closing Date, the Company will maintain the levels of insurance coverage in
effect on the date hereof and will submit all claims existing prior to the
Closing Date to its insurance carrier on or before the Closing Date.
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5.21. ASSETS.
(a) Except as indicated in SCHEDULE 5.21, the Company holds title to or
a leasehold, consignment or license in each item of material tangible personal
property owned by or in the possession of the Company. Except as indicated in
SCHEDULE 5.21 or on the Balance Sheet or the notes thereto:
(i) each item of tangible personal property listed in the fixed asset
ledger of the Company as being owned is owned by the Company, and will at
the Closing be owned by the Company, free and clear of all Encumbrances
except for Permitted Encumbrances; and
(ii) the Company is not in default with respect to any term or
condition of any lease of personal property, nor has any event occurred
which through the passage of time or the giving of notice, or both, would
result in such a default, in each case except as would not individually or
in the aggregate reasonably be expected to have a Material Adverse Effect;
and
(iii) except for such items of equipment as are undergoing repair or
refurbishment or are being held for replacement, in each case in the
ordinary course of business and consistent with past practice, and except to
the extent that no material liability will be incurred in restoring
equipment to reasonable operating condition, all of the equipment (including
tools, operating and office supplies, and computer hardware and softwares)
owned or leased or otherwise used by the Company are in reasonable operating
condition and, subject to normal maintenance, are available for use.
(b) All accounts receivable, unbilled invoices and other receivables of
the Company due or recorded in the records and books of account of the
Company as being due to the Company (less the amount of any provision or
reserve therefor made in the records and books of account of the Company)
(i) arose in the ordinary course of business, and (ii) are reasonably
expected to be collectible.
(c) Except as set forth in SCHEDULE 5.21, the values at which
inventories of the Company are carried on the balance sheet as of December
31, 1998 referred to in Section 5.6 reflect the inventory valuation policy
of the Company consistent with its past practice and in accordance with
GAAP.
5.22. STATEMENTS TRUE AND CORRECT. None of the information (including this
Agreement) supplied or to be supplied by the Company or any of its Subsidiaries
to any Governmental Entity in connection with the transactions contemplated
hereby will, at the respective time such documents are supplied, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or omit to state any material fact
necessary to correct any statement in any earlier communication to any
Governmental Entity. All documents that the Company or any Subsidiary thereof is
responsible for filing with any Governmental Entity in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable law. Except as disclosed in this Agreement
(including any Exhibit or Schedule) and such other documents and certificates,
there is no fact known to the Company which constitutes a Material Adverse
Effect on the Company.
5.23. REGULATORY APPROVALS. Except as set forth on SCHEDULE 5.23 hereto,
neither the Company nor any of its Subsidiaries has taken any action or has any
knowledge of any fact or circumstance that is reasonably likely to materially
impede or delay receipt of any consents of a Governmental Entity or result in
the imposition of a condition or restriction.
5.24. REAL PROPERTY AND LEASEHOLDS.
(a) SCHEDULE 5.24 lists and identifies all material parcels of real
property currently owned in fee by the Company (the 'Owned Real Estate'). The
Company holds marketable and legal title to each of the real properties
constituting Owned Real Estate, free and clear of all Encumbrances, except for
Permitted Encumbrances.
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(b) SCHEDULE 5.24 lists and identifies all material parcels of real
property leased or subleased to the Company (collectively, the "Leased Real
Estate"). Except as set forth on SCHEDULE 5.24, to the knowledge of the Company,
the Company holds valid and subsisting leasehold interests to each of the
leaseholds constituting Leased Real Estate, free and clear of all Encumbrances,
except for Permitted Encumbrances.
(c) With respect to each lease, master lease or sublease of any real
estate described in SCHEDULE 5.24, except as set forth in SCHEDULE 5.24 and to
the knowledge of the Company, the Company is not and no other party thereto is,
in default with respect to any material term or condition thereof, nor has any
event occurred that through the passage of time or the giving of notice, or
both, would constitute a material default thereunder, except in each such case
for such defaults as would not reasonably be expected to result in any adverse
consequence that, individually or in the aggregate, would have a Material
Adverse Effect on the Company.
(d) Except as set forth on SCHEDULE 5.24 and to the knowledge of the
Company, all the real property leases relating to the Leased Real Estate are in
full force and effect (including those that have expired original terms and are
continuing on a month-to-month or similar basis) and the Company is entitled to
all the rights of a tenant thereunder, taking into account the consummation of
the transactions contemplated by this Agreement. Except as set forth on SCHEDULE
5.24, no Action against the Company is pending or, to the knowledge of the
Company, threatened in connection with any such real property leases, except for
any Action (not involving the failure to pay rent) that is not, individually or
in the aggregate, reasonably expected to have a Material Adverse Effect.
5.25. COMPANY ACTION. The Company Board or Special Committee has adopted
resolutions recommending that this Agreement and the Merger be approved by its
stockholders and note holders (as applicable) and directing that this Agreement
and the Merger be submitted for consideration by its stockholders at the Special
Meeting.
5.26. TAKEOVER STATUTES. Except for Section 203 of the DGCL, no Takeover
Statute applicable to the Company is applicable to the Merger, the
Recapitalization or the other transactions contemplated hereby.
5.27. EARN OUT PAYMENTS. SCHEDULE 5.27 sets forth a summary of the material
terms of any and all earn out payment obligations of the Company, including but
not limited to the payment of cash, the issuance of equity and incurring of
Indebtedness by the Company. Such summary shall contain the identity of the
party due such earn out payment, the amount of the payment, the transaction
related to such earn out and the earn out performance thresholds.
5.28. OPINION. The Special Committee has engaged Deutsche Bank Securities
Inc. and has received the opinion of Deutsche Bank Securities Inc. to the effect
that, as of the date of this Agreement, the cash consideration to be received in
the Merger by the holders of the shares of Common Stock (other than the Rollover
Holders) is fair to such holders from a financial point of view.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF RECAP
Recap hereby represents and warrants to the Company as follows:
6.1. ORGANIZATION AND GOOD STANDING; AUTHORITY. Recap is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority and has taken all corporate
action necessary in order to execute and deliver this Agreement and consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Recap and is a valid and legally binding obligation of it,
enforceable against Recap in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy,
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insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by general
equity principles).
6.2. ABSENCE OF CONFLICT. Subject to the receipt of the approvals set forth
in SCHEDULE 6.2, the execution, delivery and performance of this Agreement, the
consummation of the transactions contemplated hereby, and compliance with the
provisions hereof do not and will not (i) violate, or conflict with, or result
in a breach of the terms, conditions, or provisions of the charter or bylaws of
Recap; (ii) violate, or conflict with, or result in a breach of any provisions
of, or constitute a default (or an event that, with the notice or lapse of time
or both, would constitute a default) under, or give rise to a right of
termination, cancellation, modification or acceleration of the performance
required by or a loss of a material benefit under, or result in the creation or
imposition of (or the obligation to create or impose) any Encumbrance upon any
of the properties or assets of Recap under any of the terms, conditions or
provisions of any material agreement, indenture, note, bond, mortgage, deed of
trust, undertaking, permit, lease, franchise, license or other instrument to
which Recap is a party or by which it or any of its properties or assets may be
bound or affected; or (iii) to the knowledge of Recap, violate any Law or Order
applicable to Recap, except for any such violation, conflict, breach, default,
event, right or Encumbrance which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
6.3. APPROVALS. SCHEDULE 6.3 contains a list of all Approvals of
Governmental Entities which, to the knowledge of Recap, are required to be given
or obtained by Recap from any and all Governmental Entities in connection with
the consummation of the transactions contemplated by this Agreement, except
where the failure to be given or obtain such Approvals, individually or in the
aggregate, would not reasonable be expected to have a Material Adverse Effect.
