EXHIBIT 2.2
Annex 1
APPLE ORTHODONTIX, INC.
UNIFORM PROVISIONS
FOR THE
ACQUISITION
OF
FOUNDING COMPANIES
WORDS AND TERMS USED IN THESE UNIFORM PROVISIONS WHICH
ARE DEFINED IN THE AGREEMENT AND PLAN OF REORGANIZATION
AMONG APPLE ORTHODONTIX, INC.,__________________ ,_____
____________________________ AND THE STOCKHOLDERS NAMED
THEREIN (CALLED THEREIN AND HEREIN "THIS AGREEMENT") TO
WHICH THESE UNIFORM PROVISIONS ARE ATTACHED AS ANNEX 1
ARE USED HEREIN AS DEFINED THEREIN.
TABLE OF CONTENTS
ARTICLE I ADDITIONAL DEFINITIONS.......................................... 1
Section 1.02 Additional Defined Terms............................. 1
Section 1.03 Other Definitional Provisions........................12
Section 1.04 Captions.............................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH
STOCKHOLDER........................................................13
Section 3.02 Ownership and Status of Company Capital Stock........13
Section 3.03 Power of the Stockholder; Approval of the Merger.....13
Section 3.04 No Conflicts or Litigation...........................14
Section 3.05 No Brokers...........................................14
Section 3.06 Preemptive and Other Rights; Waiver..................14
Section 3.07 Control of Related Businesses........................14
Section 3.08 Organization and Good Standing; Qualification........15
Section 3.09 [Intentionally Left Blank]...........................15
Section 3.10 Corporate Records. .................................15
Section 3.11 Authorization and Validity. ........................15
Section 3.12 No Violation. ......................................15
Section 3.13 No Business, Agreements, Assets or Liabilities. ....16
Section 3.14 Compliance with Laws. ..............................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS............................................16
Section 4.02 Qualification........................................16
Section 4.03 Authorization; Enforceability; Absence of
Conflicts Required Consents..........................16
Section 4.04 Charter Documents and Records; No Violation..........17
Section 4.05 No Defaults..........................................18
Section 4.06 Company Subsidiaries.................................18
Section 4.07 Capital Stock of the Company and the Company
Subsidiaries.........................................18
Section 4.08 Transactions in Capital Stock........................19
Section 4.09 No Bonus Shares......................................19
Section 4.10 Predecessor Status; Etc..............................19
Section 4.11 Related Party Agreements.............................19
Section 4.12 Litigation...........................................19
Section 4.13 Financial Statements; Disclosure.....................19
Section 4.14 Compliance With Laws.................................20
Section 4.15 Certain Environmental Matters........................20
Section 4.16 Liabilities and Obligations..........................21
Section 4.17 Receivables..........................................21
Section 4.18 Owned and Leased Real Properties.....................22
Section 4.19 Owned and Leased Property, Plant and Equipment.......22
Section 4.20 Proprietary Rights...................................23
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Section 4.21 Title to Other Properties............................23
Section 4.22 Commitments..........................................23
Section 4.23 Capital Expenditures.................................25
Section 4.24 Inventories..........................................25
Section 4.25 Insurance............................................26
Section 4.26 Employee Matters.....................................26
Section 4.27 Compliance with ERISA, Etc...........................28
Section 4.28 Taxes................................................31
Section 4.29 Government Contracts.................................32
Section 4.30 Absence of Changes...................................32
Section 4.31 Bank Relations; Powers of Attorney...................33
Section 4.32 Relations With Governments, Etc......................34
Section 4.33 Reliance on Representatives..........................34
ARTICLE V REPRESENTATIONS AND WARRANTIES OF APPLE.........................34
Section 5.02 Organization; Power..................................34
Section 5.03 Authorization; Enforceability; Absence of
Conflicts; Required Consents........................ 34
Section 5.04 Charter Documents....................................35
Section 5.05 Capital Stock of Apple...............................35
Section 5.06 Subsidiaries.........................................36
Section 5.07 Liabilities..........................................36
Section 5.08 Compliance With Laws; No Litigation..................36
Section 5.09 No Brokers...........................................36
Section 5.10 Private Placement Memorandum.........................36
ARTICLE VI COVENANTS EXTENDING TO THE EFFECTIVE TIME.......................36
Section 6.02 Access and Cooperation; Due Diligence................36
Section 6.03 Conduct of Business Pending Closing..................37
Section 6.04 Prohibited Activities................................39
Section 6.06 Formation of Orthodontic Entity......................40
Section 6.07 Notification of Certain Matters......................40
Section 6.08 Supplemental Information.............................40
Section 6.09 Cooperation in Connection With the IPO...............41
Section 6.10 Additional Financial Statements and Other
Information..........................................41
Section 6.11 Termination or Transfer of Plans.....................42
Section 6.12 Disposition of Unwanted Assets.......................42
Section 6.13 HSR Act Matters......................................42
Section 6.14 Retirement of Debt...................................42
ARTICLE VIITHE CLOSING AND CONDITIONS TO CLOSING AND
CONSUMMATION ...................................................42
Section 7.02 Conditions to the Obligations of Each Party..........42
Section 7.03 Conditions to the Obligations of the Company
and The Stockholders................................ 44
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Section 7.04 Conditions to the Obligations of Apple...............45
ARTICLE VIII COVENANTS FOLLOWING THE EFFECTIVE TIME..........................47
Section 8.02 Disclosure...........................................47
Section 8.03 Preparation and Filing of Tax Returns................47
Section 8.04 Directors............................................47
Section 8.05 Removal of Guaranties................................48
Section 8.06 Access...............................................48
Section 8.07 Licenses and Permits.................................48
Section 8.08 Orthodontist Employment Agreement....................48
Section 8.09 Continuity of Business...............................48
ARTICLE IX INDEMNIFICATION.................................................48
Section 9.02 Survival of Representations and Warranties...........48
Section 9.03 Indemnification of Apple Indemnified Parties.........49
Section 9.04 Indemnification of Stockholder Indemnified Parties...50
Section 9.05 Conditions of Indemnification........................51
Section 9.06 Remedies Not Exclusive...............................53
Section 9.07 Limitations on Indemnification.......................53
ARTICLE XI GENERAL PROVISIONS..............................................53
Section 11.15 Treatment of Confidential Information................53
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THE UNIFORM PROVISIONS
ARTICLE I
ADDITIONAL DEFINITIONS
Section 1.02 ADDITIONAL DEFINED TERMS. These provisions constitute
the Uniform Provisions of the Agreement and Plan of Reorganization by and among
Apple, the Company and the Stockholders and, although in a separate document,
are part of and are to be included in the Agreement and Plan of Reorganization.
As used in this Agreement, the following terms have the meanings assigned to
them below:
"Acquisition Proposal" has the meaning specified in Section 6.05.
"Affiliate" means, as to any specified Person, any other Person that,
directly or indirectly through one or more intermediaries or otherwise,
controls, is controlled by or is under common control with the specified Person.
As used in this definition, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person (whether through ownership of Capital Stock of that Person,
by contract or otherwise).
"Apple Common Stock" means the common stock, par value $.01 per
share, of Apple.
"Apple Indemnified Party" means Apple and its Affiliates and each of
their respective officers, directors, employees, agents, financial advisors and
counsel; provided, however, that no Person who indemnifies Apple Indemnified
Parties in this Agreement in his capacity as a Stockholder will be an Apple
Indemnified Party for purposes of this Agreement, notwithstanding that the
Person is an Apple Indemnified Party for purposes of one or more of the Other
Agreements.
"Apple Indemnified Loss" has the meaning specified in Section 9.03.
"Capital Lease" means a lease of (or other agreement conveying the
right to use) real or personal property that is required to be classified and
accounted for as a capital lease under GAAP as in effect on the date of this
Agreement.
"Capital Stock" means, with respect to: (a) any corporation, any
share, or any depositary receipt or other certificate representing any share, of
an equity ownership interest in that corporation; and (b) any other Entity, any
share, membership or other percentage interest, unit of participation or other
equivalent (however designated) of an equity interest in that Entity.
"Cash Compensation" means, as applied to any employee, nonemployee
director or officer of, or any natural person who performs consulting or other
independent contractor services for, the Company or any Company Subsidiary, the
wages, salaries, bonuses (discretionary and formula), fees and other cash
compensation paid or payable by the Company and each Company Subsidiary to that
employee or other natural person.
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"CERCLA" means the Comprehensive Environmental Response,
Conservation, and Liability Act of 1980.
"Certificate of Merger" means: (a) the certificate of merger
respecting the Merger which contains the information required by the DGCL to
effect the Merger; and (b) if the Company's Organization State is not Delaware,
the articles or certificate of merger respecting the Merger which contains the
information required by the laws of the Company's Organization State to effect
the Merger.
"Charter Documents" means, with respect to any Entity at any time, in
each case as amended, modified and supplemented at that time, the articles or
certificate of formation, incorporation, organization or association (or the
equivalent organizational documents) of that Entity, (b) the bylaws or limited
liability company agreement or regulations (or the equivalent governing
documents) of that Entity and (c) each document setting forth the designation,
amount and relative rights, limitations and preferences of any class or series
of that Entity's Capital Stock or of any rights in respect of that Entity's
Capital Stock.
"Claim Notice" has the meaning specified in Section 9.05.
"Closing" has the meaning specified in Section 7.01.
"COBRA" means the Comprehensive Omnibus Budget Reconciliation Act of 1984.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Commitment" has the meaning specified in Section 4.22.
"Company ERISA Benefit Plan" has the meaning specified in Section 4.26.
"Company ERISA Pension Plan" has the meaning specified in Section 4.26.
"Company Subsidiary" means at any time any Entity that is a Subsidiary of
the Company at that time.
"Confidential Information" means, with respect to any Person, all
trade secrets and other confidential, nonpublic and/or proprietary information
of that Person, including information derived from reports, investigations,
research, work in progress, codes, marketing and sales programs, capital
expenditure projects, cost summaries, pricing formulae, contract analyses,
financial information, projections, confidential filings with any Governmental
Authority and all other confidential, nonpublic concepts, methods of doing
business, ideas, materials or information prepared or performed for, by or on
behalf of that Person.
"Current Balance Sheet" has the meaning specified in Section 1.01.
"Current Balance Sheet Date" has the meaning specified in Section 1.01.
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"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Damage" to any specified Person means any cost, damage (including
any consequential, exemplary, punitive or treble damage) or expense (including
reasonable fees and actual disbursements by attorneys, consultants, experts or
other Representatives and Litigation costs) to, any fine of or penalty on or any
liability (including loss of earnings or profits) of any other nature of that
Person.
"Damage Claim" means, as asserted (a) against any specified Person,
any claim, demand or Litigation made or pending against that Person for Damages
to any other Person, or (b) by the specified Person, any claim or demand of the
specified Person against any other Person for Damages to the specified Person.
"DGCL" means the General Corporation Law of the State of Delaware.
"Derivative Securities" of a specified Entity means any Capital Stock
or debt security or other Indebtedness of the specified Entity or any other
Person which is convertible into or exchangeable for, or any option, warrant or
other right to acquire, (a) any unissued Capital Stock of the specified Entity
or (b) any Capital Stock of the specified Entity which has been issued and is
being held by the Entity directly or indirectly as treasury Capital Stock.
"Effective Time" has the meaning specified in Section 2.02.
"Election Period" has the meaning specified in Section 9.05.
"Employee Policies and Procedures" means at any time all employee
manuals and all material policies, procedures and work-related rules that apply
at that time to any employee, nonemployee director or officer of, or any other
natural person performing consulting or other independent contractor services
for, the Company or any Company Subsidiary.
"Employment Agreement" means at any time any (a) agreement to which
the Company or any Company Subsidiary is a party which then relates to the
direct or indirect employment or engagement, or arises from the past employment
or engagement, of any natural person by the Company or any Company Subsidiary,
whether as an employee, a nonemployee officer or director, a consultant or other
independent contractor, a sales representative or a distributor of any kind,
including any employee leasing or service agreement and any noncompetition
agreement, and (b) agreement between the Company or any Company Subsidiary and
any Person which arises from the sale of a business by that Person to the
Company or any Company Subsidiary and limits that Person's competition with the
Company or any Company Subsidiary.
"Entity" means any sole proprietorship, corporation, professional
association or corporation, partnership of any kind having a separate legal
status, limited liability company, business trust, unincorporated organization
or association, mutual company, joint stock company or joint venture.
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"Environmental Laws" means any and all Governmental Requirements
relating to the environment or worker health or safety, including ambient air,
surface water, land surface or subsurface strata, or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes (including Solid Wastes,
Hazardous Wastes or Hazardous Substances) or noxious noise or odor into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, recycling, removal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes (including petroleum, petroleum distillates, asbestos or
asbestos-containing material, polychlorinated biphenyls, chlorofluorocarbons
(including chlorofluorocarbon-12) or hydrochlorofluorocarbons).
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means, with respect to any specified Person at any
time, any other Person, including an Affiliate of the specified Person, that is,
or at any time within six years of that time was, a member of any ERISA Group of
which the specified Person is or was a member at the same time.
"ERISA Affiliate Pension Plan" has the meaning specified in Section
4.26.
"ERISA Employee Benefit Plan" means any "employee benefit plan" as
defined in Section 3(3) of ERISA and includes any ERISA Pension Benefit Plan.
"ERISA Group" means any "group of organizations" within the meaning
of Section 414(b), (c), (m) or (o) of the Code or any "controlled group" as
defined in Section 4001(a)(14) of ERISA.
"ERISA Pension Benefit Plan" means any "employee pension benefit
plan," as defined in Section 3(2) of ERISA, including any plan that is covered
by Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code (excluding any Multiemployer Plan).
"Exchange Act" means the Securities Exchange Act of 1934.
"Final Prospectus" means (i) the prospectus included in the
Registration Statement at the time it becomes effective, except that if the
prospectus first furnished to the Underwriter after the Registration Statement
becomes effective for use in connection with the IPO differs from the prospectus
included in the Registration Statement at the time it becomes effective (whether
or not that prospectus so furnished is required to be filed with the SEC
pursuant to Securities Act Rule 424(b)), the prospectus so furnished is the
"Final Prospectus" or (ii) any other document or means of communication which
the SEC may substitute by rule making authority for a final prospectus.
"Financial Statements" means the [Initial Financial Statements] and
the other financial statements of the Company and the Company Subsidiaries, if
any, delivered to Apple pursuant to Section 6.10 prior to the Effective Time.
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"GAAP" means generally accepted accounting principles and practices
in the United States as in effect from time to time which (i) have been
concurred in by Xxxxxx Xxxxxxxx LLP and (ii) have been or are applied on a basis
consistent (except for changes concurred in by Xxxxxx Xxxxxxxx LLP) with the
most recent audited Financial Statements delivered to Apple prior to the
Effective Time.
"General Release" means the general release of the Company and the
Company Subsidiaries to be executed at or before and delivered to Apple and the
Company at the Closing, effective as of the Effective Time, by each Stockholder
in the form of Exhibit 4.01(d) with the blanks appropriately filled.
"Governmental Approval" means at any time any authorization, consent,
approval, permit, franchise, certificate, license, implementing order or
exemption of, or registration or filing with, any Governmental Authority,
including any certification or licensing of a natural person to engage in a
profession or trade or a specific regulated activity, at that time.
"Governmental Authority" means (a) any national, state, county,
municipal or other government, domestic or foreign, or any agency, board,
bureau, commission, court, department or other instrumentality of any such
government, or (b) any Person having the authority under any applicable
Governmental Requirement to assess and collect Taxes for its own account.
"Governmental Requirement" means at any time (a) any law, statute,
code, ordinance, order, rule, regulation, judgment, decree, injunction, writ,
edict, award, authorization or other requirement of any Governmental Authority
in effect at that time or (b) any obligation included in any certificate,
certification, franchise, permit or license issued by any Governmental Authority
or resulting from binding arbitration, including any requirement under common
law, at that time.
"Guaranty" means, for any specified Person, without duplication, any
liability, contingent or otherwise, of that Person guaranteeing or otherwise
becoming liable for any obligation of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, and including any liability of
the specified Person, direct or indirect, (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) that obligation or to purchase (or
to advance or supply funds for the purchase of) any security for the payment of
that obligation, (b) to purchase property, securities or services for the
purpose of assuring the owner of that obligation of its payment or (c) to
maintain working capital, equity capital or other financial statement condition
or liquidity of the primary obligor so as to enable the primary obligor to pay
that obligation; provided, that the term "Guaranty" does not include
endorsements for collection or deposit in the ordinary course of the endorser's
business.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976.
"Immediate Family Member" of a Stockholder means at any time: (a) if
that Stockholder is a natural person, any child or grandchild (by blood or legal
adoption) or spouse of that Stockholder at that time, or any child of that
spouse; and (b) if that Stockholder is an Entity whose ultimate beneficial owner
is a natural person, or a natural person and his spouse, any
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child or grandchild (by blood or legal adoption) or spouse at that time (if not
then an ultimate beneficial owner of that Entity), or any child of that spouse,
of the ultimate beneficial owner or owners.
"Indebtedness" of any Person means, without duplication, (a) any
liability of that Person (i) for borrowed money or arising out of any extension
of credit to or for the account of that Person (including reimbursement or
payment obligations with respect to surety bonds, letters of credit, banker's
acceptances and similar instruments), for the deferred purchase price of
property or services or arising under conditional sale or other title retention
agreements, other than trade payables arising in the ordinary course of
business, (ii) evidenced by notes, bonds, debentures or similar instruments,
(iii) in respect of Capital Leases or (iv) in respect of interest rate
protection agreements, (b) any liability secured by any Lien upon any property
or assets of that Person (or upon any revenues, income or profits of that Person
therefrom), whether or not that Person has assumed that liability or otherwise
become liable for the payment thereof or (c) any liability of others of the type
described in the preceding clause (a) or (b) in respect of which that Person has
incurred, assumed or acquired a liability by means of a Guaranty.
"Indemnified Party" has the meaning specified in Section 9.05.
"Indemnifying Party" has the meaning specified in Section 9.05.
"Indemnity Notice" has the meaning specified in Section 9.05.
"Information" means written information, including (a) data,
certificates, reports and statements (excluding Financial Statements) and (b)
summaries of unwritten agreements, arrangements, contracts, plans, policies,
programs or practices or of unwritten amendments or modifications of,
supplements to or waivers under any of the foregoing documents.
"IPO" means the first time after January 31, 1997 a registration
statement filed under the Securities Act and respecting a primary offering by
Apple of shares of Apple Common Stock (other than a registration statement
respecting shares being offered pursuant to a Company ERISA Benefit Plan or any
Other Compensation Plan) is declared effective under the Securities Act and the
shares registered by that registration statement are issued and sold by Apple
(otherwise than pursuant to the exercise by the Underwriter of any
over-allotment option).
"IPO Closing Date" means the date on which Apple first receives
payment for the shares of Apple Common Stock it sells to the Underwriter in the
IPO.
"IPO Price" means the price per share of Apple Common Stock which is
set forth as the "price to public" on the cover page of the Final Prospectus.
"IPO Pricing Date" means the date, if any, on which Apple and the
Underwriter agree in the Underwriting Agreement to the price per share of Common
Stock at which the Underwriter, subject to the terms and conditions of the
Underwriting Agreement, will purchase newly issued shares of Apple Common Stock
from Apple on the IPO Closing Date.
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"IRS" means the Internal Revenue Service.
"Lien" means, with respect to any property or asset of any Person (or
any revenues, income or profits of that Person therefrom) (in each case whether
the same is consensual or nonconsensual or arises by contract, operation of law,
legal process or otherwise), (a) any mortgage, lien, security interest, pledge,
attachment, levy or other charge or encumbrance of any kind thereupon or in
respect thereof or (b) any other arrangement under which the same is
transferred, sequestered or otherwise identified with the intention of
subjecting the same to, or making the same available for, the payment or
performance of any liability in priority to the payment of the ordinary,
unsecured creditors of that Person, including any "adverse claim" (as defined in
Section 8-302(b) of each applicable Uniform Commercial Code) in the case of any
Capital Stock. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, Capital
Lease or other title retention agreement relating to that asset.
"Litigation" means any action, case, proceeding, claim, grievance,
suit or investigation or other proceeding conducted by or pending before any
Governmental Authority or any arbitration proceeding.
"Material" means, as applied to any Entity, material to the business,
operations, property or assets, liabilities, financial condition or results of
operations of that Entity and its Subsidiaries considered as a whole.
"Material Adverse Effect" means, with respect to the consequences of
any fact or circumstance (including the occurrence or non-occurrence of any
event) to the Company and the Company Subsidiaries considered as a whole (or
after the Effective Time the Surviving Corporation and the Company Subsidiaries
considered as a whole), that such fact or circumstance has caused, is causing or
will cause, directly, indirectly or consequentially, singly or in the aggregate
with other facts and circumstances, any Damages in excess of the Threshold
Amount.
"Material Agreement" of an Entity means any contract or agreement (a)
to which that Entity or any of its Subsidiaries is a party, or by which that
Entity or any of its Subsidiaries is bound or to which any property or assets of
that Entity or any of its Subsidiaries is subject and (b) which is Material to
that Entity.
"Minimum Cash Amount" has the meaning specified in Section 7.02.
"Moody's" means Xxxxx'x Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, Section 414(f) of the Code or Section 3(37) of
ERISA.
"Organization State" means, as applied to (a) any corporation, its
state or other jurisdiction of incorporation, (b) any limited liability company
or limited partnership, the state
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or other jurisdiction under whose laws it is organized and existing in that
legal form, and (c) any other Entity, the state or other jurisdiction whose laws
govern that Entity's internal affairs.
"Orthodontic Treatment Agreement" means any agreement or contract
whereby, for a fee, a Person undertakes, for a specified fee, to provide
orthodontic services to a patient.
"Orthodontics" means providing services related to the movement and
rearrangement of teeth.
"Other Agreements" has the meaning specified in the Preliminary
Statement in this Agreement.
"Other Compensation Plan" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the Company
or any Company Subsidiary, or to which the Company or any Company Subsidiary
contributes, on behalf of any of its employees, nonemployee directors or
officers or other natural persons performing consulting or other independent
contractor services for the Company or any Company Subsidiary, (a) including all
such arrangements, plans, policies, practices or programs providing for
severance pay, deferred compensation, incentive, bonus or performance awards or
the actual or phantom ownership of any Capital Stock or Derivative Securities of
the Company or any Company Subsidiary, but (b) excluding all Company ERISA
Pension Plans and Employment Agreements.
"Other Financing Sources" has the meaning specified in Section 7.02.
"Other Transaction Documents" means the Other Agreements and the
other written agreements, documents, instruments and certificates at any time
executed pursuant to or in connection with the Other Agreements (other than the
Transaction Documents and the Underwriting Agreement), all as amended, modified
or supplemented from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Investments" means at the time of purchase or other
acquisition by the Company or any Company Subsidiary (a) obligations issued or
guaranteed by the United States of America with a remaining maturity not
exceeding one year, (b) commercial paper with maturities of not more than 270
days and a published rating of not less than A-1 by S&P or P-1 by Moody's and
(c) certificates of deposit and bankers' acceptances having maturities of not
more than one year of any commercial bank or trust company if (A) that bank or
trust company has a combined capital and surplus of at least $500,000,000 and
(B) its unsecured long-term debt obligations, or those of a holding company of
which it is a subsidiary, are rated not less than A- by S&P or A3 by Moody's.
"Permitted Liens" means, as applied to the property or assets of any
Person (or any revenues, income or profits of that Person therefrom): (a) Liens
for Taxes if the same are not at the time due and delinquent; (b) Liens incurred
in the ordinary course of that Person's business in connection with worker
compensation, unemployment insurance and other social security legislation
(other than pursuant to ERISA or Section 412(n) of the Code); (c) easements,
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rights-of-way, reservations, restrictions and other similar encumbrances
incurred in the ordinary course of that Person's business or existing on
property and not materially interfering with the ordinary conduct of that
Person's business or the use of that property; (d) defects or irregularities in
that Person's title to its real properties which do not materially (i) diminish
the value of the surface estate or (ii) interfere with the ordinary conduct of
that Person's business or the use of any of such properties; (e) any interest or
title of a lessor of assets being leased by any Person pursuant to any Capital
Lease disclosed in Section 4.19 of the Disclosure Statement or any lease that,
pursuant to GAAP, would be accounted for as an operating lease; and (f) Liens
securing purchase money Indebtedness disclosed in Section 4.16 of the Disclosure
Statement so long as such Liens do not attach to any property or assets other
than the properties or assets purchased with the proceeds of such Indebtedness.
"Person" means any natural person, Entity, estate, trust, union or
employee organization or Governmental Authority or, for the purpose of the
definition of "ERISA Affiliate," any trade or business.
"Plan" has the meaning specified in Section 4.27.
"Private Placement Memorandum" means the Apple Private Placement
Memorandum dated as of January 28, 1997 relating to the offer of Apple Common
Stock in connection with the Merger.
"Professional Codes" means any and all Governmental Requirements
relating to the licensing or other regulation of the business of providing
orthodontic care to patients.
"Prohibited Transaction" means any transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA.
"Property, Plant and Equipment" means at any time any property that
then would be included and classified as property, plant and equipment on a
consolidated balance sheet prepared in accordance with GAAP of the Company and
the Company Subsidiaries.
"Proprietary Rights" means (a) patents, applications for patents and
patent rights, (b) in each case, whether registered, unregistered or under
pending registration, trademark rights, trade names, trade name rights,
corporate names, business names, trade styles or dress, service marks and logos
and other trade designations and copyrights and (c), in the case of the Company
or any Company Subsidiary, all agreements relating to the technology, know-how
or processes used in any business of the Company or any Company Subsidiary.
"Qualified Plans" has the meaning specified in Section 4.27.
"Registration Rights Agreement" means the registration rights
agreement to be executed and delivered at the Closing by Apple and the
Stockholders electing to be parties thereto in the form of Exhibit 7.03(b)(iv),
with the blanks appropriately filled.
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"Registration Statement" means the registration statement, including
(a) each preliminary prospectus included therein prior to the date on which that
registration statement is declared effective under the Securities Act (including
any prospectus filed with the SEC pursuant to Securities Act Rule 424(b)), (b)
the Final Prospectus and (c) any amendments thereof and all supplements and
exhibits thereto, filed by Apple with the SEC to register shares of Apple Common
Stock under the Securities Act for public offering and sale in the IPO.
"Returns" means the returns, reports or statements (including any
information returns) any Governmental Requirement requires to be filed for
purposes of any Tax.
"Related Party Agreement" means any contract or other agreement,
written or oral, (a) to which the Company or any Company Subsidiary is a party
or is bound or by which any property of the Company or any Company Subsidiary is
bound or may be subject and (b) (i) to which any Stockholder or any of that
Stockholder's Related Persons or Affiliates also is a party, (ii) of which any
Stockholder or any of that Stockholder's Related Persons or Affiliates is a
beneficiary or (iii) as to which any transaction contemplated thereby properly
would be characterized (without regard to the amount involved) as a related
party transaction for purposes of applying the disclosure requirements of GAAP
or the SEC applicable to the Registration Statement.
"Related Person" of a Stockholder means: (a) if that Stockholder is a
natural person, (i) any Immediate Family Member of that Stockholder, (ii) any
Estate of that Stockholder or any Immediate Family Member of that Stockholder,
(iii) the trustee of any inter vivos or testamentary trust of which all the
beneficiaries are Related Persons of that Stockholder and (iv) any Entity the
entire equity interest in which is owned by any one or more of that Stockholder
and Related Persons of that Stockholder; and (b) if that Stockholder is an
Entity, Estate or trust, (i) any Person who owns an equity interest in that
Stockholder on the date hereof, (ii) any Person who would be a Related Person
under clause (a) of this definition of a natural person who is an ultimate
beneficial owner of that Stockholder or (iii) any other Entity the entire equity
interest in which is owned by any one or more of that Stockholder and Related
Persons of that Stockholder. As used in this definition, "Estate" means, as to
any natural person who has died or been adjudicated mentally incompetent by a
court of competent jurisdiction, (i) that person's estate or (ii) the
administrator, conservator, executor, guardian or representative of that estate.
"Representatives" means, with respect to any Person, the directors,
officers, employees, Affiliates, accountants (including independent certified
public accountants), advisors, attorneys, consultants or other agents of that
Person, or any other representatives of that Person or of any of those
directors, officers, employees, Affiliates, accountants (including independent
certified public accountants), advisors, attorneys, consultants or other agents.
"Reportable Event" means, with respect to any Company ERISA Pension
Plan, (a) the occurrence of any of the events set forth in Section 4043(b) or
(c) (other than a Reportable Event as to which the provision of 30 days' notice
to the PBGC is waived under applicable regulations), 4062(e) or 4063(a) of ERISA
with respect to that plan, (b) any event requiring the Company or any ERISA
Affiliate to provide security to that plan under Section 401(a)(29) of
10
the Code or (c) any failure to make a payment required by Section 412(m) of the
Code with respect to that plan.
"RCRA" means the Resource Conservation and Recovery Act of 1976.
"Restricted Payment" means, with respect to any Entity at any time,
any of the following effected by that Entity: (a) any declaration or payment of
any dividend or other distribution, direct or indirect, on account of any
Capital Stock of that Entity or any Affiliate of that Entity or (b) any direct
or indirect redemption, retirement, purchase or other acquisition for value of,
or any direct or indirect purchase, payment or sinking fund or similar deposit
for the redemption, retirement, purchase or other acquisition for value of, or
to obtain the surrender of, any then outstanding Capital Stock of that Entity or
any Affiliate of that Entity or any then outstanding warrants, options or other
rights to acquire or subscribe for or purchase unissued or treasury Capital
Stock of that Entity or any Affiliate of that Entity.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Security Agreement" has the meaning set forth in the Service
Agreement.
"Solid Wastes, Hazardous Wastes or Hazardous Substances" have the
meanings ascribed to those terms in CERCLA, RCRA or any other Environmental Law
applicable to the business or operations of the Company or any Company
Subsidiary which imparts a broader meaning to any of those terms than does
CERCLA or RCRA.
"S&P" means Standard and Poor's Rating Group.
"Stockholder Indemnified Party" means (a) each Stockholder and each
of that Stockholder's Affiliates (other than the Company or, following the
Effective Time, the Surviving Corporation or Apple or any of its Subsidiaries,
if the Stockholder is an Affiliate of Apple), agents and counsel and (b) prior
to the Effective Time, the Company and each of its officers, directors,
employees, agents and counsel who are not Stockholder Indemnified Parties within
the meaning of clause (a) of this definition.
"Stockholder Indemnified Loss" has the meaning specified in Section
9.04.
"Subsidiary" of any specified Person at any time, means any entity a
majority of the Capital Stock of which is at that time owned or controlled,
directly or indirectly, by the specified Person.
"Supplemental Information" has the meaning specified in Section 6.08.
"Tax" or "Taxes" means all net or gross income, gross receipts, net
proceeds, sales, use, ad valorem, value added, franchise, bank shares,
withholding, payroll, employment, excise, property, deed, stamp, alternative or
add-on minimum, environmental or other taxes,
11
assessments, duties, fees, levies or other governmental charges or assessments
of any nature whatever imposed by any Governmental Requirement, whether disputed
or not, together with any interest, penalties, additions to tax or additional
amounts with respect thereto.
"Taxing Authority" means any Governmental Authority having or
purporting to exercise jurisdiction with respect to any Tax.
"Termination Event" means, with respect to any Company ERISA Pension
Plan, (a) any Reportable Event with respect to that plan which is likely to
result in the termination of that plan, (b) the termination of, or the filing of
a notice of intent to terminate, that plan or the treatment of any amendment to
that plan as a termination under Section 4041(c) of ERISA or (c) the institution
of proceedings to terminate, or the appointment of a trustee to administer, that
plan under Section 4042 of ERISA.
"Third Party Claim" has the meaning specified in Section 9.05.
"Transaction Document" means this Agreement, the Certificates of
Merger, the General Releases, the Registration Rights Agreement, the Service
Agreement, the Security Agreement and the other written agreements, documents,
instruments and certificates executed pursuant to or in connection with this
Agreement (other than the Other Transaction Documents and the Underwriting
Agreement), including those specified in Article VII to be delivered at or
before the Closing, all as amended, modified or supplemented from time to time.
"Underwriter" means collectively (a) the investment banking firms
that prospectively may enter into the Underwriting Agreement and (b) from and
after the IPO Pricing Date, the investment banking firms parties to the
Underwriting Agreement.
"Underwriting Agreement" has the meaning specified in Section 7.02.
"Welfare Plan" means an "employee welfare benefit plan" as defined in
Section 3(1) of ERISA.
"Wholly Owned Subsidiary" means any corporation or other Entity all
of whose outstanding Capital Stock on a fully diluted basis is owned and
controlled, directly or indirectly through another Wholly Owned Subsidiary, by
the Company.