6.4. BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been conducted by Recap in such manner as
not to give rise to, and the consummation of the transactions contemplated
hereby will not give rise to, any valid claim against the Company or any of its
directors, officers, stockholders or affiliates for a brokerage commission,
finder's fee or other like payment to any person or entity.
6.5. FINANCING. Recap will have at the Closing sufficient cash through a
combination of committed capital from its investors (including, without
limitation, equity cash contributions by GEI in the amounts contemplated by the
Financing Letters (as defined below)) and financing from financial institutions,
subject to the fulfillment of the conditions precedent to borrowings set forth
in the Financing Letters, to enable it to pay the full Merger Consideration as
provided herein, to make all other necessary payments by it in connection with
the Merger (including the repayment of certain outstanding indebtedness of the
Surviving Corporation, including the current senior credit facility of the
Company and the Convertible Notes) and to pay all of the related fees and
expenses (the "Financing"). The Company shall use all reasonable efforts to
cooperate with and assist Recap in obtaining the Financing. The parties
acknowledge that financing letters from the following Persons have been
delivered to the Board of Directors of the Company: (i) Deutsche Bank Securities
Inc. and (ii) Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation (collectively,
the "Financing Letters"). Notwithstanding anything in this Section 6.5 to the
contrary, the Financing Letters delivered to the Board of Directors of the
Company on or before the date of this Agreement may be superseded at the option
of Recap after the date hereof but prior to the Effective Time by letters (the
"New Financing Letters") delivered to the Board of Directors of the Company,
which New Financing Letters shall be substantially similar to the Financing
Letters, provided that the terms of the New Financing Letters shall not have any
adverse effect upon the ability to consummate, or expand upon the conditions
precedent to, the Financing as set forth in the Financing Letters. In such
event, the term "Financing Letters" as used herein shall be deemed to refer to
the New Financing Letters.
6.6. STATEMENTS TRUE AND CORRECT. None of the information supplied or to be
supplied by Recap or any of its Affiliates to the Company or any of its
Affiliates in connection with any filing or
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communication with any Governmental Entity in connection with the transactions
contemplated hereby will, at the respective time such documents are supplied, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication to
or filing with any Governmental Entity. All documents that Recap or any of its
Affiliates is responsible for filing with any Governmental Entity in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable law.
ARTICLE VII.
COVENANTS
7.1. CONDUCT OF BUSINESS PENDING CLOSING. Except for actions contemplated
by subparagraphs below, the Company agrees that on and after the date hereof and
prior to the Closing Date, except as otherwise consented to by Recap in writing
(which consent shall not be unreasonably withheld), as set forth in SCHEDULE
7.1, or as otherwise contemplated by this Agreement:
(a) The Company shall conduct its business in the ordinary course in
all material respects;
(b) The Company shall (i) discharge accounts payable and other current
liabilities and obligations of the Company in accordance with past practice, and
(ii) discharge on a timely basis in accordance with past practice any and all
liabilities as and to the extent such liabilities or any portion thereof become
due prior to the Closing; PROVIDED, HOWEVER, that the Company shall not prepay,
redeem or repurchase any Indebtedness or other obligations that are not due and
payable prior to the Closing other than as contemplated by this Agreement or
pursuant to its existing revolving credit facility in the ordinary course of
business;
(c) The Company shall use commercially reasonable efforts to preserve
the business organization of the Company intact, to preserve the goodwill of
suppliers, customers, employees and others with whom business relationships
exist and maintain all Permits, licenses and franchises;
(d) Other than in connection with acquisitions in the ordinary course
of business, not to exceed $15,000,000 individually or $40,000,000 in the
aggregate in total consideration (including but not limited to cash paid, seller
notes, Indebtedness assumed or other such consideration including earn out
obligations) (the "Permitted Acquisitions") following adequate notice to Recap,
the Company shall not borrow any money, incur any Indebtedness or guarantee any
Indebtedness or obligation of any Person, other than accounts payable arising in
the ordinary course of business, consistent with past practice, and other than
pursuant to its existing revolving credit facility in the ordinary course of
business;
(e) The Company shall not issue, sell or dispose of any capital stock
or other equity interest in the Company or options, warrants or other rights to
purchase any such capital stock or equity interest or any securities convertible
into or exchangeable for such capital stock or equity interests or otherwise
make or effect any change in the issued and outstanding capitalization of the
Company;
(f) Except as otherwise contemplated pursuant to this Agreement, the
Company shall not cause or permit any amendment, alteration or modification in
the terms of any currently outstanding options, warrants or other rights to
purchase any capital stock or equity interest in the Company or any securities
convertible into or exchangeable for such capital stock or equity interest,
including without limitation any reduction in the exercise or conversion price
of any such rights or securities, any change to the vesting or acceleration
terms of any such rights or securities, or any change to terms relating to the
grant of any such rights or securities;
(g) Except as set forth on SCHEDULE 7.1(g), the Company shall not
declare or pay any dividend or make any other distribution, or transfer any
assets, to any stockholders of the Company, or
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redeem, repurchase or otherwise reacquire any of its capital stock, except in
the ordinary course of business;
(h) Other than Permitted Acquisitions or agreements to manage dental
practices on the standard form agreements of the Company in accordance with past
practice, following adequate notice to Recap, the Company shall not enter into
any contracts or agreements (written or oral) that provide for aggregate
payments by any party in excess of $500,000 per contract per annum, and that are
not terminable upon 90 days (or less) notice by the Company without penalty or
obligation to make payments related to such termination and, to the extent the
Company is a party to any such contract or agreement as of the date hereof, the
Company shall not amend or waive any material rights under any such contract;
(i) Other than Permitted Acquisitions following adequate notice to
Recap, the Company shall not purchase, lease or otherwise acquire all or any
substantial part of the properties or assets of, or otherwise acquire, merge or
consolidate with, any Person (or division thereof);
(j) The Company shall not sell, lease, transfer, assign or otherwise
dispose of any material properties or assets, except for sales in connection
with any transaction to which the Company is contractually obligated prior to
the date hereof described on SCHEDULE 7.1(j) or as consistent with past business
practice;
(k) Except as set forth on SCHEDULE 7.1(k), the Company shall not sell,
lease, transfer, assign or otherwise dispose of any material Owned Real Estate
or Leased Real Estate, and the Company shall not permit any lease or sublease of
Leased Real Estate to terminate or expire, in each case except as otherwise
provided in this Agreement or as consistent with past business practice;
(l) Except as may be required by law or under any existing agreements
heretofore disclosed to Recap, the Company shall not increase the compensation
or fringe benefits payable or to become payable by the Company to any of the
officers or salaried employees of the Company, other than routine or customary
increases made in the ordinary course of business and consistent with past
practice;
(m) Except as set forth on SCHEDULE 7.1(m), the Company shall not
close, shut down or otherwise eliminate any of its offices or make any other
material change in the character of its business, properties or assets other
than in the ordinary course of business consistent with past practice except for
closures, shut downs, eliminations or changes that would not, individually or in
the aggregate, be reasonably expected to have a Material Adverse Effect on the
Company;
(n) Except as disclosed on SCHEDULE 7.1(n) hereof, the Company shall
not change its accounting principles, methods or practices, including any change
in its policies with respect to reserves (whether for bad debts, contingent
liabilities or otherwise), any change in depreciation or amortization policies
or rates or any change in the policies pertaining to the recognition of accounts
receivable or the discharge of accounts payable or accounting for inventories
other than in the ordinary course of business and/or would have a detrimental
impact on the financial condition of the Company;
(o) Other than in the ordinary course or as otherwise contemplated by
this Agreement as part of the transactions to be consummated pursuant to this
Agreement, the Company shall not make any representation or proposal to, or
engage in substantive discussions with, any of the holders (or their
representatives) of any Indebtedness, or to or with any party which has issued a
letter of credit that benefits the Company, without prior consultation with and
approval of Recap (which shall not be unreasonably withheld);
(p) The Company shall (i) use commercially reasonable efforts to
maintain its existing Permits and Approvals, and (ii) be in compliance with
applicable Law, except for failures to comply that would not, individually or in
the aggregate, be reasonably expected to have a Material Adverse Effect on the
Company;
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(q) The Company shall use commercially reasonable efforts to maintain
in full force and effect all policies of insurance now in effect and give all
notices and present all claims under all such policies in a timely fashion;
(r) The Company shall not enter into any agreement or take or commit to
take any action that would, if taken on or before the Closing, result in a
breach of any of the foregoing covenants contained in this Section 7.1 or of any
representation or warranty of the Company contained in this Agreement;
(s) The Company shall not take any action, enter into any agreement,
alter any policy or commit to any of the foregoing if such action, agreement or
policy would delay or hinder the consummation of the Recapitalization or the
Merger, or would result in or trigger push-down accounting treatment of the
Merger and the transactions contemplated herein;
(t) The Company shall not settle or resolve any single litigation,
arbitration or other adjudication matter, if such settlement or resolution would
result in a payment in excess of $750,000 without the prior written consent of
Recap which consent shall not be unreasonably withheld; and
(u) The Company may not make any single capital expenditures other than
capital expenditures in the ordinary course of business consistent with past
practice in amounts not exceeding $500,000.
7.2. ACCESS. The Company shall permit Recap and its Representatives to have
reasonable access during normal business hours, upon reasonable notice and in
such manner as will not unreasonably interfere with the conduct of the Company's
business, to all of the directors, officers, employees, agents and
Representatives of the Company and all properties, books, records, operating
instructions, procedures and Tax Returns of the Company and all other
information with respect to the Company, its business and operations and its
assets and properties as Recap or its Representatives may from time to time
reasonably request, and to make copies of such books, records and other
documents.
7.3. PERMITS AND APPROVALS. The Company and Recap shall use commercially
reasonable efforts to obtain all Permits and Approvals reasonably necessary for
the consummation of the transactions contemplated hereby and to permit the
Company, following the Closing, to continue to conduct its business in
substantially the manner it is being conducted as of the date hereof, except as
would not otherwise, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect on the Company. The Company shall use
commercially reasonable efforts to obtain all authorizations from any Person as
may be required for it to consummate the transactions contemplated hereby in
accordance with the terms of this Agreement, and if the Company, despite such
efforts, is unable to obtain any such authorizations, the Company shall take, or
cause to be taken, all other reasonable actions necessary, proper or advisable
in order for it to fulfill its obligations hereunder and to carry out the
intentions of the parties expressed herein.
7.4. LITIGATION. Until the Closing, each of the Company and Recap shall
promptly notify the other of any action, suit, proceeding, claim or
investigation which is threatened or commenced that materially relates to or
materially affects the Company, its business, its properties or assets, this
Agreement or the transactions contemplated hereby.
7.5. ACQUISITION PROPOSALS.
(a) The Company agrees that neither it nor any of its officers and
directors shall, and the Company shall direct and use its best efforts to cause
its employees and Representatives (including, without limitation, any investment
banker, attorney or accountant) not to, initiate, solicit or encourage, directly
or indirectly, any inquiries, discussions, negotiations or the making of any
proposal or offer (including, without limitation, any proposal or offer to
stockholders of the Company) with respect to a merger, consolidation or similar
transaction, other than pursuant to this Agreement, involving, or any purchase
of all or any significant portion of the properties and assets or any equity
securities of, the Company (any such proposal or offer being hereinafter
referred to as an 'Acquisition Proposal') or engage
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in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any Person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing and shall make all
reasonable efforts to enforce any confidentiality agreements to which it is a
party. The Company will take the necessary steps to inform the appropriate
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 7.5. The Company will notify Recap
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with the Company, including setting forth
the material terms of the proposal and the identity of the party making such
proposal, and Company shall promptly notify Recap of the status and any material
developments concerning the same, including furnishing copies of any such
written inquiries or proposals.
(b) Except as set forth in this Section 7.5(b), the Company Board shall
not withdraw its recommendation of the transactions contemplated hereby or
approve or recommend, or cause the Company to enter into any agreement with
respect to any Acquisition Proposal. If the Company Board, by a majority
disinterested vote determines in its good faith judgment after consultation with
and based, among other things, upon the advice of legal counsel, that it is
required to do so in order to comply with its fiduciary duties, the Company
Board may withdraw its recommendation of the transactions contemplated hereby or
approve or recommend a Superior Proposal (as defined in subsection (d) below),
but in each case only if the following conditions are met:
(i) the Company Board after providing written notice to Recap (a
"Notice of Superior Proposal") advising Recap that the Company Board has
received a Superior Proposal, and specifies the material terms and
conditions of such Superior Proposal and identifies the person making such
Superior Proposal; and
(ii) if Recap does not, within five (5) business days of Recap's
receipt of the Notice of Superior Proposal, make an offer that the Company
Board by a majority disinterested vote determines in its good faith judgment
(after consultation with a financial adviser of nationally recognized
reputation) to be at least as favorable to the Company's stockholders as
such Superior Proposal; provided, however, that the Company shall not be
entitled to enter into any agreement with respect to a Superior Proposal
unless and until this Agreement is terminated by its terms pursuant to
Section 9.1 and the Company has paid all amounts due to Recap pursuant to
Section 9.3.
Any disclosure that the Company Board may be compelled to make with respect
to the receipt of an Acquisition Proposal or otherwise in order to comply with
its fiduciary duties or Rule 14d-9 or 14e-2 will not constitute a violation of
this Agreement, provided that such disclosure states that no action will be
taken by the Company Board in violation of this Section 7.5(b).
(c) Should the Company, within 30 days following the public
announcement of this Agreement, receive an unsolicited Acquisition Proposal and
provided that the Company shall not have otherwise violated the provisions of
Section 7.5(a) hereof with respect to such unsolicited Acquisition Proposal, the
Company may for a period not to exceed 30 days from the date that the Company
received such unsolicited Acquisition Proposal, notwithstanding the provisions
of Section 7.5(a), provide confidential information or data to and have
discussions with the Person making such unsolicited Acquisition Proposal
(subject to the execution and delivery of customary confidentiality agreements),
if the Company Board by a majority disinterested vote determines in its good
faith judgment after consultation with and based, among other things, upon the
advice of legal counsel, that it is required to do so in order to comply with
its fiduciary duties.
(d) For purposes of this Agreement, a "Superior Proposal" means any
bona fide Acquisition Proposal the terms of which contain a consideration higher
than the cash consideration to be paid to the holders of the Common Stock of the
Company in the Merger by Recap and that the Company Board by a
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majority vote determines in its good faith judgment (after consultation with a
financial advisor of nationally recognized reputation) to be more favorable to
the Company's stockholders than the Merger.
7.6. H-S-R NOTIFICATION. (a) FILINGS. As soon as reasonably practicable
after the execution of this Agreement, each of the Company and Recap shall file,
or cause to be filed, with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice pursuant to the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the 'H-S-R Act'),
the notification and documentary material required in connection with the
transactions contemplated hereby.
(b) COOPERATION. Recap and the Company shall promptly file any additional
information requested as soon as reasonably practicable after receipt of a
request for additional information. Recap and the Company shall use their
commercially reasonable efforts to obtain early termination of the applicable
waiting period under the H-S-R Act. The parties hereto will coordinate and
cooperate with one another in exchanging such information and providing such
reasonable assistance as may be requested in connection with such filings.
(c) OTHER ACTIONS. The Company agrees that, in order to comply with the
H-S-R Act in connection with the transactions contemplated hereby, Recap shall
be entitled, in its sole discretion, to acquiesce to any divestitures, operating
restrictions or other constraints imposed or required by any Governmental
Entity, provided that such divestitures, operating restrictions or other
constraints shall not have any material effect on the terms of the Merger.