Section 1.03 OTHER DEFINITIONAL PROVISIONS. (a) Except as otherwise
specified herein, all references herein to any Governmental Requirement defined
or referred to herein, including the Code, CERCLA, ERISA, the Exchange Act, RCRA
and the Securities Act, shall be deemed references to that Governmental
Requirement or any successor Governmental Requirement, as the same may have been
amended or supplemented from time to time, and any rules or regulations
promulgated thereunder.
(b) When used in this Agreement, the words "herein," "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any provision of this Agreement, and the words "Article," "Section,"
"Addendum," "Annex" and "Exhibit" refer to
12
Articles and Sections of, and Annexes, Addenda and Exhibits to, this Agreement
unless otherwise specified.
(c) Whenever the context so requires, the singular number includes
the plural and vice versa, and a reference to one gender includes the other
gender and the neuter.
(d) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding such word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
Section 1.04 CAPTIONS. Captions to Articles, Sections and subsections
of, and Addenda, Annexes and Exhibits to, this Agreement or any other
Transaction Document are included for convenience of reference only, and such
captions shall not constitute a part of this Agreement or any other Transaction
Document for any other purpose or in any way affect the meaning or construction
of any provision of this Agreement or any other Transaction Document.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Section 3.02 OWNERSHIP AND STATUS OF COMPANY CAPITAL STOCK. The
Stockholder is the record and beneficial owner (or, if the Stockholder is a
trust or the estate of a deceased natural person, the legal owner) of the number
of shares of Capital Stock of the Company set forth, by each class, and by each
series in each class, thereof, opposite the Stockholder's name in Section 3.02
of the Disclosure Statement, free and clear of all Liens, except for the Liens
accurately set forth in Section 3.02 of the Disclosure Statement, all of which
will be released at or before the Effective Time.
Section 3.03 POWER OF THE STOCKHOLDER; APPROVAL OF THE MERGER. (a)
The Stockholder has the full power, legal capacity and authority to execute and
deliver this Agreement and each other Transaction Document to which the
Stockholder is a party and to perform the Stockholder's obligations in this
Agreement and in all other Transaction Documents to which the Stockholder is a
party. This Agreement constitutes, and each such other Transaction Document,
when executed in the Stockholder's individual capacity and delivered by the
Stockholder, will constitute, the legal, valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
except as that enforceability may be (i) limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and (ii) subject to general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law). If the Stockholder is an Entity, the Stockholder has
obtained, in accordance with all applicable Governmental Requirements and its
Charter Documents, all approvals and the taking of all actions necessary for the
authorization, execution, delivery and performance by the Stockholder of this
Agreement and the other Transaction Documents to which the Stockholder is a
party. If the Stockholder is acting otherwise than in his individual capacity
(whether as an executor or a guardian or in any other fiduciary or
representative capacity), all actions on the part of the Stockholder and all
other Persons (including any court) necessary for
13
the authorization, execution, delivery and performance by the Stockholder of
this Agreement and the other Transaction Documents to which the Stockholder is a
party have been duly taken.
(b) The Stockholder, acting in each capacity in which he is entitled,
by reason of the Company's Charter Documents or the Governmental Requirements of
the Company's Organization State or for any other reason, to vote to approve or
disapprove the consummation of the Merger, has voted all the shares of Company
Capital Stock owned by him and entitled to a vote or votes on that matter, in
any one or more of the manners prescribed or permitted by the Company's Charter
Documents or the Governmental Requirements of the Company's Organization State,
whichever are controlling, to approve this Agreement and the consummation of the
Merger and the other transactions contemplated hereby.
Section 3.04 NO CONFLICTS OR LITIGATION. The execution, delivery and
performance in accordance with their respective terms by the Stockholder of this
Agreement and the other Transaction Documents to which the Stockholder is a
party do not and will not (a) violate or conflict with any Governmental
Requirement, (b) breach or constitute a default under any agreement or
instrument to which the Stockholder is a party or by which the Stockholder or
any of the shares of Company Capital Stock owned by Stockholder is bound, (c)
result in the creation or imposition of, or afford any Person the right to
obtain, any Lien upon any of the shares of Company Capital Stock owned by the
Stockholder (or upon any revenues, income or profits of the Stockholder
therefrom) or (d) if the Stockholder is an Entity, violate the Stockholder's
Charter Documents. No Litigation is pending or, to the knowledge of the
Stockholder, threatened to which the Stockholder is or may become a party which
(a) questions or involves the validity or enforceability of any of the
Stockholder's obligations under any Transaction Document or (b) seeks (or
reasonably may be expected to seek) (i) to prevent or delay the consummation by
the Stockholder of the transactions contemplated by this Agreement to be
consummated by the Stockholder or (ii) damages in connection with any
consummation by the Stockholder of the transactions contemplated by this
Agreement.
Section 3.05 NO BROKERS. Except as disclosed in the Private Placement
Memorandum or in Section 11.03 of the Disclosure Statement, the Stockholder has
not, directly or indirectly, in connection with this Agreement or the
transactions contemplated hereby (a) employed any broker, finder or agent (other
than a Purchaser Representative) or (b) agreed to pay or incurred any obligation
to pay any broker's or finder's fee, any sales commission or any similar form of
compensation.
Section 3.06 PREEMPTIVE AND OTHER RIGHTS; WAIVER. Except for the
right of the Stockholder to receive shares of Apple Common Stock as a result of
the Merger or to acquire Apple Common Stock pursuant to any written option
granted by Apple to the Stockholder, the Stockholder either (a) does not own or
otherwise have any statutory or contractual preemptive or other right of any
kind (including any right of first offer or refusal) to acquire any shares of
Company Capital Stock or Apple Common Stock or (b) hereby irrevocably waives
each right of that type the Stockholder does own or otherwise has.
Section 3.07 CONTROL OF RELATED BUSINESSES. Except as accurately set
forth in Section 3.07 of the Disclosure Statement, the Stockholder is not, alone
or with one or more other
14
Persons, the controlling Affiliate of any Entity, business or trade (other than
the Company and the Company Subsidiaries, if the Stockholder is an Affiliate of
the Company) that (a) is engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three-year period ending on the date of
this Agreement, engaged in any transaction with the Company or any Company
Subsidiary, except for transactions in the ordinary course of business of the
Company or that Company Subsidiary.
Section 3.08 ORGANIZATION AND GOOD STANDING; QUALIFICATION. The
Orthodontic Entity is, or will be no later than the IPO Pricing Date, a
professional corporation or association duly organized, validly existing and in
good standing under the laws of its Organization State, with all requisite
corporate power and authority to carry on the business in which it intends to
engage, to own the properties it intends to own, and to execute and deliver the
Service Agreement, the Security Agreement, the Stockholder Employment Agreement
and consummate the transactions and perform the services contemplated thereby.
The Orthodontic Entity is, or will be no later than the IPO Pricing Date, duly
qualified and licensed to do business and is in good standing in all
jurisdictions where the nature of its intended business makes such qualification
necessary, which jurisdictions are listed in Section 3.08 of the Disclosure
Statement.
Section 3.09 [INTENTIONALLY LEFT BLANK].
Section 3.10 CORPORATE RECORDS. The copies of the Charter Documents,
and all amendments thereto, of the Orthodontic Entity that have been, or will
have been by the IPO Pricing Date, delivered or made available to Apple are
true, correct and complete copies thereof, as in effect on the IPO Pricing Date.
The minute books of the Orthodontic Entity, copies of which have been, or will
have been by the IPO Pricing Date, delivered or made available to Apple, contain
accurate minutes of all meetings of, and accurate consents to all actions taken
without meetings by, the Board of Directors (and any committees thereof) and the
stockholders of the Orthodontic Entity since its formation.
Section 3.11 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Orthodontic Entity of the Service Agreement, the Security
Agreement, the Stockholder Employment Agreement and the other agreements
contemplated thereby, and the consummation of the transactions and provisions of
services contemplated thereby, have been, or will have been by the IPO Pricing
Date, duly authorized by the Orthodontic Entity. The Service Agreement, the
Security Agreement, the Stockholder Employment Agreement and each other
agreement contemplated thereby will be as of the IPO Pricing Date duly executed
and delivered by the Orthodontic Entity and will constitute legal, valid and
binding obligations of the Orthodontic Entity enforceable against the
Orthodontic Entity in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
Section 3.12 NO VIOLATION. Neither the execution, delivery or
performance of the Service Agreement, the Security Agreement, the Stockholder
Employment Agreement or the other agreements contemplated thereby nor the
consummation of the transactions or provision of services contemplated thereby
will (a) conflict with, or result in a violation or breach of the
15
terms, conditions or provisions of, or constitute a default under, the Charter
Documents of the Orthodontic Entity, or (b) to the actual knowledge of the
Stockholders, violate or conflict with any Governmental Requirement.
Section 3.13 NO BUSINESS, AGREEMENTS, ASSETS OR LIABILITIES. The
Orthodontic Entity has not commenced business since its incorporation. Other
than its Charter Documents, and as of the IPO Pricing Date, the Service
Agreement, the Security Agreement, the Stockholder Employment Agreement, the
Plans and the other contracts and agreements assigned to the Orthodontic Entity
pursuant to Section 6.12, the Orthodontic Entity is not a party to or subject to
any agreement, indenture or other instrument. The Orthodontic Entity does not
own any assets (tangible or intangible) other than the consideration received
upon the issuance of shares of its capital stock and the assets transferred
pursuant to Section 6.12, and the Orthodontic Entity does not have any
liabilities, accrued, contingent or otherwise (known or unknown and asserted or
unasserted).
Section 3.14 COMPLIANCE WITH LAWS. The Orthodontic Entity has
complied with all applicable laws, regulations and licensing requirements and
has filed with the proper authorities all necessary statements and reports,
except where failure to so comply or file would not, individually or in the
aggregate, have a material adverse effect on the business, operations or
financial condition of the Orthodontic Entity.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF
THE COMPANY AND THE STOCKHOLDERS
Section 4.02 QUALIFICATION. Section 4.02 of the Disclosure Statement
accurately lists all the jurisdictions in which each of the Company and the
Company Subsidiaries is authorized or qualified to own or lease and to operate
its properties or to carry on its business as now conducted, and neither the
Company nor any Company Subsidiary owns, leases or operates properties or
carries on its business in any jurisdiction not listed in that Section which is
Material to the Company.
Section 4.03 AUTHORIZATION; ENFORCEABILITY; ABSENCE OF CONFLICTS;
REQUIRED CONSENTS. (a) The execution, delivery and performance by the Company of
this Agreement and each other Transaction Document to which it is a party, and
the effectuation of the Merger and the other transactions contemplated hereby
and thereby, are within its corporate or other power under its Charter Documents
and the applicable Governmental Requirements of its Organization State and have
been duly authorized by all proceedings, including actions permitted to be taken
in lieu of proceedings, required under its Charter Documents and those
Governmental Requirements.
(b)This Agreement has been, and each of the other Transaction
Documents to which the Company is a party, when executed and delivered to Apple
(or, in the case of the
16
Certificates of Merger, the applicable Governmental Authorities) will have been,
duly executed and delivered by the Company and is, or when so executed and
delivered will be, the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as that
enforceability may be (i) limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and (ii) subject to general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law).
(c) Except as set forth in Section 4.03 of the Disclosure Statement,
the execution, delivery and performance in accordance with their respective
terms by the Company of the Transaction Documents to which it is a party have
not and will not (i) violate, breach or constitute a default under (A) the
Charter Documents of any of the Company and the Company Subsidiaries, (B) any
Governmental Requirement applicable to any of the Company and the Company
Subsidiaries or (C) any Material Agreement of the Company, (ii) result in the
acceleration or mandatory prepayment of any Indebtedness, or any Guaranty not
constituting Indebtedness, of any of the Company and the Company Subsidiaries or
afford any holder of any of that Indebtedness, or any beneficiary of any of
those Guaranties, the right to require any of the Company and the Company
Subsidiaries to redeem, purchase or otherwise acquire, reacquire or repay any of
that Indebtedness, or to perform any of those Guaranties, (iii) cause or result
in the imposition of, or afford any Person the right to obtain, any Lien upon
any property or assets of any of the Company and the Company Subsidiaries (or
upon revenues, income or profits of any of the Company and the Company
Subsidiaries therefrom) or (iv) result in the revocation, cancellation,
suspension or material modification, in any single case or in the aggregate, of
any Governmental Approval possessed by any of the Company and the Company
Subsidiaries at the date hereof and necessary for the ownership or lease or the
operation of its properties or the carrying on of its business as now conducted,
including any necessary Governmental Approval under each applicable
Environmental Law and Professional Code.
(d) Except (i) for the filing of the Certificates of Merger with the
applicable Governmental Authorities, (ii) filings of the Registration Statement
under the Securities Act and the SEC order declaring the Registration Statement
effective under the Securities Act and (iii) as may be required by the HSR Act
or the applicable state securities or blue sky laws, no Governmental Approvals
are required to be obtained, and no reports or notices to or filings with any
Governmental Authority are required to be made, by any of the Company and the
Company Subsidiaries for the execution, delivery or performance by the Company
of the Transaction Documents to which it is a party, the enforcement against the
Company of its obligations thereunder or the effectuation of the Merger and the
other transactions contemplated thereby.
Section 4.04 CHARTER DOCUMENTS AND RECORDS; NO VIOLATION. The Company
has caused true, complete and correct copies of the Charter Documents, each as
in effect on the date hereof, and the minute books and similar corporate or
other Entity records of each of the Company and the Company Subsidiaries to be
delivered or otherwise made available to Apple. No breach or violation of any
Charter Document of any of the Company and the Company Subsidiaries has occurred
and is continuing.
17
Section 4.05 NO DEFAULTS. No condition or state of facts exists, or,
with the giving of notice or the lapse of time or both, would exist, which (a)
entitles any holder of any outstanding Indebtedness, or any Guaranty not
constituting Indebtedness, of any of the Company and the Company Subsidiaries,
or a representative of that holder, to accelerate the maturity, or require a
mandatory prepayment, of that Indebtedness or Guaranty, or affords that holder
or its representative, or any beneficiary of that Guaranty, the right to require
any of the Company and the Company Subsidiaries to redeem, purchase or otherwise
acquire, reacquire or repay any of that Indebtedness, or to perform that
Guaranty in whole or in part, (b) entitles any Person to obtain any Lien (other
than a Permitted Lien) upon any properties or assets of any of the Company and
the Company Subsidiaries (or upon revenues, income or profits of any of the
Company and the Company Subsidiaries therefrom) or (c) constitutes a violation
or breach of, or a default under, any Material Agreement of the Company by any
of the Company and the Company Subsidiaries.
Section 4.06 COMPANY SUBSIDIARIES. Section 4.06 of the Disclosure
Statement either (a) accurately sets forth the form of organization, legal name,
each assumed name and Organization State of each Company Subsidiary or (b)
correctly states no Entity is a Company Subsidiary. Except as accurately
disclosed in Section 4.06 of the Disclosure Statement, each Company Subsidiary
is a Wholly Owned Subsidiary. In the case of any Company Subsidiary that is not
a Wholly Owned Subsidiary, Section 4.06 of the Disclosure Statement accurately
sets forth, by each class and each series within each class, the number of
outstanding shares of Capital Stock of the Company Subsidiary, (a) the Company's
aggregate direct and indirect ownership of those shares and (b) the name and
address of record and percentage ownership of those shares of each holder of
record thereof other than the Company or a Company Subsidiary. No Lien exists on
any outstanding share of Capital Stock of any Company Subsidiary which is owned
directly or indirectly by the Company other than (a) the Liens, if any,
described in Section 4.06 of the Disclosure Statement, all of which will be
released at or before the Effective Time, and (b) Permitted Liens. Except as
accurately set forth in Section 4.06 of the Disclosure Statement, the Company
does not own, of record or beneficially, directly or indirectly through any
Person, and does not control, directly or indirectly through any Person or
otherwise, any Capital Stock or Derivative Securities of any Entity other than a
Company Subsidiary.
Section 4.07 CAPITAL STOCK OF THE COMPANY AND THE COMPANY
SUBSIDIARIES. All the issued and outstanding shares of Capital Stock of each of
the Company and the Company Subsidiaries (a) have been duly authorized and
validly issued in accordance with the applicable Governmental Requirements of
their issuer's Organization State and Charter Documents and (b) are fully paid
and nonassessable. Neither the Company nor any Company Subsidiary has issued or
sold any shares of its outstanding Capital Stock in breach or violation of (a)
any applicable statutory or contractual preemptive rights, or any other rights
of any kind (including any rights of first offer or refusal), of any Person or
(b) the terms of any of its Derivative Securities which then were outstanding.