7.7. FINANCIAL STATEMENT DELIVERIES. As soon as is reasonably practicable
and in no event later than thirty (30) days from the last day of each fiscal
month, each fiscal quarter and each fiscal year between the date of this
Agreement and the Closing Date, the Company shall prepare and provide to Recap
monthly, quarterly or yearly historical financial statements, as applicable (the
"Update Financial Statements") for the Company, utilizing the same format and
methodology used in preparing the financial statements that are provided
internally to management. As soon as reasonably practicable between the date of
this Agreement and the Closing Date, the Company shall deliver drafts of any
Form 10-Q or Form 10-K, including any revisions or amendments thereto, prepared
or filed by the Company.
7.8. COVENANT TO SATISFY CONDITIONS. Each of the Company and Recap will use
reasonable best efforts to ensure that the conditions set forth in Article 8
hereof are satisfied, insofar as such matters are within the control of such
party. Each such party shall promptly consult with the other with respect to,
and provide to the other any legally permitted information and copies of all
filings made by such party with any Governmental Entity or any other information
supplied by such party to a Governmental Entity (other than confidential
personnel information) in connection with this Agreement and the transactions
contemplated hereby. Recap and the Company further covenant and agree, with
respect to any pending or threatened Action, preliminary or permanent injunction
or other Order, decree or ruling or statute, rule, regulation or executive order
that would adversely affect the ability of the parties hereto to consummate the
transactions contemplated hereby, to use reasonable best efforts to prevent or
lift the entry, enactment or promulgation thereof, as the case may be. Upon the
request of Recap, the Company agrees that it shall use reasonable best efforts
to secure waivers and/or consents from such third parties as may be necessary or
desirable in Recap's reasonable judgment in order to consummate the transactions
contemplated hereby.
7.9. PROXY STATEMENT. As soon as reasonably practicable after the date
hereof, the Company shall prepare the Company Proxy Statement, file such proxy
statement and such other reports, schedules or other information (including
without limitation Schedule 13E-3 under the Exchange Act) as may be required
with the SEC, respond to comments of the staff of the SEC, if any, file the
definitive proxy statement as soon as practicable, and promptly thereafter mail
such proxy statement to all holders of record (as of the applicable record date)
of Existing Shares. The Company and Recap shall cooperate reasonably with each
other in the preparation of the proxy statement and such other materials. Recap
shall provide the Company and any of its Affiliates with any information for
inclusion in the Company Proxy
A-29
Statement or any other filings required to be made by the Company or any of its
Affiliates with any Governmental Entity in connection with the transactions
contemplated by this Agreement which may be required under applicable law and
which is reasonably requested by the Company or any of its Affiliates. The
Company agrees that Recap shall be given reasonable opportunity to review and
comment on the proxy statement and such other materials and to approve the proxy
statement and such other materials prior to its filing (which approval will not
be unreasonably withheld) and thereafter to participate in discussions
concerning the comments of the SEC staff and to approve all responses thereto
(which approval will not be unreasonably withheld). The Company shall promptly
notify Recap of the receipt of the comments of the SEC and of any request from
the SEC for amendments or supplements to the Company Proxy Statement or for
additional information, and will promptly supply Recap with copies of all
correspondence between the Company or its representatives, on the one hand, and
the SEC or members of its staff, on the other hand, with respect to the Company
Proxy Statement or the Merger. If at any time prior to the Special Meeting any
event should occur which is required by applicable law to be set forth in an
amendment of, or a supplement to, the Company Proxy Statement, the Company will
promptly inform Recap. In such case, the Company, with the cooperation of Recap,
will, upon earning of such event, promptly prepare and mail such amendment or
supplement; provided, that prior to such mailing, the Company shall consult with
Recap with respect to such amendment or supplement and shall afford Recap
reasonable opportunity to comment thereon. The Company will notify Recap at
least 24 hours prior to the mailing of the Company Proxy Statement, or any
amendment or supplement thereto, to the stockholders of the Company.
7.10. STOCKHOLDERS' MEETING. The Company shall take all action necessary,
in accordance with applicable law and its certificate of incorporation and
bylaws, to convene a Special Meeting of the holders of the Existing Shares (the
'Special Meeting') as promptly as practicable, but in no event more than 45 days
after a definitive proxy statement has been filed with the SEC (unless Recap
requests or consents to an extension of such 45 day period), for the purpose of
approving the Merger. The Company Board shall recommend at such Special Meeting
that the Merger be approved by its stockholders. Notwithstanding the foregoing,
if, as a result of actions taken in compliance with Section 7.5 hereof and
subject to the provisions of Article 9 hereof, the Company receives a formal
unsolicited Acquisition Proposal concerning a transaction in which all the
holders of Existing Shares will receive the consideration in a Superior
Proposal, the Company Board may withdraw or modify such recommendation prior to
the Special Meeting; PROVIDED, HOWEVER, that the Company shall have consulted
with its legal counsel and conclude in its good faith that the Company Board is
legally required to do so in the discharge of its fiduciary duties; and PROVIDED
FURTHER, that the Company shall give Recap five (5) Business Days' prior notice
of such withdrawal or modification, specifying the material terms of such
unsolicited Acquisition Proposal.
7.11. FINANCING. Each of the Company and Recap agrees to use its
commercially reasonable efforts to obtain all of the financing necessary in
connection with the consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, the Company
acknowledges receipt of the 'Financing Letters' referred to in Section 6.5
hereof and undertakes to use its commercially reasonable efforts to fulfill, or
cause to be fulfilled, the obligations of 'Borrower' thereunder. Each of the
Company and Recap shall use their respective best commercial efforts to (i)
commence the process to obtain the financing as contemplated in this Section
7.11 (including marketing of debt instruments) promptly following approval of
the Merger and this Agreement by the requisite vote of the holders of capital
stock and Convertible Notes of the Company (provided that Recap shall not
required to commence any marketing of debt instruments prior to January 15,
2000), and (ii) obtain such financing by the earlier to occur of eight (8) weeks
from the date the Merger and this Agreement are approved by the requisite vote
of the holders of capital stock and Convertible Notes of the Company or April
30, 2000.
7.12. DISCLOSURE PRIOR TO CLOSING. In the event that, at any time prior to
the Closing, the Company or Recap becomes aware of any matter that, if existing
or known as of the date of this
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Agreement, would have been required to be set forth or described in the
Schedules hereto or would otherwise have rendered any representation or warranty
false, such party shall promptly provide written notice of such matters to the
other party. However, no such notice provided under this Section 7.12 shall be
deemed to cure any breach of any representation or warranty made in this
Agreement whether for purposes of determining whether or not the conditions set
forth in Article 8 hereof have been satisfied or otherwise. In addition, the
Company shall promptly provide written notice of any events occurring after the
date hereof that individually or in the aggregate have had or are reasonably
expected to have a Material Adverse Effect on the Company.
7.13. DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION. The Surviving
Corporation will indemnify each person who is now, or has been at any time prior
to the date hereof, a director or officer of the Company or its successors and
assigns (individually an 'Indemnified Party' and collectively the 'Indemnified
Parties'), to the fullest extent required or permitted under the certificate of
incorporation or Bylaws of the Company, or any agreement with the Company in
each case as in effect immediately prior to the execution of this Agreement,
with respect to any claim, liability, loss, damage, judgment, fine, penalty,
amount paid in settlement or compromise, cost or expense, including reasonable
fees and expenses of legal counsel (whenever asserted or claimed), based in hole
or in part on, or arising in whole or in part out of, any matter, state of
affairs or occurrence existing or occurring at or prior to the Effective Time
whether commenced, asserted or claimed before or after the Effective Time,
including, without limitation, liability arising under the Securities Act, the
Exchange Act, or state law. The Surviving Corporation will maintain in effect
for not less than six years after the Effective Time the current policies of
directors' and officers' liability insurance maintained by the Company on the
date hereof (provided that Recap may substitute therefor policies having at
least the same coverage, with a comparably rated issuer and containing terms and
conditions which are no less advantageous to the persons currently covered by
such policies as insured) with respect to matters existing or occurring at or
prior to the Effective Time; PROVIDED, HOWEVER, that if the aggregate annual
premiums for such insurance during such period exceed 200% of the per annum rate
of the aggregate premium currently paid by the Company for such insurance on the
date of this Agreement, then the Surviving Corporation will provide the maximum
coverage that will then be available at an annual premium equal to 200% of such
rate. The rights under this Section 7.13 are in addition to rights that an
Indemnified Party may have under the certificate of incorporation, Bylaws or
other similar organizational documents of the Company or any Subsidiary or under
the DGCL. The rights under this Section 7.13 are contingent upon the occurrence
of, and will survive consummation of, the Merger and are expressly intended to
benefit each Indemnified Party.