No Person has, otherwise than solely by reason of that Person's right, if any,
to vote shares of the Capital Stock of the Company or any Company Subsidiary it
holds (to the extent those shares afford the holder thereof any voting rights)
any right to vote on any matter with the holders of Capital Stock of the Company
or any Company Subsidiary.
18
Section 4.08 TRANSACTIONS IN CAPITAL STOCK. Except as accurately set
forth in Section 4.08 of the Disclosure Statement: (a) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire or
reacquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof; and (b) no transaction has
been effected, and no action in contemplation of the transactions described in
this Agreement has been taken, respecting the equity ownership of either the
Company or any Company Subsidiary.
Section 4.09 NO BONUS SHARES. Except as accurately set forth in
Section 4.09 of the Disclosure Statement, no outstanding share of Capital Stock
of the Company was issued for less than the fair market value thereof at the
time of issuance or was issued in exchange for any consideration other than
cash.
Section 4.10 PREDECESSOR STATUS; ETC. Section 4.10 of the Disclosure
Statement accurately lists all the legal and assumed names of all predecessor
companies for the past five years of the Company, including the names of any
Entities from which the Company previously acquired material assets. Except as
accurately disclosed in Section 4.10 of the Disclosure Statement, the Company
has not been a Subsidiary or division of another corporation or a part of an
acquisition that later was rescinded.
Section 4.11 RELATED PARTY AGREEMENTS. Except as set forth in Section
4.11 of the Disclosure Statement, each Related Party Agreement in effect on the
date hereof will have been terminated as of the IPO Closing Date, and no Related
Party Agreement will exist then or thereafter to and including the Effective
Time.
Section 4.12 LITIGATION. Except as accurately disclosed in Section
4.12 of the Disclosure Statement, no Litigation is pending or, to the knowledge
of the Company or any Stockholder, threatened to which the Company or any
Company Subsidiary is or may become a party.
Section 4.13 FINANCIAL STATEMENTS; DISCLOSURE. (a) FINANCIAL
STATEMENTS. (i) The Financial Statements (including in each case the related
schedules and notes) delivered to Apple present fairly, in all material
respects, the consolidated financial position of the Company and the Company
Subsidiaries at the respective dates of the balance sheets included therein and
the consolidated results of their operations and their consolidated cash flows
and stockholders' or other owners' equity for the respective periods set forth
therein and have been prepared in accordance with GAAP. As of the date of any
balance sheet included in those Financial Statements, neither the Company nor
any Company Subsidiary then had any outstanding Indebtedness to any Person or
any liabilities of any kind (including contingent obligations, tax assessments
or unusual forward or long-term commitments), or any unrealized or anticipated
loss, which in the aggregate then were Material to the Company and required to
be reflected in those Financial Statements or in the notes related thereto in
accordance with GAAP which were not so reflected.
(ii) Since the Current Balance Sheet Date, no change has occurred in
the business, operations, properties or assets, liabilities, condition
(financial or other) or results of operations
19
of the Company or any Company Subsidiary that could reasonably be expected,
either alone or together with all other such changes, to have a Material Adverse
Effect on the Company.
(iii) All financial budgets and projections that have been or are
hereafter from time to time prepared by the Company or any of its
Representatives and made available prior to the Effective Time to Apple pursuant
to or in connection with this Agreement, any other Transaction Document or the
transactions contemplated hereby or thereby have been and will be prepared and
furnished to Apple in good faith and were and will be based on facts and
assumptions that are believed by the management of the Company to be reasonable
in light of the then current and foreseeable business conditions of the Company
and the Company Subsidiaries and represented and will represent that
management's good faith estimate of the consolidated projected financial
performance of the Company and the Company Subsidiaries based on the information
available to the Responsible Officer at the time so furnished.
Section 4.14 COMPLIANCE WITH LAWS. (a) Except as accurately disclosed
in Section 4.14 of the Disclosure Statement: (i) each of the Company and the
Company Subsidiaries possesses, if required by the applicable Governmental
Requirement, Governmental Approvals required for the conduct of its business;
and (ii) each of the Company and the Company Subsidiaries and, to their
knowledge their employees are, in compliance in all material respects with the
terms and conditions of all Governmental Approvals necessary for the ownership
or lease and the operation of its properties (including all the facilities and
sites it owns or holds under any lease) and the carrying on of its business as
now conducted. The Company has provided Apple with an accurate, complete written
list of all the Governmental Approvals so possessed. To the knowledge of the
Company, all the Governmental Approvals so listed are valid, and, except as
accurately disclosed in Section 4.14 of the Disclosure Statement, neither the
Company nor any Company Subsidiary has received, nor to the knowledge of any
Stockholder has any employee of either received, any notice from any
Governmental Authority of its intention to cancel, terminate or not renew any of
those Governmental Approvals.
(b) Except as accurately disclosed in Section 4.14 of the Disclosure
Statement, each of the Company and the Company Subsidiaries: (i) to the
knowledge of the Company, has been and continues to be in compliance with all
Governmental Requirements applicable to it or any of its presently or previously
owned or operated properties (including all the facilities and sites now or
previously owned or held by it under any lease), businesses or operations,
including all applicable Governmental Requirements under ERISA, Environmental
Laws and Professional Codes; and (ii)(A) neither the Company nor any Company
Subsidiary has received, nor to the knowledge of the Company has any employee of
either received, any notice from any Governmental Authority which asserts, or
raises the possibility of assertion of, any noncompliance with any of those
Governmental Requirements and, to the knowledge of each of the Company, the
Company Subsidiaries and the Stockholders, (B) no condition or state of facts
exists which would provide a valid basis for any such assertion.
Section 4.15 CERTAIN ENVIRONMENTAL MATTERS. Except as accurately
disclosed in Section 4.15 of the Disclosure Statement: (a) to the knowledge of
the Company, the Company and each Company Subsidiary have complied, and remain
in compliance, to the knowledge of the Company, with the provisions of all
Environmental Laws applicable to any of them or any
20
of their respective presently owned or operated facilities, sites or other
properties, businesses and operations and which relate to the reporting by the
Company and each Company Subsidiary of all sites presently owned or operated by
any of them where Solid Wastes, Hazardous Wastes or Hazardous Substances have
been treated, stored, disposed of or otherwise handled; (b) no release (as
defined in those Environmental Laws) at, from, in or on any site owned or
operated by the Company or any Company Subsidiary has occurred which, if all
relevant facts were known to the relevant Governmental Authorities, reasonably
could be expected to require remediation to avoid deed record notices,
restrictions, liabilities or other consequences that would not be applicable if
that release had not occurred; (c) neither the Company nor any Company
Subsidiary (or any agent or contractor of either) has transported or arranged
for the transportation of any Solid Wastes, Hazardous Wastes or Hazardous
Substances to, or disposed or arranged for the disposition of any Solid Wastes,
Hazardous Wastes or Hazardous Substances at, any off-site location that could
lead to any claim against the Company, any Company Subsidiary or Apple, as a
potentially responsible party or otherwise, for any clean-up costs, remedial
work, damage to natural resources, personal injury or property damage, including
any claim under CERCLA; and (d) no storage tanks exist on or under any of the
properties owned or operated by the Company or any Company Subsidiary from which
any Solid Wastes, Hazardous Wastes or Hazardous Substances have been released
into the surrounding environment. The Company has provided Apple with copies (or
if not available, accurate written summaries) of all environmental
investigations, studies, audits, reviews and other analyses conducted by or on
behalf, or which otherwise are in the possession, of the Company or any Company
Subsidiary respecting any facility, site or other property presently owned or
operated by the Company and each Company Subsidiary.
Section 4.16 LIABILITIES AND OBLIGATIONS. Section 4.16 of the
Disclosure Statement accurately lists all present liabilities, of every kind,
character and description and whether accrued, absolute, fixed, contingent or
otherwise, of each of the Company and the Company Subsidiaries which (a) (i)
exceed or reasonably could be expected to exceed $1,000 and (ii) (A) had been
incurred prior to the Current Balance Sheet Date, but are not reflected on the
Current Balance Sheet, or (B) were incurred after the Current Balance Sheet
otherwise than in the ordinary course of business, and consistent with the past
practice, of that Entity. That Section also accurately lists and describes, for
each of the Company and the Company Subsidiaries: (a) each of its outstanding
secured and unsecured Guaranties not constituting its Indebtedness and, for each
of those Guaranties, whether any Stockholder or Related Person or Affiliate of
any Stockholder is a Person whose obligation is covered by that Guaranty, and
(b) for each of the items listed under clause (a) of this sentence, (i) if that
item is secured by any property or asset of the Company or any Company
Subsidiary, the nature of that security, and (ii) if that item is covered in
whole or in part by a Guaranty of any Stockholder or any Related Person or
Affiliate of any Stockholder, the name of the guarantor.
Section 4.17 RECEIVABLES. Except as accurately set forth in Section
4.17 of the Disclosure Statement; all the accounts and notes or other advances
receivable of the Company and the Company Subsidiaries reflected on the Current
Balance Sheet were collected, or are, in the good faith belief of the Company's
management, collectible, in the respective amounts so reflected, net of the
reserves, if any, reflected in the Current Balance Sheet.
21
Section 4.18 OWNED AND LEASED REAL PROPERTIES. (a) Section 4.18 of
the Disclosure Statement accurately lists and correctly describes in all
material respects: (i) all real properties owned by any of the Company and the
Company Subsidiaries and, for each of those properties, the address thereof, the
type and square footage of each structure located thereon and the use thereof in
the business of the Company and the Company Subsidiaries; (ii) all real
properties of which any of the Company and the Company Subsidiaries is the
lessee and, for each of those properties, the address thereof, the type and
square footage of each structure located thereon the Company or a Company
Subsidiary is leasing and the expiration date of its lease and the use thereof
in the business of the Company and the Company Subsidiaries; and (iii) in the
case of each real property listed as being owned, whether it was previously
owned, and in the case of each real property listed as being leased, whether it
is presently owned, by any Stockholder or any of his Related Persons or
Affiliates (other than the Company and the Company Subsidiaries, if the
Stockholder is an Affiliate of the Company).
(b) The Company has provided Apple with true, complete and correct
copies of all title reports and insurance policies owned or in the possession of
any of the Company and the Company Subsidiaries and relating to any of the real
properties listed as being owned in Section 4.18 of the Disclosure Statement.
Except as accurately set forth in that Section or those reports and policies,
and except for Permitted Liens, the Company or a Company Subsidiary owns in fee,
and has good, valid and marketable title to, free and clear of all Liens, each
property listed in that Section as being owned.
(c) The Company has provided Apple with true, correct and complete
copies of all leases under which the Company or a Company Subsidiary is leasing
each of the properties listed in Section 4.18 of the Disclosure Statement as
being leased and, except as accurately set forth in Section 4.18 of the
Disclosure Statement, (i) each of those leases is, to the knowledge of the
Company, valid and binding on the lessor party thereto, and (ii) the lessee
party thereto has not sublet any of the leased space to any Person other than
the Company or a Company Subsidiary.
(d) The fixed assets of each of the Company and the Company
Subsidiaries are affixed only to one or more of the real properties listed in
Section 4.18 of the Disclosure Statement and, except as accurately set forth in
that Section, are well-maintained and adequate for the purposes for which they
presently are being used or held for use, ordinary wear and tear excepted.
(e) The Company has accurately disclosed in Section 4.18 of the
Disclosure Statement in all material respects all plans or projects involving
the opening of new operations, the expansion of any existing operations or the
acquisition of any real property or existing business, with respect to which
management of the Company or any Company Subsidiary has made any expenditure in
the two-year period prior to the date of the Agreement in excess of $1,000, or
which if pursued by the Company or any Company Subsidiary would require
additional capital expenditures in excess of $1,000.
Section 4.19 OWNED AND LEASED PROPERTY, PLANT AND EQUIPMENT. (a) The
Company has provided Apple with a list accurate and complete in all material
respects of the Property, Plant and Equipment owned and leased by any of the
Company and the Company Subsidiaries, which list states, in the case of each of
those properties listed as being owned, whether it was
22
previously owned, and in the case of each of those properties listed as being
leased, whether it is presently owned, by any Stockholder or any of his Related
Persons or Affiliates (other than the Company and the Company Subsidiaries, if
the Stockholder is an Affiliate of the Company).
(b) Except as accurately set forth in Section 4.19 of the Disclosure
Statement and except for Permitted Liens, the Company or a Company Subsidiary
has good, valid and marketable title to, free and clear of all Liens, the
property owned by it.
(c) The Company has provided Apple with true, correct and complete
copies of all leases under which the Company or a Company Subsidiary is leasing
each of the properties listed in Section 4.21 of the Disclosure Statement as
being leased and all leases referred to in Section 4.19 and, except as
accurately set forth in Section 4.19 of the Disclosure Statement, (i) each of
those leases is, to the knowledge of the Company, valid and binding on the
lessor party thereto, and (ii) the lessee party thereto has not sublet any of
the leased property to any Person other than the Company or a Company
Subsidiary.
(d) Except as accurately set forth in Section 4.19 of the Disclosure
Statement, all the Property, Plant and Equipment are in good working order and
condition, ordinary wear and tear excepted, and adequate for the purposes for
which they presently are being used or held for use.
Section 4.20 PROPRIETARY RIGHTS. Except as accurately set forth in
Section 4.20 of the Disclosure Statement, each of the Company and the Company
Subsidiaries owns or has the legal right to use all Proprietary Rights that are
necessary to the conduct of its business as now conducted, in each case free of
any claims or infringements known to the Company or any Stockholder. Section
4.20 of the Disclosure Statement accurately (a) lists these Proprietary Rights
and (b) indicates those owned by the Company or any Company Subsidiary and, for
those not listed as so owned, the agreement or other arrangement pursuant to
which they are possessed. Except as accurately set forth in that Section, (a) no
consent of any Person will be required for the use of any of these Proprietary
Rights by Apple or any Subsidiary of Apple following the Effective Time and (b)
no governmental registration of any of these Proprietary Rights has lapsed or
expired or been canceled, abandoned, opposed or the subject of any reexamination
request.
Section 4.21 TITLE TO OTHER PROPERTIES. In each case, free and clear
of all Liens except for Permitted Liens and as accurately set forth in Section
4.21 of the Disclosure Statement, each of the Company and the Company
Subsidiaries has good and valid title to, or holds under a lease valid and
binding on the lessor party thereto, all its tangible personal properties and
assets (other than Property, Plant and Equipment) that individually is or in the
aggregate are Material to the Company.
Section 4.22 COMMITMENTS. (a) Except as accurately set forth in
Section 4.22(a) of the Disclosure Statement, the Company has provided Apple with
a complete, accurate list of each of the following (each a "Company Commitment")
to which any of the Company and the Company Subsidiaries is a party or by which
any of its properties is bound and which presently remains executory in whole or
in any part:
23
(i) each partnership, joint venture or cost-sharing
agreement;
(ii) each guaranty or suretyship, indemnification or
contribution agreement or performance bond;
(iii) each instrument, agreement or other
obligation evidencing or relating to
Indebtedness of any of the Company and
the Company Subsidiaries or to money
lent or to be lent to another Person;
(iv) each contract to purchase or sell real property;
(v) each agreement with dealers or sales or commission
agents, public relations or advertising agencies,
accountants or attorneys (other than in connection
with this Agreement and the transactions contemplated
hereby) involving total payments within any 12-month
period in excess of $5,000 and which is not terminable
without penalty and on no more than 30 days' prior
notice;
(vi) each Related Party Agreement involving
total payments within any 12-month
period in excess of $1,000 and which
is not terminable without penalty on
no more than 30 days' prior notice;
(vii) each agreement for the acquisition or
provision of services, supplies,
equipment, inventory, fixtures or
other property involving more than
$1,000 in the aggregate;
(viii) each contract containing any noncompetition agreement,
covenant or undertaking;
(ix) each agreement providing for the purchase from a
supplier of all or substantially all the requirements
of the Company or any Company Subsidiary of a
particular product or service; or
(x) each other agreement or commitment not made in the
ordinary course of business or that is Material to the
Company.
True, correct and complete copies of all written Company Commitments,
and true, correct and complete written descriptions of all oral Company
Commitments, have heretofore been delivered or made available to Apple. Except
as accurately set forth in Section 4.22(a) of the Disclosure Statement: (i)
there are no existing or asserted defaults, events of default or events,
occurrences, acts or omissions that, with the giving of notice or lapse of time
or both,
24
would constitute defaults or events of default under any Company Commitment
Material to the Company by any of the Company and the Company Subsidiaries or,
to the knowledge of the Company, any other party thereto; and (ii) no penalties
have been incurred, nor are amendments pending, with respect to the Company
Commitments Material to the Company. The Company Commitments are in full force
and effect and are valid and enforceable obligations of the Company or the
Company Subsidiaries parties thereto and, to the knowledge of the Company, the
other parties thereto in accordance with their respective terms, and no
defenses, off-sets or counterclaims have been asserted or, to the knowledge of
the Company, may be made by any party thereto (other than by the Company or a
Company Subsidiary), nor has the Company or a Company Subsidiary, as the case
may be, waived any rights thereunder, except as accurately described in Section
4.22(a) of the Disclosure Statement.
(b) Except as accurately disclosed in Section 4.22(b) of the
Disclosure Statement or contemplated hereby or by any other Transaction Document
to which the Company or any Company Subsidiary or Stockholder is a party: (i)
neither the Company nor any Company Subsidiary or Stockholder has received
notice of any plan or intention of any other party to any Company Commitment to
exercise any right to cancel or terminate any Company Commitment, and neither
the Company nor any Company Subsidiary or Stockholder knows of any condition or
state of facts which would justify the exercise of such a right; and (ii)
neither the Company nor any Company Subsidiary or Stockholder currently
contemplates, or has reason to believe any other Person currently contemplates,
any amendment or change to any Company Commitment.
Section 4.23 CAPITAL EXPENDITURES. Section 4.23 of the Disclosure
Statement accurately sets forth the total amount of capital expenditures
currently budgeted to be incurred by the Company and the Company Subsidiaries
during the balance of the Company's current fiscal year. Except as accurately
set forth in that Section, to the knowledge of the Company and the Stockholders,
no condition or state of facts exists which will cause the total capital
expenditures of the Company and the Company Subsidiaries which will be required
to replace worn-out Property, Plant and Equipment in any of the Company's five
fiscal years following that current fiscal year to exceed by a material amount
the amount budgeted for capital expenditures of that type by the Company and the
Company Subsidiaries for that current fiscal year in order to maintain the types
and levels of patients and services the Company and the Company Subsidiaries
presently provide.
Section 4.24 INVENTORIES. Except as accurately set forth in Section
4.24 of the Disclosure Statement: (a) all inventories, net of reserves
determined in accordance with GAAP, of each of the Company and the Company
Subsidiaries which are classified as such on the Current Balance Sheet are, to
the knowledge of the Company, merchantable and salable or usable in the ordinary
course of business of the Company and the Company Subsidiaries; (b) the
inventories reflected in the Financial Statements, as at the Current Balance
Sheet Date, (i) were reasonable in relation to the then existing circumstances
of the Company and the Company Subsidiaries on a consolidated basis and
classified as current assets in accordance with GAAP, (ii) were consistent with
their past practices and (iii) fairly reflected the average inventory levels
maintained during the 12-month periods ended on that date; and (c) neither the
Company nor any Company Subsidiary depends on any single vendor for its
inventories the loss of which
25
could have a Material Adverse Effect on the Company or ever has sustained a
difficulty Material to the Company in obtaining its inventories.
Section 4.25 INSURANCE. Except as accurately set forth in Section
4.25 of the Disclosure Statement: (a) the Company has provided Apple with: (i) a
list accurate as of the Current Balance Sheet Date of all insurance policies
then carried by each of the Company and the Company Subsidiaries; (ii) an
accurate list of all insurance loss runs and worker's compensation claims
received for the most recently ended three policy years; and (iii) true,
complete and correct copies of all insurance policies carried by each of the
Company and the Company Subsidiaries which are in effect, all of which (A) have
been issued by insurers of recognized responsibility and (B) currently are, and
will remain without interruption through the IPO Closing Date, in full force and
effect; (b) no insurance carried by the Company or any Company Subsidiary has
been canceled by the insurer during the past five years, and neither the Company
nor any Company Subsidiary has ever been denied coverage; and (c) neither the
Company nor any Company Subsidiary or Stockholder has received any notice or
other communication from any issuer of any such insurance policy of any material
increase in any deductibles, retained amounts or the premiums payable
thereunder, and, to the knowledge of the Company and the Stockholders, no such
increase in deductibles, retainages or premiums is threatened.
Section 4.26 EMPLOYEE MATTERS. (a) CASH COMPENSATION. The Company has
provided Apple with an accurate, complete written list of the names, titles and
rates of annual Cash Compensation, at the Current Balance Sheet Date and at the
date hereof (and the portions thereof attributable to salary or the equivalent,
fixed bonuses, discretionary bonuses and other Cash Compensation, respectively)
of all key employees (including all employees who are officers or directors),
nonemployee officers, nonemployee directors and key consultants and independent
contractors of each of the Company and the Company Subsidiaries.
(b) EMPLOYMENT AGREEMENTS. Section 4.26(b) of the Disclosure
Statement accurately lists all Employment Agreements remaining executory in
whole or in part on the date hereof, and the Company has provided Apple with
true, complete and correct copies of all those Employment Agreements. Neither
the Company nor any Company Subsidiary is a party to any oral Employment
Agreement.
(c) OTHER COMPENSATION PLANS. Section 4.26(c) of the Disclosure
Statement accurately lists all Other Compensation Plans either remaining
executory at the date hereof or to become effective after the date hereof. The
Company has provided Apple with a true, correct and complete copy of each of
those Other Compensation Plans that is in writing and an accurate description of
each of those Other Compensation Plans that is not written. Except as accurately
set forth in Section 4.26(c) of the Disclosure Statement, each of the Other
Compensation Plans, including each that is a Welfare Plan, may be unilaterally
amended or terminated by the Company or any Company Subsidiary without liability
to any of them, except as to benefits accrued thereunder prior to that amendment
or termination.
(d) ERISA BENEFIT PLANS. Section 4.26(d) of the Disclosure
Statement accurately (i) lists each ERISA Pension Benefit Plan (A)(1) the
funding requirements of which
26
(under Section 301 of ERISA or Section 412 of the Code) are, or at any time
during the six-year period ending on the date hereof were, in whole or in part,
the responsibility of the Company or any Company Subsidiary or (2) respecting
which the Company or any Company Subsidiary is, or at any time during that
period was, a "contributing sponsor" or an "employer" as defined in Sections
4001(a)(13) and 3(5), respectively, of ERISA (each plan described in this clause
(A) being a "Company ERISA Pension Plan"), (B) each other ERISA Pension Benefit
Plan respecting which an ERISA Affiliate is, or at any time during that period
was, such a "contributing sponsor" or "employer" (each plan described in this
clause (B) being an "ERISA Affiliate Pension Plan") and (C) each other ERISA
Employee Benefit Plan that is being, or at any time during that period was,
sponsored, maintained or contributed to by the Company or any Company Subsidiary
(each plan described in this clause (C) and each Company ERISA Pension Plan
being a "Company ERISA Benefit Plan"), (ii) states the termination date of each
Company ERISA Benefit Plan and ERISA Affiliate Pension Plan that has been
terminated and (iii) identifies for each ERISA Affiliate Pension Plan the
relevant ERISA Affiliates. The Company has provided Apple with (i) true,
complete and correct copies of (A) each Company ERISA Benefit Plan and ERISA
Affiliate Pension Plan, (B) each trust agreement related thereto and (C) all
amendments to those plans and trust agreements. Except as accurately set forth
in Section 4.26(d) of the Disclosure Statement, (i) neither the Company nor any
Company Subsidiary is, or at any time during the six-year period ended on the
date hereof was, a member of any ERISA Group that currently includes, or
included when the Company or a Company Subsidiary was a member, among its
members any Person other than the Company and the Company Subsidiaries and (ii)
no Person is an ERISA Affiliate of the Company or any Company Subsidiary (other
than the Company or any Company Subsidiary in the case of any other Company
Subsidiary or any Company Subsidiary in the case of the Company, if the Company
and the Company Subsidiaries comprise an ERISA Group).
(e) EMPLOYEE POLICIES AND PROCEDURES. Section 4.26(e) of the
Disclosure Statement accurately lists all Employee Policies and Procedures. The
Company has provided Apple with a copy of all written Employee Policies and
Procedures and a written description of all material unwritten Employee Policies
and Procedures.
(f) UNWRITTEN AMENDMENTS. Except as accurately described in Section
4.26(f) of the Disclosure Statement, no material unwritten amendments have been
made, whether by oral communication, pattern of conduct or otherwise, with
respect to any of the Employment Agreements, Other Compensation Plans or
Employee Policies and Procedures.
(g) LABOR COMPLIANCE. To the knowledge of the Company, each of the
Company and the Company Subsidiaries has been and is in compliance with all
applicable Governmental Requirements respecting employment and employment
practices, terms and conditions of employment and wages and hours, and neither
the Company nor any Company Subsidiary is liable for any arrears of wages or
penalties for failure to comply with any of the foregoing. Neither the Company
nor any Company Subsidiary has engaged in any unfair labor practice or
discriminated on the basis of race, color, religion, sex, national origin, age,
disability or handicap in its employment conditions or practices. Except as
accurately set forth in Section 4.26(g) of the Disclosure Statement, there are
no (i) unfair labor practice charges or complaints or racial, color, religious,
sex, national origin, age, disability or handicap discrimination charges
27
or complaints pending or, to the knowledge of the Company, threatened against
the Company or any of the Company Subsidiaries before any Governmental Authority
(nor, to the knowledge of the Company, does any valid basis therefor exist) or
(ii) existing or, to the knowledge of the Company, threatened labor strikes,
disputes, grievances, controversies or other labor troubles affecting the
Company or any of the Company Subsidiaries (nor, to the knowledge of the
Company, does any valid basis therefor exist).
(h) UNIONS. Neither the Company nor any Company Subsidiary or ERISA
Affiliate has ever been a party to any agreement with any union, labor
organization or collective bargaining unit. No employees of the Company and the
Company Subsidiaries are represented by any union, labor organization or
collective bargaining unit. Except as accurately set forth in Section 4.26(h) of
the Disclosure Statement, to the knowledge of the Company, none of the employees
of the Company and the Company Subsidiaries has threatened to organize or join a
union, labor organization or collective bargaining unit.
(i) NO ALIENS. All employees of each of the Company and the Company
Subsidiaries are citizens of, or are authorized in accordance with federal
immigration laws to be employed in, the United States.
(j) CHANGE OF CONTROL BENEFITS. Except as accurately set forth in
Section 4.26(j) of the Disclosure Statement, neither the Company nor any of the
Company Subsidiaries is a party to any agreement, or has established any policy,
practice or program, requiring it to make a payment or provide any other form of
compensation or benefit or vesting rights to any person performing services for
the Company or any of the Company Subsidiaries which would not be payable or
provided in the absence of this Agreement or the consummation of the
transactions contemplated by this Agreement, including any parachute payment
under Section 280G of the Code.
(k) RETIREES. Neither the Company nor any of the Company Subsidiaries
has any obligation or commitment to provide medical, dental or life insurance
benefits to or on behalf of any of its employees who may retire or any of its
former employees who have retired except as may be required pursuant to the
continuation of coverage provisions of Section 4980B of the Code and the
applicable parallel provisions of ERISA.
Section 4.27 COMPLIANCE WITH ERISA, ETC. (a) COMPLIANCE. Each of the
Company ERISA Benefit Plans and Other Compensation Plans (each, a "Plan") (i) is
in substantial compliance with all applicable provisions of ERISA, as well as
with all other applicable Governmental Requirements, and (ii) has been
administered, operated and managed in accordance with its governing documents.
(b) QUALIFICATION. All Plans that are intended to qualify under
Section 401(a) of the Code (the "Qualified Plans") are so qualified and have
been determined by the IRS to be so qualified (or application for determination
letters have been timely submitted to the IRS). The Company has provided Apple
with true, complete and correct copies of the current plan determination
letters, most recent actuarial valuation reports, if any, most recent Form 5500,
or, as applicable, Form 5500-C/R, filed with respect to each such Qualified Plan
and most
28
recent trustee or custodian report. To the extent that any Qualified Plans have
not been amended to comply with applicable Governmental Requirements, the
remedial amendment period permitting retroactive amendment of these Qualified
Plans has not expired and will not expire within 120 days after the Effective
Time. All reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including annual
reports, summary annual reports, actuarial reports, PBGC-1 Forms, audits or
Returns) have been timely filed or distributed.
(c) NO PROHIBITED TRANSACTIONS, ETC. None of the Stockholders, any
Plan or the Company or any Company Subsidiary has engaged in any Prohibited
Transaction. No Plan has incurred an accumulated funding deficiency, as defined
in Section 412(a) of the Code and Section 302(a) of ERISA, and no circumstances
exist pursuant to which the Company or any Company Subsidiary could have any
direct or indirect liability whatsoever (including being subject to any
statutory Lien to secure payment of any such liability), to the PBGC under Title
IV of ERISA or to the IRS for any excise tax or penalty with respect to any Plan
now or hereafter maintained or contributed to by the Company or any of its ERISA
Affiliates. Further:
(i) there have been no terminations,
partial terminations or
discontinuances of contributions to
any Qualified Plan without a
determination by the IRS that such
action does not adversely affect the
tax-qualified status of that plan;
(ii) no Termination Event has occurred;
(iii) no Reportable Event has occurred with respect to any
Plan which was not properly reported;
(iv) the valuation of assets of any Qualified Plan, as of
the Effective Time, shall equal or exceed the
actuarial present value of all "benefit liabilities"
(within the meaning of Section 40001(a)(16) of ERISA)
under that plan in accordance with the assumptions
contained in the Regulations of the PBGC governing the
funding of terminated defined benefit plans;
(v) with respect to Plans qualifying as "group health
plans" under Section 4980B of the Code or Section
607(l) or 609 of ERISA and related regulations
(relating to the benefit continuation rights imposed
by "COBRA" or qualified medical child support orders),
the Company, each Company Subsidiary and the
Stockholders have complied (and at the Effective Time
will have complied) in all material respects with all
reporting, disclosure, notice, election and other
benefit continuation and coverage requirements imposed
thereunder as and when applicable to those plans, and
neither the Company nor any Company
29
Subsidiary has incurred (or will
incur) any direct or indirect
liability or is (or will be) subject
to any loss, assessment, excise tax
penalty or other sanction, arising on
account of or in respect of any direct
or indirect failure by the Company,
any Company Subsidiary or any
Stockholder, at any time prior to the
Effective Time, to comply with any
such federal or state benefit
continuation or coverage requirement,
which is capable of being assessed or
asserted before or after the Effective
Time directly or indirectly against
the Company, any Company Subsidiary,
any Stockholder, the Surviving
Corporation or Apple with respect to
any of those group health plans;
(vi) the Financial Statements as of the
Current Balance Sheet Date reflect the
approximate total unfunded (or
uninsured) pension, medical and other
benefit liability for all Plans
determined in accordance with
accounting principles and actuarial
assumptions consistently applied in
the ongoing administration of the
Plans; and
(vii) neither the Company nor any Company Subsidiary has
incurred liability under Section 4062 of ERISA.
(d) MULTIEMPLOYER PLANS. Except as set forth in Section 4.27(d) of
the Disclosure Statement, neither the Company nor any Company Subsidiary, and no
ERISA Affiliate of any of them, is, or at any time during the six-year period
ended on the date hereof was, obligated to contribute to a Multiemployer Plan.
Neither the Company nor any Company Subsidiary, and no ERISA Affiliate of any of
them, has made a complete or partial withdrawal from a Multiemployer Plan so as
to incur withdrawal liability as defined in Section 4201 of ERISA.
(e) CLAIMS AND LITIGATION. Except as accurately set forth in Section
4.27(e) of the Disclosure Statement, no Litigation or claims (other than routine
claims for benefits) are pending or, to the knowledge of the Company, threatened
against, or with respect to, any of the Plans or with respect to any fiduciary,
administrator or sponsor thereof (in their capacities as such), or any
party-in-interest thereof.
(f) EXCISE TAXES, DAMAGES AND PENALTIES. No act, omission or
transaction has occurred which would result in the imposition on the Company or
any Company Subsidiary of (i) breach of fiduciary duty liability damages under
Section 409 of ERISA, (ii) a civil penalty assessed pursuant to subsection (c),
(i) or (l) of Section 502 of ERISA or (iii) any excise tax under applicable
provisions of the Code with respect to any Plan.