7.14. OPTIONS, WARRANTS AND CONVERTIBLE NOTES. The Company shall use its
reasonable best efforts to obtain the rollover, the exercise or the cancellation
of the Options and Rollover Options as set forth in Section 2.5. The Surviving
Corporation shall assume the Rollover Options pursuant to Section 2.5 and in
accordance with the respective Stock Option Plan, and the exercise price and
number of shares underlying each such option shall be adjusted equitably to
reflect the effect of the Merger. The Company shall use its reasonable best
efforts to obtain the cancellation and surrender of the Warrants as set forth in
Section 2.6, and the receipt of any approvals or consents from the holder
thereof to this Agreement and the transactions contemplated hereby. The Company
shall use its reasonable best efforts to obtain the cancellation and surrender
of the Convertible Notes as set forth in Section 2.2, and the receipt of any
approvals or consents from the holders thereof to this Agreement and the
transactions contemplated hereby.
7.15. ANTITAKEOVER STATUTES. If any Takeover Statute (as defined below) is
or may become applicable to the transactions contemplated hereby, the Company
Board will grant such approvals and take such actions as are necessary so that
the transactions contemplated hereby and thereby may be consummated as promptly
as practicable on the terms contemplated hereby and thereby and otherwise act to
eliminate the effects of any Takeover Statute on any of the transactions
contemplated hereby or thereby. For purposes of this Agreement, a "Takeover
Statute" means a "fair price", "moratorium", "control share
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acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States, including without limitation Section
203 of the DGCL.
7.16. REGULATORY APPLICATIONS. (a) Each of the Company and Recap and their
respective Subsidiaries shall cooperate and use their respective reasonable best
efforts to prepare all documentation, to effect all filings and to obtain all
permits, consents, approvals and authorizations of all third parties and
Governmental Entities necessary to consummate the transactions contemplated by
this Agreement. Each of the Company and Recap shall have the right to review in
advance, and to the extent practicable each will consult with the other, in each
case subject to applicable laws relating to the exchange of information, with
respect to all material written information submitted to any third party or any
Governmental Entity in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as practicable. Each party hereto agrees that
it will consult with the other party hereto with respect to the obtaining of all
material permits, consents, approvals and authorizations of all third parties
and Governmental Entities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other party
appraised of the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Entity.
7.17. NOTICES OF CERTAIN EVENTS. Each of the parties hereto shall promptly
notify the other party of:
(a) the receipt by such party of any notice or other communication from any
Person alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement.
(b) the receipt by such party of any notice or other communication from any
Governmental Authority in connection with the transactions contemplated by this
Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced or,
to the best of such party's knowledge threatened against, or affecting such
party which, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to this Agreement or which relate to the
consummation of the transactions contemplated by this Agreement.
7.18. REDEMPTION OR CANCELLATION OF SECURITIES. The Company agrees to
redeem and/or cancel the securities set forth on SCHEDULE 7.18, in accordance
with the provisions of this Agreement and in order to consummate the Merger.
7.19. DELIVERY OF OPINION OF FINANCIAL ADVISOR. The Company agrees to
deliver to Recap a true and complete copy of the written opinion of Deutsche
Bank Securities Inc., promptly following the execution and delivery of this
Agreement.
ARTICLE VIII.
CONDITIONS OF MERGER
8.1. GENERAL CONDITIONS. The obligations of the parties to effect the
Closing shall be subject to the following conditions unless waived in writing by
both parties:
8.1.1. NO LAW OR ORDERS. No Law or Order shall have been enacted,
entered, issued or promulgated by any Governmental Entity (and be in effect)
which prohibits or materially restricts the consummation of the transactions
contemplated hereby.
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8.1.2. H-S-R. Any applicable waiting period under the H-S-R Act shall
have expired or have been terminated with respect to the transactions
contemplated hereby.
8.1.3. LEGAL PROCEEDINGS. No Governmental Entity shall have notified
either party to this Agreement that it intends to commence proceedings to
restrain or prohibit the transactions contemplated hereby or force rescission,
unless such Governmental Entity shall have withdrawn such notice and abandoned
any such proceedings prior to the time which otherwise would have been the
Closing Date.
8.1.4. STOCKHOLDER APPROVAL. The Merger and the other transactions
contemplated hereby shall have been approved by the requisite vote of the
holders of the outstanding capital stock of the Company entitled to vote
thereon.
8.1.5. REGULATORY APPROVAL. All regulatory approvals or waivers
required to consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect and all statutory waiting
periods in respect thereof shall have expired and no such approvals or waivers
shall contain any conditions, restrictions or requirements which Recap's Board
reasonably determines would (i) following the Effective Time, have a Material
Adverse Effect on the Surviving Corporation taken as a whole or (ii) reduce the
benefits of the transactions contemplated hereby to such a degree that Recap
would not have entered into this Agreement had such conditions, restrictions or
requirements been known at the date hereof.
8.1.6. THIRD PARTY CONSENTS. The Company shall have received all
requisite consents to the transactions contemplated by the Merger and/or waivers
to certain redemption or conversion rights, or conversion price or redemption
price adjustments or change in control rights or acceleration rights, reasonably
satisfactory to the Company and Recap, and of the Purchasers (as that term is
defined in the Securities Purchase Agreement) pursuant to the Subordinated Notes
and the Securities Purchase Agreement signed in connection therewith.
8.1.7. CONVERTIBLE NOTE HOLDERS APPROVAL. The Merger and the other
transactions contemplated hereby shall have been approved by the requisite vote
or consent of the holders of the Convertible Notes entitled to vote or consent
thereon.
8.2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to close the transactions contemplated by this
Agreement shall be subject to the satisfaction on or prior to the Closing Date
of each of the following conditions precedent, any of which may be waived by the
Company:
8.2.1. ACCURACY OF RECAP'S REPRESENTATIONS AND PERFORMANCE OF
OBLIGATIONS.
(a) All representations and warranties made by Recap in this Agreement, any
Schedule or any agreement, certificate or instrument to be executed by Recap
pursuant hereto shall be true and correct in all respects on the date when made
and on and as of the Closing Date (unless the representations and warranties
address matters as of a particular date, in which case they shall remain true
and correct in all respects as of such date) with the same effect as if made on
and as of the Closing Date (without regard to any amendment or supplement of any
such Schedule, agreement or instrument after the date hereof), except where such
failures, in each case or in the aggregate, have not had and are not reasonably
expected to have a Material Adverse Effect on Recap, PROVIDED THAT, whenever any
such representation or warranty is conditioned by reference to materiality or a
Material Adverse Effect, for the purposes of this Section 8.2.1(a), such
representation or warranty shall be treated as if such representation or
warranty did not contain any limitation as to materiality or Material Adverse
Effect as stated therein.
(b) Recap shall have performed or complied in all material respects with
all covenants and conditions contained in this Agreement, any Schedule or any
agreement, certificate or instrument to be
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executed by Recap pursuant hereto required to be performed or complied with by
Recap either at or prior to the Closing.