(g) VEBA WELFARE TRUST. Any trust funding a Plan, which is intended
to be exempt from federal income taxation pursuant to Section 501(c)(9) of the
Code, satisfies the requirements of that section and has received a favorable
exemption letter from the IRS
30
regarding that exempt status and has not, since receipt of the most recent
favorable exemption letter, been amended or operated in a way that would
adversely affect that exempt status. The value of assets of each trust described
in this Section 4.27(g) equals or exceeds the value of benefit liabilities of
such trust (or related Plan) determined in accordance with actuarial assumptions
consistently applied in the ongoing administration of such trust (or related
plan).
Section 4.28 TAXES. (a) Each of the following representations and
warranties in this Section 4.28 is qualified to the extent set forth in Section
4.28 of the Disclosure Statement.
(b) All Returns required to be filed with respect to any Tax for
which any of the Company and the Company Subsidiaries is liable have been duly
and timely (taking into account applicable extensions) filed with the
appropriate Taxing Authority, all such Returns were correct and complete in all
material respects, all Taxes that have become due from the Company and any
Company Subsidiaries have been paid, each Tax payable by the Company or a
Company Subsidiary by assessment has been timely paid in the amount assessed and
adequate reserves have been established on the consolidated books of the Company
and the Company Subsidiaries for all Taxes for which any of the Company and the
Company Subsidiaries is liable, but the payment of which is not yet due. Neither
the Company nor any Company Subsidiary is, or ever has been, liable for any Tax
payable by reason of the income or property of a Person other than the Company
or a Company Subsidiary. Each of the Company and the Company Subsidiaries has
timely filed true, correct and complete declarations of estimated Tax in each
jurisdiction in which any such declaration is required to be filed by it. No
Liens for Taxes exist upon the assets of the Company or any Company Subsidiary
except Liens for Taxes which are not yet due. Neither the Company nor any
Company Subsidiary is, or ever has been, subject to Tax in any jurisdiction
outside of the United States. No Litigation with respect to any Tax for which
the Company or any Company Subsidiary is asserted to be liable is pending or, to
the knowledge of the Company or any Stockholder, threatened and no basis which
the Company or any Stockholder believes to be valid exists on which any claim
for any such Tax can be asserted against the Company or any Company Subsidiary.
There are no requests for rulings or determinations in respect of any Taxes
pending between the Company or any Company Subsidiary and any Taxing Authority.
No extension of any period during which any Tax may be assessed or collected and
for which the Company or any Company Subsidiary is or may be liable has been
granted to any Taxing Authority. Neither the Company nor any Company Subsidiary
is or has been a party to any tax allocation or sharing agreement. All amounts
required to be withheld by any of the Company and the Company Subsidiaries and
paid to governmental agencies for income, social security, unemployment
insurance, sales, excise, use and other Taxes have been collected or withheld
and paid to the proper Taxing Authority. The Company and each Company Subsidiary
have made all deposits required by law to be made with respect to employees'
withholding and other employment taxes.
(c) Neither the Company, any Company Subsidiary nor any Stockholder
is a "foreign person," as that term is referred to in Section 1445(f)(3) of the
Code.
(d) Neither the Company, nor any Company Subsidiary, has filed a
consent pursuant to Section 341(f) of the Code or any comparable provision of
any other Tax statute, nor has agreed to have Section 341(f)(2) of the Code or
any comparable provision of any other
31
Tax statute apply to any disposition of an asset. Neither the Company, nor any
Company Subsidiary, has made, is obligated to make or is a party to any
agreement that could require it to make any payment that is not, or would not
be, deductible under Section 280G of the Code. No asset of the Company or of any
Company Subsidiary is subject to any provision of applicable law which
eliminates or reduces the allowance for depreciation or amortization in respect
of that asset below the allowance generally available to an asset of its type.
No accounting method changes of the Company or of any Company Subsidiary exist
or are proposed or threatened which could give rise to an adjustment under
Section 481 of the Code.
Section 4.29 GOVERNMENT CONTRACTS. Except as accurately set forth in
Section 4.29 of the Disclosure Statement, neither the Company nor any Company
Subsidiary is a party to any governmental contract subject to price
redetermination or renegotiation.
Section 4.30 ABSENCE OF CHANGES. Since the Current Balance Sheet
Date, except as accurately set forth in Section 4.30 of the Disclosure
Statement, none of the following has occurred with respect to the Company or any
Company Subsidiary:
(a) any circumstance, condition, event or state of facts (either
singly or in the aggregate), other than conditions generally affecting the
business of providing orthodontic care to patients, which has caused, is causing
or will cause a Material Adverse Effect on the Company;
(b) any change in its authorized Capital Stock or in any of its
outstanding Capital Stock or Derivative Securities;
(c) any Restricted Payment, except any declaration or payment of
dividends by any Company Subsidiary solely to the Company;
(d) any increase in, or any commitment or promise to increase, the
rates of Cash Compensation as of the date hereof, or the amounts or other
benefits paid or payable under any Company ERISA Pension Plan or Other
Compensation Plan, except for ordinary and customary bonuses and salary
increases for employees (other than the Stockholders or their Immediate Family
Members) at the times and in the amounts consistent with its past practice;
(e) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, that will have a Material Adverse
Effect on the Surviving Corporation following the Effective Time;
(f) any distribution, sale or transfer of, or any Company Commitment
to distribute, sell or transfer, any of its assets or properties of any kind
which singly is or in the aggregate are Material to the Company, other than
distributions, sales or transfers in the ordinary course of its business and
consistent with its past practices to Persons other than the Stockholders and
their Immediate Family Members and Affiliates;
(g) any cancellation, or agreement to cancel, any Indebtedness,
obligation or other liability owing to it, including any Indebtedness,
obligation or other liability of any Stockholder
32
or any Related Person or Affiliate thereof, provided that it may negotiate and
adjust bills in the course of good faith disputes with customers in a manner
consistent with past practice, if all those adjustments are included in the
Supplemental Information provided Apple pursuant to Section 6.08;
(h) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property or
rights or requiring consent of any Person to the transfer and assignment of any
such assets, property or rights;
(i) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the ordinary
course of its business consistent with its past practices;
(j) any waiver of any of its rights or claims that singly is or in
the aggregate are Material to the Company;
(k) any transaction by it outside the ordinary course of its business
or not consistent with its past practices;
(l) any incurrence by it of any Indebtedness or any Guaranty not
constituting its Indebtedness, or any Company Commitment to incur any
Indebtedness or any such Guaranty;
(m) any investment in the Capital Stock, Derivative Securities or
Indebtedness of any Person other than a Permitted Investment;
(n) except in accordance with the Company's consolidated capital
expenditure budget for the Company's current fiscal year, any capital
expenditure or series of related capital expenditures by the Company and the
Company Subsidiaries collectively in excess of $5,000, or commitments by the
Company and the Company Subsidiaries to make capital expenditures totaling in
excess of $5,000; or
(o) any cancellation or termination of a Material Agreement of the
Company.
Section 4.31 BANK RELATIONS; POWERS OF ATTORNEY. The Company has
provided Apple with an accurate, complete written statement setting forth:
(a) the name of each financial institution in which the Company or
any Company Subsidiary has borrowing or investment arrangements, deposit or
checking accounts or safe deposit boxes;
(b) the types of those arrangements and accounts, including, as
applicable, names in which accounts or boxes are held, the account or box
numbers and the name of each Person authorized to draw thereon or have access
thereto; and
(c) the name of each Person holding a general or special power of
attorney from the Company or any Company Subsidiary and a description of the
terms of each such power.
33
Section 4.32 RELATIONS WITH GOVERNMENTS, ETC. Neither the Company nor
any Company Subsidiary has made, offered or agreed to offer anything of value to
any governmental official, political party or candidate for government office
which would cause the Company or any Company Subsidiary to be in violation of
the Foreign Corrupt Practices Act of 1977 or any Governmental Requirement to a
similar effect.
Section 4.33 RELIANCE ON REPRESENTATIVES. The Company and the
Stockholders are solely relying on their own Representatives (including their
own legal counsel and accountant) as to legal, tax and related matters
concerning the transaction contemplated by this Agreement and are in no way
relying on Apple or Apple's Representatives (including Apple's legal counsel and
accountant) as to such legal, tax and related matters. Further, the Company and
the Stockholders acknowledge that neither Apple nor Apple's Representatives have
made any representations regarding the tax treatment of the transactions
contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF APPLE
Section 5.02 ORGANIZATION; POWER. Apple is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and Apple has all requisite corporate power and authority under the
laws of its Organization State and its Charter Documents to own or lease and to
operate its properties presently and following the Effective Time and to carry
on its business as now conducted and as proposed to be conducted following the
Effective Time. Apple has not engaged in any operations since its organization
other than in connection with their formation and capitalization and the
transactions contemplated by this Agreement and the Other Agreements.
Section 5.03 AUTHORIZATION; ENFORCEABILITY; ABSENCE OF CONFLICTS;
REQUIRED CONSENTS. (a) The execution, delivery and performance by Apple of this
Agreement and each other Transaction Document to which it is a party, and the
effectuation of the Merger and the other transactions contemplated hereby and
thereby, are within its corporate power under its Charter Documents and the
applicable Governmental Requirements of its Organization State and have been
duly authorized by all proceedings, including actions permitted to be taken in
lieu of proceedings, required under its Charter Documents and the applicable
Governmental Requirements of its Organization State.
(b) This Agreement has been, and each of the other Transaction
Documents to which Apple is a party, when executed and delivered to the other
parties thereto (or, in the case of the Certificates of Merger, the applicable
Governmental Authorities), will have been, duly executed and delivered by it and
is, or when so executed and delivered will be, its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as that
enforceability may be (i) limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and (ii) subject to general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law).
34
(c) The execution, delivery and performance in accordance with their
respective terms by Apple of the Transaction Documents to which it is a party
have not and will not (i) violate, breach or constitute a default under (A) the
Charter Documents of Apple, (B) any Governmental Requirement applicable to Apple
or (C) any Material Agreement of Apple, (ii) result in the acceleration or
mandatory prepayment of any Indebtedness, or any Guaranty not constituting
Indebtedness, of Apple or afford any holder of any of that Indebtedness, or any
beneficiary of any of those Guaranties, the right to require Apple to redeem,
purchase or otherwise acquire, reacquire or repay any of that Indebtedness, or
to perform any of those Guaranties, (iii) cause or result in the imposition of,
or afford any Person the right to obtain, any Lien upon any property or assets
of Apple (or upon any revenues, income or profits of either Apple therefrom) or
(iv) result in the revocation, cancellation, suspension or material
modification, in any single case or in the aggregate, of any Governmental
Approval possessed by Apple at the date hereof and necessary for the ownership
or lease and the operation of its properties or the carrying on of its business
as now conducted, including any necessary Governmental Approval under each
applicable Environmental Law and Professional Code.
(d) Except for (i) the filing of the Certificates of Merger with the
applicable Governmental Authorities, (ii) filings of the Registration Statement
under the Securities Act and the SEC order declaring the Registration Statement
effective under the Securities Act and (iii) as may be required by the HSR Act
or the applicable state securities or blue sky laws, no Governmental Approvals
are required to be obtained, and no reports or notices to or filings with any
Governmental Authority are required to be made, by Apple for the execution,
delivery or performance by Apple of the Transaction Documents to which it is a
party, the enforcement against Apple of its obligations thereunder or the
effectuation of the Merger and the other transactions contemplated thereby.
Section 5.04 CHARTER DOCUMENTS. Apple has delivered to the Company
true, complete and correct copies of the Charter Documents of Apple. No breach
or violation of any Charter Document of Apple has occurred and is continuing.
Section 5.05 CAPITAL STOCK OF APPLE. (a) Immediately prior to the
Effective Time, (i) the authorized Capital Stock of Apple will be comprised of
(A) 50,000,000 shares of Apple Common Stock and (B) 10,000,000 shares of
preferred stock, $.01 par value per share, (ii) before giving effect to the
Merger and the merger or other acquisition transactions contemplated by the
Other Agreements, (A) the number of shares of Apple Common Stock then issued and
outstanding will be as set forth in the Registration Statement when it becomes
effective under the Securities Act, (B) no shares of the Apple preferred stock
then will be issued or outstanding and (C) Apple will have reserved for issuance
pursuant to Other Compensation Plans or the exercise of Derivative Securities
the number of shares of Apple Common Stock set forth in the Registration
Statement when it becomes effective under the Securities Act.
(b) All shares of Apple Common Stock outstanding immediately prior to
the Effective Time, and all shares of Apple Common Stock to be issued pursuant
to Section 2.04, when issued, (i) will have been duly authorized and validly
issued in accordance with the DGCL and Apple's Charter Documents and (ii) will
be fully paid and nonassessable. None of the shares of Apple Common Stock to be
issued pursuant to Section 2.04 will, when issued, have
35
been issued in breach or violation of (i) any applicable statutory or
contractual preemptive rights, or any other rights of any kind (including any
rights of first offer or refusal), of any Person or (ii) the terms of any of its
Derivative Securities then outstanding.
Section 5.06 SUBSIDIARIES. Immediately prior to the IPO Closing Date,
(a) Apple will have no Subsidiaries and (b) Apple will not own, of record or
beneficially, directly or indirectly through any Person or otherwise (except
pursuant hereto or to the Other Agreements), any Capital Stock or Derivative
Securities of any Entity.
Section 5.07 LIABILITIES. Except as disclosed in the Private
Placement Memorandum, Apple has no material liabilities of any kind other than
those incurred in connection with this Agreement and the Other Agreements and
the transactions contemplated hereby and thereby, including the IPO.
Section 5.08 COMPLIANCE WITH LAWS; NO LITIGATION. Apple is in
compliance with all Governmental Requirements applicable to it, and no
Litigation is pending or, to the knowledge of Apple, threatened to which Apple
is or may become a party which (a) questions or involves the validity or
enforceability of any obligation of Apple under any Transaction Document, (b)
seeks (or reasonably may be expected to seek) (i) to prevent or delay
consummation by Apple of the transactions contemplated by this Agreement to be
consummated by Apple, as the case may be, or (ii) damages from Apple in
connection with any such consummation.
Section 5.09 NO BROKERS. Except as disclosed in the Private Placement
Memorandum, Apple has not, directly or indirectly, in connection with this
Agreement or the transactions contemplated hereby (a) employed any broker,
finder or agent or (b) agreed to pay or incurred any obligation to pay any
broker's or finder's fee, any sales commission or any similar form of
compensation.
Section 5.10 PRIVATE PLACEMENT MEMORANDUM. At the date hereof, the
Private Placement Memorandum (other than the historical financial statements,
including the notes thereto, of the Founding Companies (other than the Company)
and the historical information contained therein respecting the Company and the
Stockholders, to which this Section 5.10 does not apply) does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not materially misleading in
the light of the circumstances under which those statements are made.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Section 6.02 ACCESS AND COOPERATION; DUE DILIGENCE. (a) From the date
hereof and until the IPO Closing Date, the Company will (i) afford to the
Representatives of Apple reasonable access to all the key employees, sites,
properties, books and records of each of the Company and the Company
Subsidiaries, (ii) provide Apple with such additional financial and operating
data and other information relating to the business and properties of each of
the
36
Company and the Company Subsidiaries as Apple or any Other Founding Company may
from time to time reasonably request and (iii) cooperate with Apple and each
Other Founding Company and their respective Representatives in the preparation
of any documents or other material which may be required in connection with any
Transaction Documents or any Other Transaction Documents. Each Stockholder and
the Company will treat all Confidential Information obtained by them in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to Apple as confidential in
accordance with the provisions of Section 11.01.
(b) Each of the Company and the Stockholders will use its best
efforts to secure, as soon as practicable after the date hereof, all approvals
or consents of third Persons as may be necessary to consummate the transactions
contemplated hereby.
(c) From the date hereof and until the IPO Closing Date, Apple will
(i) afford to the Representatives of the Company and the Stockholders access to
all sites, properties, books and records of Apple, (ii) provide the Company with
such additional financial and operating data and other information relating to
the business and properties of Apple as the Company or any Stockholder may from
time to time reasonably request and (iii) cooperate with the Company and the
Stockholders and their respective Representatives in the preparation of any
documents or other material which may be required in connection with any
Transaction Documents.
(d) If this Agreement is terminated pursuant to Section 12.1, Apple
promptly will return all written Confidential Information of the Company it then
possesses to the Company.
Section 6.03 CONDUCT OF BUSINESS PENDING CLOSING. From the date
hereof and until the Effective Time, the Company will, and will cause each
Company Subsidiary to, except as and only to the extent set forth in Section
6.03 of the Disclosure Statement:
(a) carry on its businesses in substantially the same manner as it
has heretofore and not introduce any material new method of management,
operation or accounting;
(b) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present, ordinary
wear and tear excepted;
(c) perform all its obligations under agreements relating to or
affecting its assets, properties and other rights;
(d) keep in full force and effect without interruption all its
present insurance policies or other comparable insurance coverage;
(e) use reasonable commercial efforts to (i) maintain and preserve
its business organization intact, (ii) retain its present employees and (iii)
maintain its relationships with suppliers, customers, patients and others having
business relations with it;
(f) comply with all applicable Governmental Requirements; and
37
(g) except as required or expressly permitted by this Agreement,
maintain the instruments and agreements governing its outstanding Indebtedness
and leases on their present terms and not enter into new or amended Indebtedness
or lease instruments or agreements involving amounts over $1,000 in any case or
$5,000 in the aggregate, without the prior written consent of Apple (which
consent will not be unreasonably withheld).
Section 6.04 PROHIBITED ACTIVITIES. From the date hereof and until
the Effective Time, without the prior written consent of Apple or unless as
required or expressly permitted by this Agreement, the Company will not, and
will not permit any Company Subsidiary to:
(a) make any change in its Charter Documents;
(b) issue any of its Capital Stock or issue or otherwise create any
of its Derivative Securities;
(c) make any Restricted Payment (other than as provided in Section
6.04 of the Disclosure Statement);
(d) make any investments (other than Permitted Investments) in the
Capital Stock, Derivative Securities or Indebtedness of any Person;
(e) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures in a single transaction or a
series of related transactions involving an aggregate amount of more than $1,000
otherwise than in the ordinary course of its business and consistent with its
past practice;
(f) increase or commit or promise to increase the Cash Compensation
payable or to become payable to any officer, director, stockholder, employee or
agent, consultant or independent contractor of any of the Company and the
Company Subsidiaries or make any discretionary bonus or management fee payment
to any such Person, except bonuses or salary increases to employees (other than
the Stockholders or their Immediate Family Members) at the times and in the
amounts consistent with its past practice;
(g) create, assume or permit to be created or imposed any Liens
(other than Permitted Liens) upon any of its assets or properties, whether now
owned or hereafter acquired, except for purchase money Liens incurred in
connection with the acquisition of equipment with an aggregate cost not in
excess of $1,000 and necessary or desirable for the conduct of the business of
any of the Company and the Company Subsidiaries;
(h) (i) adopt, establish, amend or terminate any ERISA Employee
Benefit Plan, or any Other Compensation Plan or Employee Policies and Procedures
or (ii) take any discretionary action, or omit to take any contractually
required action, if that action or omission could either (A) deplete the assets
of any ERISA Employee Benefit Plan or any Other Compensation Plan or (B)
increase the liabilities or obligations under any such plan;
38
(i) sell, assign, lease or otherwise transfer or dispose of any of
its owned or leased property or equipment otherwise than in the ordinary course
of its business and consistent with its past practice;
(j) negotiate for the acquisition of any business or the start-up of
any new business;
(k) merge, consolidate or effect a share exchange with, or agree to
merge, consolidate or effect a share exchange with any other Entity;
(l) waive any of its material rights or claims, provided that it may
negotiate and adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice, but such adjustments will not be
deemed to be included in Section 4.17 of the Disclosure Statement unless
specifically listed in the Supplemental Information;
(m) commit a material breach of or amend or terminate any Material
Agreement of the Company or any of its Governmental Approvals; or
(n) enter into any other transaction (i) outside the ordinary course
of its business and consistent with its past practice or (ii) prohibited hereby.
Section 6.05 NO SHOP; RELEASE OF DIRECTORS. (a) Each of the Company
and the Stockholders agrees that, from the date hereof and until the first to
occur of the Effective Time or the termination of this Agreement in accordance
with Article XII, neither the Company nor any Stockholder, nor any of their
respective officers and directors shall, and the Company and each Stockholder
will direct and use their best efforts to cause each of their respective
Representatives not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including any proposal or offer to the Stockholders) with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity securities of, the
Company (any such proposal or offer being an "Acquisition Proposal") or engage
in any activities, discussions or negotiations concerning, or provide any
Confidential Information respecting, the Company, any Other Founding Company or
Apple to, or have any discussions with, any Person relating to an Acquisition
Proposal or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. The Company and each Stockholder will: (i) immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Persons conducted heretofore with respect to any of the
foregoing, and each will take the steps necessary to inform the Persons referred
to in the first sentence of this Section 6.05(a) of the obligations undertaken
in this Section 6.05(a); and (ii) notify Apple immediately if any such inquiries
or proposals are received by, any such information is requested from or any such
discussions or negotiations are sought to be initiated or continued with the
Company or any Stockholder.
(b) Each of the Company and the Stockholders hereby (i) waives every
right, if any, the Governmental Requirements of the Company's Organization State
afford the Company or Stockholders to require the Company's directors (or their
equivalents if the Company is not
39
a corporation), in the exercise of their fiduciary duties in their capacity as
such, to engage in any of the activities prohibited by this Section 6.05 and
(ii) releases each such person from any and all liability he might otherwise
have to the Company or any Stockholders but for this release.
Section 6.06 FORMATION OF ORTHODONTIC ENTITY. The Stockholders shall
duly form, organize and incorporate the Orthodontic Entity in its Organization
State, and the Articles of Association and Bylaws of the Orthodontic Entity
shall be in form and substance reasonably satisfactory to Apple. The
Stockholders shall not permit the Orthodontic Entity to commence business until
the IPO Pricing Date.
Section 6.07 NOTIFICATION OF CERTAIN MATTERS. The Stockholders and
the Company shall give prompt notice to Apple of (a) the existence or occurrence
of each condition or state of facts which will or reasonably could be expected
to cause any representation or warranty of the Company or any Stockholder
contained herein to be untrue or incorrect in any material respect at or prior
to the Closing or on the IPO Closing Date and (b) any material failure of any
Stockholder or the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by that Person hereunder, provided
that no such notice shall be required until Apple shall give notice to the
Company and the Stockholders of the date scheduled for the Closing with respect
to the occurrence in the ordinary course of business and consistent with past
practice of the Company or any Company Subsidiary, as the case may be, of any
condition or state of facts which would cause any Sections of the Disclosure
Statement to be incorrect. Apple shall give prompt notice to the Company of (a)
the existence or occurrence of each condition or state of facts which will or
reasonably could be expected to cause any representation or warranty of Apple
contained herein to be untrue or inaccurate at or prior to the Closing or on the
IPO Closing Date and (b) any material failure of Apple to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder. The delivery of any notice pursuant to this Section 6.07 shall not be
deemed to (a) modify the representations or warranties herein of the party
delivering that notice, or any other party, which modification may be made only
pursuant to Section 6.08, (b) modify the conditions set forth in Article VII or
(c) limit or otherwise affect the remedies available hereunder to the party
receiving that notice.
Section 6.08 SUPPLEMENTAL INFORMATION. Each of the Company and the
Stockholders agrees that, with respect to the representations and warranties of
that party contained in this Agreement, that party will have the continuing
obligation (except to the extent otherwise provided in Section 6.07) until the
Closing to provide Apple promptly with such additional supplemental Information
(collectively, the "Supplemental Information"), in the form of (a) amendments to
then existing Sections of the Disclosure Statement or (b) additional Sections of
the Disclosure Statement, as would be necessary, in the light of the
circumstances, conditions, events and states of facts then known to the Company
or any Stockholder, to make each of those representations and warranties true
and correct as of the Closing and on the IPO Closing Date. For purposes only of
determining whether the conditions to the obligations of Apple which are
specified in Sections 7.04(a)(ii)(A) and 7.04(b)(ii) have been satisfied, and
not for any purpose under Article IX, the Disclosure Statement as of the Closing
and on the IPO Closing Date shall be deemed to be the Disclosure Statement as of
the date hereof as amended or supplemented by the Supplemental Information
provided to Apple prior to the Closing pursuant to this Section
40
6.08; provided, however, that if the Supplemental Information so provided
discloses the existence of circumstances, conditions, events or states of facts
which, in any combination thereof, (a) have had a Material Adverse Effect on the
Company which was not reflected in the determination of the Transaction Value
or, in the sole judgment of Apple (which shall be conclusive for purposes of
this Section 6.08 and Article XII, but not for any purpose of Article IX), (b)
are having or will have a Material Adverse Effect on the Company or the
Surviving Corporation, as the case may be, Apple will be entitled either (i) to
terminate this Agreement pursuant to Section 12.01(d) or (ii) to treat as Apple
Indemnified Losses for all purposes of Article IX (which treatment will not
prejudice the right of any Stockholder under Article IX to contest Damage Claims
made by Apple in respect of those Apple Indemnified Losses) all Damages to the
Company or the Surviving Corporation which are attributable to the
circumstances, conditions, events and states of facts first disclosed herein
after the date hereof in the Supplemental Information. Apple will provide the
Company with copies of the Registration Statement, including all pre-effective
amendments thereto, promptly after the filing thereof with the SEC under the
Securities Act.
Section 6.09 COOPERATION IN CONNECTION WITH THE IPO. The Company and
the Stockholders will (a) provide Apple and the Underwriter with all the
Information concerning the Company or any of the Stockholders which is
reasonably requested by Apple and the Underwriter from time to time in
connection with effecting the IPO and (b) cooperate with Apple and the
Underwriter and their respective Representatives in the preparation and
amendment of the Registration Statement (including the Financial Statements) and
in responding to the comments of the SEC staff, if any, with respect thereto.
The Company and each Stockholder agree promptly to (a) advise Apple if, at any
time during the period in which a prospectus relating to the IPO is required to
be delivered under the Securities Act, any information contained in the then
current Registration Statement prospectus concerning the Company or the
Stockholders becomes incorrect or incomplete in any material respect and (b)
provide Apple with the information needed to correct or complete that
information.
Section 6.10 ADDITIONAL FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Company will furnish to Apple:
(a) as soon as available and in any event within 30 days after the
end of each of the Company's fiscal quarters which ends prior to the IPO Pricing
Date, an unaudited consolidated balance sheet of the Company and the Company
Subsidiaries as of the end of that fiscal quarter and the related consolidated
statements of income or operations, cash flows and stockholders' or other
owners' equity for that fiscal quarter and for the period of the Company's
fiscal year ended with that quarter, in each case (i) setting forth in
comparative form the figures for the corresponding portion of the Company's
previous fiscal year and (ii) prepared in accordance with GAAP applied on basis
consistent (A) throughout the periods indicated (excepting footnotes) and (B)
with the basis on which the Initial Financial Statements including the Current
Balance Sheet were prepared;
(b) if requested by Apple in connection with any amendment of the
Registration Statement and promptly following any such request, such summary
consolidated operating or other financial information of the Company and the
Company Subsidiaries as of the end of either
41
the first or second fiscal month in any of the Company's fiscal quarters as
Apple may request: and
(c) to the extent not provided at the time of execution and delivery
of this Agreement, on or prior to March 1, 1997 the information concerning the
Company and the Stockholders contemplated by the Agreement to be set forth in
the Disclosure Statement.
Section 6.11 TERMINATION OR TRANSFER OF PLANS. If requested by Apple,
the Company will, or will cause the applicable Company Subsidiary to, if
permitted by all applicable Governmental Requirements to do so, terminate each
Plan identified in Section 4.26(c) or (d) of the Disclosure Statement as a "Plan
To Be Terminated" (or in the case of Company ERISA Benefit Plans, or Company
ERISA Pension Plans, remove such Plans from the Company and transfer sponsorship
of such Plans to the Orthodontic Entity) prior to the Effective Time.
Section 6.12 DISPOSITION OF UNWANTED ASSETS. At or prior to the
Closing, the Company will make all arrangements and take all such actions as are
necessary and satisfactory to Apple to convey to the Orthodontic Entity, prior
to the Effective Time, each asset of it or of one or more of the Company
Subsidiaries that by law cannot be acquired by Apple because it relates to the
practice of dentistry, which assets are listed in Section 6.12 of the Disclosure
Statement, and each other asset listed in Section 6.12 of the Disclosure
Statement.
Section 6.13 HSR ACT MATTERS. If Apple shall determine that filings
pursuant to and under the HSR Act are necessary or appropriate in connection
with the effectuation of the Merger or the consummation of the acquisitions
contemplated by the Other Agreements, and advises the Company in writing of that
determination, the Company promptly will compile and file under the HSR Act such
information respecting it as the HSR Act requires of an Entity to be acquired,
and the expiration or termination of the applicable waiting period and any
extension thereof under the HSR Act shall be deemed a condition precedent set
forth in Section 7.02(b).
Section 6.14 RETIREMENT OF DEBT. The Company shall repay all of its
outstanding Indebtedness on or prior to the IPO Closing Date.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.02 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. (a) The
obligation of each party hereto to take the actions contemplated to be taken by
that party at the Closing is subject to the satisfaction of each of the
following conditions on or before the date of the Closing:
(i) NO LITIGATION. Except as set forth in Section
7.02 of the Disclosure Statement, no Litigation
shall be pending on the date of the Closing to
restrain, prohibit or otherwise interfere with,
or to obtain material damages or other relief
42
from Apple or the Surviving Corporation in
connection with, the consummation of the Merger
or the IPO;
(ii) GOVERNMENTAL APPROVALS. All Governmental
Approvals (other than the acceptance for filing
of the Certificates of Merger) required to be
obtained by any of the Company and Apple in
connection with the consummation of the Merger
and the IPO shall have been obtained; and
(iii) THE REGISTRATION STATEMENT. (A) The
Registration Statement, as amended to cover the
offering, issuance and sale by Apple of such
number of shares of Apple Common Stock at the
IPO Price (which need not be set forth in the
Registration Statement when it becomes
effective under the Securities Act) as shall
yield aggregate cash proceeds to Apple from
that sale (net of the Underwriter's discount or
commissions) in at least the amount (the
"Minimum Cash Amount") that is sufficient, when
added to the funds, if any, available from
other sources (if any, and as set forth in the
Registration Statement when it becomes
effective under the Securities Act) (the "Other
Financing Sources") to enable Apple to pay or
otherwise deliver on the IPO Closing Date (1)
the total cash portion of the Merger
Consideration then to be delivered pursuant to
Section 2.04, (2) the total cash portion of the
Merger or other acquisition consideration then
to be delivered pursuant to the Other
Agreements as a result of the consummation of
the Merger or other acquisition transactions
contemplated thereby and (3) the total amount
of Indebtedness of the Founding Companies and
Apple which the Registration Statement
discloses at the time it becomes effective
under the Securities Act will be repaid on the
IPO Closing Date with proceeds received by
Apple from the IPO and the Other Financing
Sources, shall have been declared effective
under the Securities Act by the SEC; (B) no
stop order suspending the effectiveness of the
Registration Statement shall have been issued
by the SEC, and the SEC shall not have
initiated or threatened to initiate Litigation
for that purpose; and (C) the Underwriter shall
have agreed in writing (the "Underwriting
Agreement," which term includes the related
pricing agreement, if any) to purchase from
Apple on a firm commitment basis for resale to
the public initially at the IPO Price, subject
to the conditions set forth in the Underwriting
Agreement, such number of shares of Apple
Common Stock covered by the
43
Registration Statement as, when multiplied by
the price per share of Apple Common Stock to be
paid by the Underwriter to Apple pursuant to
the Underwriting Agreement, shall equal at
least the Minimum Cash Amount.
(b) The obligation of each party hereto with respect to the actions
to be taken on the IPO Closing Date is subject to the satisfaction on that date
of each of the following conditions:
(i) NO LITIGATION. Except as disclosed in Section
7.02 of the Disclosure Statement, no Litigation
shall be pending on the IPO Closing Date to
restrain, prohibit or otherwise interfere with,
or to obtain material damages or other relief
from Apple or the Surviving Corporation in
connection with, the consummation of the Merger
or the IPO;
(ii) GOVERNMENTAL APPROVALS. All Governmental
Approvals required to be obtained by the
Company and Apple in connection with the
consummation of the Merger and the IPO shall
have been obtained;
(iii) RECEIPT OF CERTAIN CERTIFICATES. Each
Stockholder or his Representative shall receive
the certificates that such party is entitled to
receive on the IPO Closing Date; and
(iv) CLOSING OF THE IPO. Apple shall have issued and
sold shares of Apple Common Stock to the
Underwriter in accordance with the Underwriting
Agreement for initial resale at the IPO Price
and received payment therefor in an amount at
least equal to the amount by which (A) the
Minimum Cash Amount exceeds (B) the aggregate
amount of funds actually received on the IPO
Closing Date, if any, from any one or more of
the Other Financing Sources.