8.2.2. RECAP DELIVERIES. Recap shall have delivered, or shall have
caused to be delivered, to the Company at or prior to the Closing the following:
(a) a certified copy of the resolutions duly adopted by the board of
directors of Recap authorizing this Agreement and the transactions
contemplated hereby and thereby;
(b) such other documents, instruments or certificates as shall be
reasonably requested by the Company or its counsel; and
(c) a certificate of the president or any vice president and secretary
or any assistant secretary of Recap certifying to the matters set forth in
Section 8.2.1(a) and (b) above.
8.3. CONDITIONS PRECEDENT TO OBLIGATIONS OF RECAP. The obligations of Recap
to close the transactions contemplated by this Agreement shall be subject to the
satisfaction on or prior to the Closing Date of each of the following conditions
precedent, any of which may be waived by Recap:
8.3.1. ACCURACY OF THE COMPANY'S REPRESENTATIONS AND PERFORMANCE OF
OBLIGATIONS.
(a) All representations and warranties made by the Company in this
Agreement, any Schedule or any agreement, certificate or instrument to be
executed by the Company pursuant hereto shall be true and correct in all
respects on the date when made and on and as of the Closing Date (unless the
representations and warranties address matters as of a particular date, in which
case they shall remain true and correct in all respects as of such date) with
the same effect as if made on and as of the Closing Date (without regard to any
amendment or supplement of any such Schedule, agreement or instrument after the
date hereof), except where such failures, in each case or in the aggregate, have
not had and are not reasonably expected to have a Material Adverse Effect on the
Company, PROVIDED THAT, whenever any such representation or warranty is
conditioned by reference to materiality or a Material Adverse Effect, for the
purposes of this Section 8.3.1(a), such representation or warranty shall be
treated as if such representation or warranty did not contain any limitation as
to materiality or Material Adverse Effect as stated therein.
(b) Except for any action requested or required to be taken by the
Company pursuant to Section 7.6(c) hereof, the Company shall have performed or
complied in all material respects with all covenants and conditions contained in
this Agreement, any Schedule or any agreement, certificate or instrument to be
executed by the Company pursuant hereto required to be performed or complied
with by the Company either at or prior to the Closing.
8.3.2. PERMITS AND APPROVALS. The Company shall have made or obtained, on
terms reasonably satisfactory to Recap, all Permits and Approvals required from
any Governmental Entity or any third party in order to consummate the
transactions contemplated hereby and permit the Surviving Corporation to
continue the Company's business in substantially the manner as it is being
conducted as of the date hereof, except where the failure to obtain such Permits
or Approvals, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect.
8.3.3. COMPANY ADVERSE CHANGES. There shall not have occurred after the
date hereof any events which individually or in the aggregate have had or are
reasonably expected to have a Material Adverse Effect on the Company.
8.3.4. DELIVERIES. The Company shall have delivered, or shall have caused
to be delivered, to Recap at or prior to the Closing the following:
(a) to the extent requested by Xxxxx, resignations of the directors of
the Company and each of the Company's Subsidiaries effective as of the Closing;
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(b) certified copies of the resolutions duly adopted by the Company
Board and by the holders of the Existing Shares, authorizing this Agreement and
the transactions contemplated hereby;
(c) a certificate of the chief executive officer, president or any vice
president and secretary or any assistant secretary of the Company certifying to
the matters set forth in Section 8.3.1(a) and (b) above;
(d) the corporate seal, minute books and stock transfer books of the
Company; and
(e) such other documents, instruments or certificates as shall be
reasonably requested by Recap or its counsel.
8.3.5. FINANCING. Recap shall have made or obtained all financing (i)
necessary in connection with the consummation of the transactions contemplated
by this Agreement and the 'Financing Letters' referred to in Section 6.5 and
(ii) which is reasonably necessary to continue after the Closing the business of
the Surviving Corporation in substantially the manner it is currently being
conducted or is planned to be conducted.
8.3.6. RECAPITALIZATION. The Recapitalization shall have been consummated.
8.3.7. ACCOUNTING PRINCIPLES. Except as set forth on SCHEDULE 8.3.7, from
the fiscal year ended December 31, 1998 and prior to the Effective Time, the
Company shall not have altered, modified or amended, and the Company shall not
have been required in the future to make any alteration, modification or
amendment (which in Recap's reasonable belief would have a Material Adverse
Effect on the Company) of, any of its material accounting principles, methods or
practices (that are limited and directed to the Company specifically and not
applicable generally to all companies), whether or not required or requested to
make such alteration, modification or amendment by any Governmental Entity, by
the Company's independent auditors or otherwise.
8.3.8. PUSH-DOWN ACCOUNTING. There shall not have occurred any material
change in accounting rules (including but not limited to GAAP), or in the
applicable federal and state securities Laws, or any action by the Company or
its Subsidiaries, which results in or triggers push-down accounting treatment
for the Merger.
8.3.9. DISSENTING SHARES. The aggregate number of Dissenting Shares shall
not equal 15% or more of the shares of the Company outstanding as of the record
date for the Special Meeting.
8.3.10. SHARE EXCHANGE AND SUBSCRIPTION. Subject to the terms and
conditions of the Exchange Agreement, the Rollover Holders and Recap shall have
consummated a transfer and exchange of the Rollover Shares held by the Rollover
Holders with Recap, in exchange for newly issued shares of capital stock of
Recap to the Rollover Holders, prior to the Effective Time.
8.3.11. MANAGEMENT SERVICES AGREEMENT. The Company (and/or the
Subsidiaries) and Xxxxxxx Xxxxx & Partners, L.P. (and/or its Affiliates) shall
have executed and delivered the management services agreement prior to the
Closing.
8.3.12. STOCKHOLDERS AGREEMENT. Each of the respective parties to the
stockholders agreement shall have executed and delivered such agreement prior to
the Closing.
8.3.13. DUE DILIGENCE OF DENTISTS AND DENTAL PROFESSIONALS. For a period of
thirty (30) days from the date of this Agreement, Recap shall be entitled to
meet with and perform due diligence on certain dentists, other dental
professionals and certain dental practices affiliated with the Company,
identified and selected by Recap at its discretion after reasonable notice to
and consultation with the Company. The discoveries by Recap from such due
diligence shall not reasonably be expected to have a Material Adverse Effect on
the Company.
8.3.14. XXXX-XXXXX OPINION. The Company shall deliver an opinion letter
from Xxxxx Xxxxxxx or other law firm of national standing with expertise in the
area of California health plan regulation to the
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effect that the Agreement and the transactions contemplated hereby shall not
require prior approval from the California Department of Corporations pursuant
to the California Xxxx-Xxxxx Health Care Service Plan Act of 1975, as amended,
and the regulations issued thereunder (the 'Xxxx-Xxxxx Act'), by virtue of the
licensure of the Company's Subsidiary, Dedicated Dental Systems, Inc. as a
specialized health care service plan under the Xxxx-Xxxxx Act and other than any
issues arising from the notice and prior approval from the California Department
of Corporations pursuant to the Xxxx-Xxxxx Act, the Agreement and the
transactions contemplated hereby would not otherwise violate the Xxxx-Xxxxx Act.
8.3.15. EMPLOYMENT AGREEMENTS. Each of Xxxxxxx Xxxxx and Xxxxxx Xxxxxxx
shall have executed and delivered an employment agreement substantially in the
form attached hereto as Exhibit C prior to the Closing.
8.3.16. CANCELLATION OF OPTIONS, WARRANTS AND CONVERTIBLE NOTES. The
Company shall have obtained the rollover, the exercise or the cancellation of
the Options and Rollover Options as set forth in Section 2.5 and received any
necessary agreements, approvals or consents from the holders thereof. The
Company shall have obtained the cancellation and surrender of the outstanding
Warrants as set forth in Section 2.6 (except for Warrants held by two members of
management of the Company not to exceed an aggregate value of $155,000 which may
not be cancelled and may remain outstanding) and received any necessary
approvals or consents from the holders thereof. The Company shall have obtained
the cancellation and surrender of the Convertible Notes as set forth in Section
2.2(f).
8.3.17. AGREEMENTS WITH POTENTIAL RECIPIENTS OF EARN OUT SHARES. The
Company shall have entered into an agreement with each potential recipient of
Earn Out Shares, including but not limited to those recipients set forth on
Schedule 5.3, to the effect that such recipient agrees to accept cash in lieu of
any Earn Out Shares to be issued to such recipient in the event that the earn
out obligation is incurred by the Company.
8.3.18. RESIGNATION OF DIRECTORS. All of the directors of the Company,
other than those persons set forth on SCHEDULE 4.3, shall have resigned from the
Board of Directors effective as of the Closing Date.
ARTICLE IX.
TERMINATION
9.1. TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Effective Time, whether
before or after stockholder approval of the Merger:
(a) MUTUAL CONSENT. By mutual written consent of the parties hereto;
(b) BY RECAP. By Recap, if (i) any of the conditions set forth in
Section 8.1 or 8.3 shall have become incapable of fulfillment, (ii) the Company
Board or any committee thereof fails to recommend or withdraws or modifies, or
resolves to withdraw or modify, its recommendation of the Merger, whether or not
in compliance with Section 7.10 hereof, or (iii) the Company, the Company Board
or any Representative of the Company shall take any other actions that would be
proscribed by Section 7.5 hereof but for the exceptions therein set forth in
Section 7.5(b) allowing certain actions to be taken based on the fiduciary
obligations of the Company Board or in order to comply with applicable
securities law requirements;
(c) BY THE COMPANY. By the Company, if (i) the Company Board has
approved a Superior Proposal in accordance with the terms of Section 7.5 or (ii)
any of the conditions set forth in Section 8.1 or 8.2 shall have become
incapable of fulfillment;
(d) FAILURE OF CONDITIONS. By Recap or the Company, if the transactions
contemplated hereby are not consummated on or before April 30, 2000 and if the
failure to consummate such
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transactions on or before such date did not result from the breach of any
representation, warranty or agreement herein of the party seeking such
termination;
(e) BREACH OF COVENANT. By Recap or the Company, if the other party
shall be in material breach of any of its covenants contained in this Agreement
and such breach either is incapable of cure or is not cured within 15 days after
notice from the party wishing to terminate; PROVIDED THAT the party seeking such
termination shall not also then be in material breach of this Agreement;
PROVIDED FURTHER that any breach of the provisions of Section 7.5 hereof shall
entitle Recap to an immediate right of termination without any notice or cure
requirement.
(f) BREACH OF REPRESENTATIONS AND WARRANTIES. By Recap or the Company,
if the other party shall be in breach of any of its representations or
warranties contained in this Agreement, which breach, individually or together
with all other breaches, is reasonably expected to have a Material Adverse
Effect on the Company or Recap, as applicable, and such breach either is
incapable of cure or is not cured within 15 days after notice from the party
wishing to terminate, PROVIDED, that the party seeking such termination shall
not also then be in material breach of this Agreement.
9.2. MANNER AND EFFECT OF TERMINATION. Termination shall be effected by
the giving of written notice to that effect by the party seeking termination. If
this Agreement is validly terminated and the transactions contemplated hereby
are not consummated, this Agreement shall become null and void and of no further
force and effect and no party shall be obligated to the others hereunder;
PROVIDED, HOWEVER, that termination shall not affect (i) the rights and remedies
available to a party as a result of the breach by the other party hereunder
(provided that, the provisions of Section 9.3 shall constitute the exclusive
legal remedy of Recap with respect to breach by the Company described therein),
(ii) the provisions of Sections 5.12 and 6.4 hereof, or (iii) the obligations of
the Company pursuant to Section 9.3 below.
9.3. CERTAIN PAYMENTS UPON TERMINATION.
(a) In the event that: (i) either party terminates this Agreement under
Section 9.1(b)(i), 9.1(c)(ii) or 9.1(d) due to the failure of the condition
specified in Section 8.1.7 to be satisfied; (ii) the Company terminates this
Agreement under Section 9.1(c)(i); (iii) Recap terminates this Agreement under
Section 9.1(b)(ii); or (iv) Recap terminates this Agreement under Section 9.1(e)
based on the violation or breach by the Company of the covenants set forth in
Sections 7.5, 7.9, or 7.10 hereof, the Company shall pay to Recap a termination
fee in the amount of $7,500,000 (the 'Termination Fee'), plus all Expenses. In
the event that this Agreement is terminated by either party under Section
9.1(b)(i), 9.1(c)(ii) or 9.1(d) due to a failure of the condition specified in
Section 8.1.4 and the Termination Fee is not then otherwise payable pursuant to
the preceding sentence, the Company shall pay Recap a preliminary termination
fee in the amount of $1,000,000 (the 'Preliminary Termination Fee'), plus all
Expenses; provided, however, that if the Company enters into an Acquisition
Proposal within twelve months from the date of the termination of this Agreement
under such circumstance, the Company shall pay to Recap an additional
$6,500,000. In the event that Recap terminates this Agreement under Section
9.1(b)(iii) the Company shall pay Recap for all Expenses; and if the Termination
Fee is not otherwise payable, the Company shall pay Recap the Termination Fee if
the Company enters into an Acquisition Proposal within twelve months from the
date of the termination of this Agreement.
(b) In the event this Agreement is terminated under Section 9.1 and
neither the Termination Fee nor the Preliminary Termination Fee is payable under
Section 9.3(a), the Company shall pay, or reimburse Recap, upon submission of
one or more statements thereof, accompanied by reasonable supporting
documentation, for all Expenses incurred in connection with or related to this
Agreement, the Merger and the consummation of all transactions contemplated by
this Agreement, unless: (i) Recap fails in any material respect to perform any
of its material obligations under this Agreement and has not cured such
non-performance within 20 days after Recap has received written notice from the
Company specifying
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the nature of such non-performance; (ii) Recap has materially breached any of
the material representations or warranties made by it in Article VI, and such
breach is not cured (if the same is susceptible of being cured) within 20 days
after Recap has received written notice from the Company specifying the nature
of such breach; or (iii) the financing necessary to consummate the transactions
contemplated by this Agreement is not obtained, except for the failure to obtain
such financing as a result of a breach of the Company's representations and
warranties made in Article V, the failure of the Company to perform any of its
material obligations under this Agreement, or the occurrence of any event,
individually or in the aggregate, that would reasonably expected to have a
Material Adverse Effect on the Company.
(c) For purposes of this Section 9.3, "Expenses" shall mean (A) all
fees and expenses (including those of counsel, accountants and other advisors,
but not including any fees and expenses in connection with financings) not to
exceed $1,500,000 and (B) all fees and expenses in connection with financings
(that have been approved in advance by the Company), incurred by any of Recap
and its affiliates in connection with the transactions contemplated by this
Agreement; PROVIDED, HOWEVER, any fees and expenses set forth in the Financing
Letters shall be deemed approved by the Company. All payments required to be
made hereunder shall be made by wire transfer of immediately available funds
within two (2) Business Days of the event giving rise to the payment of such
Expenses. The Company acknowledges that the agreements contained in this Section
9.3 are an integral part of the transactions contemplated by this Agreement and
that, without said agreements, Recap would not enter into this Agreement;
accordingly, if the Company fails promptly to pay the Termination Fee and
Expenses due pursuant to this Section 9.3, and, in order to obtain such payment,
Recap commences a suit which results in a judgment against the Company for the
fees and expenses set forth herein, the Company will pay to Recap Recap's
reasonable expenses (including attorneys' fees and expenses) in connection with
such suit, together with interest on the amounts due hereunder at the legal rate
determined by the court rendering such judgment.
ARTICLE X.
OTHER AGREEMENTS
10.1. CONFIDENTIALITY. The Company agrees that from the date hereof until
the Closing Date or earlier termination of this Agreement it will not, and will
use reasonable best efforts to ensure that none of its directors, officers,
Representatives, agents or employees will, without the prior written consent of
Recap, submit or disclose to or file with any other Person, or use, any
confidential or non-public information relating to the Company or Recap, except
for such disclosure as may be required by Law or applicable accounting
regulations. Recap agrees that from the date hereof until the Closing Date or
earlier termination of this Agreement it will not, and will use reasonable best
efforts to ensure that none of its directors, officers, Representatives, agents
or employees will, without the prior written consent of the Company, submit or
disclose to or file with any other Person, or use, any confidential or
non-public information relating to the Company, except for such disclosure as
may be required by Law or applicable accounting regulations. Without limiting
the generality of the foregoing, Recap and the Company agree and acknowledge
that, until the Closing, they will continue to be bound by the Confidentiality
Agreement dated August 10, 1999 between the Company and Xxxxxxx Xxxxx &
Partners, L.P.
ARTICLE XI.
MISCELLANEOUS
11.1. EXPENSES. Except as otherwise specifically provided for herein
(including without limitation under Article IX hereof), each of the Company, on
the one hand, and Recap, on the other, shall pay all of its costs and expenses
(including attorneys', accountants' and investment bankers' fees) incurred in
connection with this Agreement and the transactions contemplated hereby.
11.2. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given upon receipt if delivered personally or sent by facsimile
transmission (receipt of which is confirmed) or by courier service promising
overnight delivery
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(with delivery confirmed the next day) or three (3) Business Days after sent by
registered or certified mail (postage prepaid, return receipt requested).
Notices shall be addressed as follows:
To The Company: InterDent, Inc.
000 Xxxxx Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx
Xxxxxxxxx: (000) 000-0000
With a copy to: XxXxxxxxx, Will & Xxxxx
00000 Xxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
To Recap: ID Recap, Inc.
c/o Xxxxxxx Xxxxx & Partners, L.P.
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
With a copy to: Irell & Xxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Either party may from time to time change its address for the purpose of notices
by a similar notice specifying the new address but no such change shall be
effective as against any Person until such Person shall have actually received
it.
11.3. ENTIRE AGREEMENT. This Agreement contains the final and entire
agreement between the parties with respect to the transactions contemplated
hereby and supersedes all written or verbal representations, warranties,
commitments and other understandings prior to the date hereof, other than the
Confidentiality Agreement, dated August 10,1999. No reference shall be made to
any draft of this Agreement for purposes of interpretation or resolution of
ambiguity or otherwise. All Exhibits annexed hereto, and all Schedules referred
to herein, are hereby incorporated in and made a part of this Agreement as if
set forth in full herein.
11.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
11.5. SEVERABILITY. If any provision hereof shall be held to be
unenforceable or invalid by any court of competent jurisdiction or as a result
of future legislative action, such holding or action shall be strictly construed
and shall not alter the enforceability, validity or effect of any other
provision hereof.
11.6. ASSIGNABILITY. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns; PROVIDED, HOWEVER, that neither this Agreement
nor any right or obligation hereunder may be assigned by either party without
the prior written consent of the other to be given in the other party's sole
discretion.
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11.7. CAPTIONS. The descriptive headings herein are inserted for
convenience only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
11.8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
11.9. SPECIFIC PERFORMANCE. The parties hereto agree that if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof (without requirement to post bond), in addition to any and all other
remedies at law or in equity.
11.10. AMENDMENT AND WAIVER. This Agreement may be amended, modified or
supplemented at any time, whether before or after stockholder approval only by
an instrument in writing signed by all parties hereto; PROVIDED, HOWEVER, this
Agreement may not be amended, modified or supplemented following approval of the
Merger by the holders of the Company's outstanding capital stock entitled to
vote thereon without the further approval of such stockholders if such
amendment, modification or supplement would adversely affect such stockholders.
No waiver by any party of any of the provisions hereof shall be effective unless
set forth in writing and executed by the party so waiving. Any waiver or failure
to insist upon strict compliance with any obligation, covenant, agreement,
provision, term or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure to comply.
11.11. FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable, whether under applicable laws
and regulations or otherwise, to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement.
11.12. PUBLICITY. Except as hereinafter provided, the Company and Recap
shall not, and each of them shall use commercially reasonable efforts to cause
their respective directors, officers, employees, Representatives and agents not
to, discuss publicly or make any public statement with respect to this Agreement
or the transactions contemplated hereby without the other party's approval.
Before making any such public announcements, the parties hereto shall use good
faith efforts to agree upon the text of a joint announcement to be made by the
parties hereto or use good faith efforts to obtain the other party's approval of
the text of any public announcement to be made solely on behalf of such party.
If the parties hereto are unable to agree on or approve such a public statement
or announcement and legal counsel for a party is of the opinion that such
statement or announcement is required by law or the rules of any stock exchange
on which the parties' securities are traded, then such party may make or issue
the legally required statement or announcement.
11.13. FORCE MAJEURE. Anything to the contrary in this Agreement
notwithstanding, no party hereto shall be liable to the other parties hereto for
any loss, injury, delay, damages or other casualty suffered or incurred by such
other party hereto due to strikes, riots, storms, fires, explosions, acts of
God, war, governmental action, or any other cause similar thereto which is
beyond the reasonable control of such parties, and any failure or delay by any
party hereto in performance of any of its obligations under this Agreement due
to one or more of the foregoing causes shall not be considered as a breach of
this Agreement. In the event that performance of any of the material obligations
under this Agreement shall be suspended due to one or more of the foregoing
causes and such suspension shall have a material adverse impact on consummation
of the transactions as contemplated in this Agreement or on the operations or
financial conditions or prospects of the Company, then the aggrieved party which
shall be materially and adversely affected thereby may terminate this Agreement.
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11.14. ATTORNEY'S FEES. In any suit or proceeding arising out of this
Agreement or to interpret or enforce any provision of this Agreement, the
prevailing party shall be entitled to all reasonable out-of-pocket expenses and
reasonable attorneys' fees incurred by such party in connection with such suit
or proceeding.
11.15. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for the agreements contained in Article II, and Sections
5.12, 6.4 and 7.13 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
INTERDENT, INC.
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxx______________
Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
ID RECAP, INC.,
a Delaware corporation
By: /s/ Xxxx Xxxxxxx__________________
Name: Xxxx Xxxxxxx
Title: President
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EXHIBITS
Exhibit A Voting Agreement
Exhibit B Recapitalization Agreement
Exhibit C Employment Agreement
SCHEDULES
Schedule 1.2(lll) Permitted Encumbrances
Schedule 1.2(ttt) Rollover Options
Schedule 4.3 Directors
Schedule 5.1 Organization, Standing and Authority
Schedule 5.2 Company, Subsidiaries and Equity
Schedule 5.3 Company Capital Stock
Schedule 5.4 Corporate Power
Schedule 5.5(a) Consent and Approvals; No Defaults
Schedule 5.5(b) Conflicts
Schedule 5.5(c) Governmental Approvals
Schedule 5.5(d) Non-Governmental Approvals
Schedule 5.6 Financial Reports and Regulatory Documents; Changes
Schedule 5.8 Litigation
Schedule 5.9 Regulatory Matters
Schedule 5.10 Compliance with Laws
Schedule 5.11 Material Contracts; Defaults
Schedule 5.13 Undisclosed Liabilities
Schedule 5.14 Employee Benefit Plans
Schedule 5.15 Labor and Employment Matters
Schedule 5.16 Year 2000 Compliance
Schedule 5.17 Environmental Matters
Schedule 5.18 Tax Matters
Schedule 5.20 Insurance
Schedule 5.21 Assets
Schedule 5.23 Regulatory Approvals
Schedule 5.24 Real Property and Leaseholds
Schedule 5.27 Earn out Payments
Schedule 6.2 Conflicts
Schedule 6.3 Approvals
Schedule 7.1 Conduct of Business Pending Closing
Schedule 7.18 Redemption or Cancellation of Securities
Schedule 8.3.7 Accounting Principles
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