Section 7.03 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS. The obligations of the Company and each Stockholder with respect
to actions to be taken by them at or before the Closing and the actions to be
taken on the IPO Closing Date are subject to the satisfaction, or the written
waiver by the Company on behalf of itself and each Stockholder pursuant to
Section 11.05 on or before the date of the Closing of, in addition to the
conditions specified in Section 7.02(a) or 7.02(b), as applicable, (i) all the
conditions set forth in Section 7.01(b), if any, and (ii) all the following
conditions:
44
(a) REPRESENTATIONS AND WARRANTIES. All the representations and
warranties of Apple in Article V shall be true and correct as of the Closing as
though made at that time;
(b) DELIVERY OF DOCUMENTS. Apple shall have delivered to the Company,
with copies for each Stockholder:
(i) an Apple officer's certificate respecting the
representations and warranties of Apple in
Article V and compliance with the covenants of
Apple in Article VI and in the form thereof
attached as an exhibit to the Closing Memorandum;
(ii) opinions dated the IPO Closing Date and addressed
to the Company and the Stockholders from Counsel
for Apple substantially in the forms thereof
attached as exhibits to the Closing Memorandum;
(iii) a certificate of the secretary or any assistant
secretary of Apple in the form thereof attached
as an exhibit to the Closing Memorandum and
respecting, and to which is attached, (A) the
Charter Documents of Apple (certified by the
Secretary of State of the State of Delaware in
the case of the certificates of incorporation
included therein); (B) the resolutions of the
board of directors of Apple respecting the
Transaction Documents and the transactions
contemplated thereby; (C) a certificate
respecting the incumbency and true signatures of
the Apple officers who execute the Transaction
Documents on behalf of Apple; (D) a specimen
certificate evidencing shares of Apple Common
Stock; (E) the prospectus included in the
Registration Statement when it became effective;
and (F) a facsimile copy of the Underwriting
Agreement as executed and delivered by Apple and
the Underwriter;
(iv) the Registration Rights Agreement duly executed
and delivered by Apple; and
(v) a certificate, dated as of a Current Date, duly
issued by the Secretary of State of the State of
Delaware, showing Apple to be in good standing
and authorized to do business in that State.
Section 7.04 CONDITIONS TO THE OBLIGATIONS OF APPLE. (a) The
obligations of Apple with respect to actions to be taken by it at or before the
Closing are subject to the satisfaction on or before the date of the Closing of,
in addition to the conditions specified in Section 7.02 (a), (i) all the
conditions set forth in Section 7.01(c), if any, and (ii) all the following
conditions:
45
(A) REPRESENTATIONS AND WARRANTIES. All the
representations and warranties of the Stockholders and the Company in Articles
III and IV shall be true and correct as of the Closing as though made at that
time;
(B) DELIVERY OF DOCUMENTS. The Stockholders and the
Company shall have delivered to Apple:
(1) a Company officer's certificate, signed by a
Responsible Officer, respecting the
representations and warranties of the
Stockholders and the Company in Articles III and
IV and compliance with the covenants of the
Stockholders and the Company in Article VI and in
the form thereof attached as an exhibit to the
Closing Memorandum;
(2) opinions dated the IPO Closing Date and addressed
to Apple and Counsel for Apple from Counsel for
the Company and the Stockholders substantially in
the form thereof attached as exhibits to the
Closing Memorandum;
(3) a certificate of the secretary or any assistant
secretary of the Company in the form thereof
(without attachments thereto) attached as an
exhibit to the Closing Memorandum and respecting,
and to which is attached, (a) the Charter
Documents of the Company; (b) the resolutions of
the board of directors of the Company respecting
the Transaction Documents and the transactions
contemplated thereby; and (c) a certificate
respecting the incumbency and true signatures of
the Responsible Officers who execute the
Transaction Documents on behalf of the Company;
(4) from each Stockholder, a General Release duly
executed and delivered by that Xxxxxxxxxxx;
(5) from each Stockholder, an executed certificate to
the effect that no withholding is required under
Section 1445 of the Code, in the form of Exhibit
7.04(a)(ii)(B)(5), with the blanks appropriately
filled; and
(6) for each of the Company and the Company
Subsidiaries, a certificate, dated as of a
Current Date, duly issued by the appropriate
Governmental Authorities in its Organization
State and, unless waived by Apple, in each other
jurisdiction listed for it in Section 4.02 of the
Disclosure Statement, showing it to be in good
standing and authorized to do business in its
Organization State and those other jurisdictions
and that all state franchise and/or income tax
returns and taxes due by it in its Organization
State and
46
those other jurisdictions for all periods prior
to the Closing have been filed and paid.
(C) DUE DILIGENCE. Apple's due diligence investigation
of the Company shall have been completed to the satisfaction of Apple in its
sole discretion.
(b) The obligations of Apple with respect to the actions to be taken
on the IPO Closing Date are subject to the satisfaction on that date of (i) all
the conditions set forth in Section 7.01(d), if any, and (ii) the condition that
all the representations and warranties of the Stockholders and the Company in
Articles III and IV shall be true and correct as of the IPO Closing Date as
though made on that date.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
Section 8.02 DISCLOSURE. If, subsequent to the IPO Pricing Date and
prior to the 25th day after the date of the Final Prospectus, any Stockholder
becomes aware of any fact or circumstance which would change (or, if after the
Effective Time, would have changed) a representation or warranty of the Company
or any Stockholder in this Agreement or would affect any document delivered
pursuant hereto in any material respect, that Stockholder will promptly give
notice of that fact or circumstance to Apple.
Section 8.03 PREPARATION AND FILING OF TAX RETURNS. Each party hereto
will, and will cause its Affiliates to, provide to each of the other parties
hereto such cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund, determining a liability
for Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. This cooperation and information shall include
providing copies of all relevant portions of the relevant Returns, together with
such accompanying schedules and work papers, documents relating to rulings or
other determinations by Taxing Authorities and records concerning the ownership
and Tax bases of property as are relevant which a party possesses. Each party
will make its employees, if any, reasonably available on a mutually convenient
basis at its cost to provide an explanation of any documents or information so
provided. Subject to the preceding sentence, each party required by law to file
Returns shall bear all costs attributable to the preparation and filing of those
Returns; provided that if Apple is required to file a Return covering a period
described in Code Section 1362(e)(l)(A) (an S short year), such costs shall be
reimbursed by the Stockholders.
Section 8.04 DIRECTORS. Apple will use its best efforts to cause each
of the persons, if any, who are named in the Final Prospectus as persons who
will become members of the board of directors of Apple following the Effective
Time to be appointed to that board when that prospectus so provides.
47
Section 8.05 REMOVAL OF GUARANTIES. At or within 60 days following
the Effective Time, Apple will cause the Stockholder Guaranties listed in
Section 8.05 of the Disclosure Statement to be terminated.
Section 8.06 ACCESS. The Company and the Stockholders shall, at
reasonable times during normal business hours and on reasonable notice, permit
Apple and its authorized representatives reasonable access to, and make
available for inspection, all of the assets and records of the Orthodontic
Entity, and permit Apple and its authorized representatives to inspect and, at
Apple's sole cost and expense, make copies of all documents, records (other than
patient medical records) and information with respect to the affairs of the
Orthodontic Entity as Apple and its representatives may request.
Section 8.07 LICENSES AND PERMITS. The Company and the Stockholders
shall use their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, statute, rule, regulation or ordinance,
or otherwise necessary or desirable to provide the services of the Orthodontic
Entity, the stockholders of the Orthodontic Entity and the Orthodontic Entity
Professional Employees (as defined in the Service Agreement) contemplated by the
Service Agreement, the Orthodontic Entity Professional Employment Agreements (as
defined in the Service Agreement), and to conduct the intended business of the
Orthodontic Entity.
Section 8.08 ORTHODONTIST EMPLOYMENT AGREEMENT. The Company and the
Stockholders shall use their best efforts to cause, at or immediately prior to
Closing, each orthodontist (i) to terminate his or her employment agreement, if
any, with the applicable Company by mutual consent without any liability
therefor on the part of any Company and (ii) to enter into a Orthodontic Entity
Professional Employment Agreement with the Orthodontic Entity.
Section 8.09 CONTINUITY OF BUSINESS. Apple (directly or through its
direct and indirect subsidiaries) will continue at least one significant
historic business line of the Company or use at least a significant portion of
the Company's historic business assets in a business, in each case within the
meaning of Treasury regulation Section 1.368-1(d).
ARTICLE IX
INDEMNIFICATION
Section 9.02 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All the
provisions of this Agreement will survive the Closing and the Effective Time
indefinitely notwithstanding any investigation at any time made by or on behalf
of any party hereto or the provision of any Supplemental Information pursuant to
Section 6.08, provided that the representations and warranties set forth in
Articles IV, V and VI and in any certificate delivered in connection herewith
with respect to any of those representations and warranties will terminate and
expire on December 31, 1999, except as follows: (a) the representations and
warranties of the Stockholders which relate expressly or by necessary
implication to Taxes, ERISA or other
48
employment or labor matters or the Governmental Requirements referred to in
clause (iii) of Section 9.03(a) will survive until ninety (90) days after the
expiration of the applicable statutes of limitations (including all periods of
extension and tolling); (b) the representations and warranties of the
Stockholders which relate expressly or by necessary implication to the
environment or Environmental Laws will survive for a period of three years from
the Effective Time; and (c) the representations and warranties of the Company
will terminate and expire at the Effective Time. After a representation and
warranty has terminated and expired, no indemnification will or may be sought
pursuant to this Article IX on the basis of that representation and warranty by
any Person who would have been entitled pursuant to this Article IX to
indemnification on the basis of that representation and warranty prior to its
termination and expiration, provided that, in the case of each representation
and warranty that will terminate and expire as provided in this Section 9.02, no
claim presented in writing for indemnification pursuant to this Article IX on
the basis of that representation and warranty prior to its termination and
expiration will be affected in any way by that termination and expiration.
Section 9.03 INDEMNIFICATION OF APPLE INDEMNIFIED PARTIES. (a)
Subject to the applicable provisions of Sections 9.02 and 9.07, the Stockholders
covenant and agree that they, jointly and severally, will indemnify each Apple
Indemnified Party against, and hold each Apple Indemnified Party harmless from
and in respect of, all Damage Claims that arise from, are based on or relate or
otherwise are attributable to (i) any breach of the representations and
warranties of the Stockholders or the Company set forth herein (other than in
Article III) or in certificates delivered in connection herewith (other than in
respect of certificates relating only to the representations and warranties in
Article III), (ii) any nonfulfillment of any covenant or agreement on the part
of the Stockholders or the Company under this Agreement, (iii) all Taxes of the
Company or any Company Subsidiary that arise or result from the consummation of
the transactions contemplated by this Agreement or any agreement ancillary
hereto (including, without limitation, sales, use and other transfer Taxes and
income Taxes), (iv) all Taxes of the Company and any Company Subsidiary for any
taxable period that ends on or before the IPO Closing Date (or for any taxable
period that begins before and ends after the IPO Closing Date to the extent
allocable to the portion of such period prior to the IPO Closing Date), to the
extent such Taxes are not properly reflected in a reserve for Tax liability
(rather than any reserve for deferred Taxes) shown on the face of the Current
Balance Sheet as adjusted for the passage of time through the IPO Closing Date
in accordance with GAAP and the Company's most recent custom and practice, (v)
all costs and expenses of the Company and any Company Subsidiary (including,
without limitation, attorneys' and accountants' fees) incurred in connection
with the negotiation, preparation and consummation of the transactions
contemplated by this Agreement or any agreement ancillary hereto, (vi) any
liability under the Securities Act, the Exchange Act or other applicable
Governmental Requirement which arises out of or is based on (A) any untrue
statement or alleged untrue statement of a material fact relating to the Company
and the Company Subsidiaries, or any of them, which is (1) provided to Apple or
its counsel by the Company or the Stockholders and (2) contained in the Private
Placement Memorandum, any preliminary prospectus relating to the IPO, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or (B) any omission or alleged omission
to state therein a material fact relating to the Company and the Company
Subsidiaries, or any of them, required to be stated therein or necessary to make
the statements therein not misleading, and not provided to Apple or its counsel
by the Company or the Stockholders or
49
(vii) the litigation described in Section 4.12 of the Disclosure Statement (each
such Damage Claim and each Damage Claim described in Section 9.03(b) being an
"Apple Indemnified Loss"); provided, however, that no Stockholder shall be
obligated to indemnify any Apple Indemnified Party against any Apple Indemnified
Loss to the extent that such untrue statement (or alleged untrue statement) was
made in, or such omission (or alleged omission) occurred in, any preliminary
prospectus and the Stockholder timely provided, in writing, corrected or the
necessary additional information to Apple and its counsel for inclusion in the
Final Prospectus. For purposes of subclause (iv) above, the portion of any Tax
for a taxable period that begins before and ends after the IPO Closing Date that
is allocable to the portion of such period that ends on the IPO Closing Date
shall be determined by apportioning the Tax for the entire Taxable period among
such portions based upon the number of days in each such portion, except that in
the case of Taxes based upon or related to income or receipts, such portion
shall be the amount of Tax that would have been due if such Taxable period ended
on the IPO Closing Date.
(b) Each Stockholder, severally and not jointly with any other
Person, covenants and agrees that he will indemnify each Apple Indemnified Party
against, and hold each Apple Indemnified Party harmless from and in respect of,
all Damage Claims that arise from, are based on or relate or otherwise are
attributable to (i) any breach of the representations and warranties of that
Stockholder solely as to that Stockholder set forth in Article III or in
certificates delivered by that Stockholder and relating to those representations
and warranties, (ii) any nonfulfillment of any several, and not joint and
several, agreement on the part of that Stockholder under this Agreement or (iii)
any liability under the Securities Act, the Exchange Act or other applicable
Governmental Requirement which arises out of or is based on (A) any untrue
statement or alleged untrue statement of a material fact relating solely to that
Stockholder which is (1) provided to Apple or its counsel by that Stockholder
and (2) contained in the Private Placement Memorandum, any preliminary
prospectus relating to the IPO, the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or (B)
any omission or alleged omission to state therein a material fact relating
solely to that Stockholder required to be stated therein or necessary to make
the statements therein not misleading, and not provided to Apple or its counsel
by that Stockholder; provided, however, that no Stockholder shall be obligated
to indemnify any Apple Indemnified Party against any Apple Indemnified Loss to
the extent that such untrue statement (or alleged untrue statement) was made in,
or such omission (or alleged omission) occurred in, any preliminary prospectus
and the Stockholder timely provided, in writing, corrected or the necessary
additional information to Apple and its counsel for inclusion in the Final
Prospectus.
Section 9.04 INDEMNIFICATION OF STOCKHOLDER INDEMNIFIED PARTIES.
Apple covenants and agrees that it will indemnify each Stockholder Indemnified
Party against, and hold each Stockholder Indemnified Party harmless from and in
respect of, all Damage Claims (that arise from, are based on or relate or
otherwise are attributable to (i) any breach by Apple of its representations and
warranties set forth herein or in their certificates delivered to the Company or
the Stockholders in connection herewith, (ii) any nonfulfillment of any covenant
or agreement on the part of Apple under this Agreement, or (iii) any liability
under the Securities Act, the Exchange Act or other applicable Governmental
Requirement which arises out of or is based on (A) any untrue statement or
alleged untrue statement of a material fact relating to Apple or any of the
Other Founding Companies contained in the Private Placement Memorandum, any
50
preliminary prospectus relating to the IPO, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or (B) any omission or alleged omission to state therein a material
fact relating to Apple or any of the Other Founding Companies, or any of them,
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made (each
such Damage Claim being a "Stockholder Indemnified Loss").
Section 9.05 CONDITIONS OF INDEMNIFICATION. (a) All claims for
indemnification under this Agreement shall be asserted and resolved as follows
in this Section 9.05.
(b) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any third-party claim or
claims asserted against the Indemnified Party ("Third Party Claim") that could
give rise to a right of indemnification under this Agreement and (ii) transmit
to the Indemnifying Party a written notice ("Claim Notice") describing in
reasonable detail the nature of the Third Party Claim, a copy of all papers
served with respect to that claim (if any), an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible (which estimate
shall not be conclusive of the final amount of such claim) and the basis for the
Indemnified Party's request for indemnification under this Agreement. Except as
set forth in Section 9.02, the failure to promptly deliver a Claim Notice shall
not relieve the Indemnifying Party of its obligations to the Indemnified Party
with respect to the related Third Party Claim except to the extent that the
resulting delay is materially prejudicial to the defense of that claim. Within
15 days after receipt of any Claim Notice (the "Election Period"), the
Indemnifying Party shall notify the Indemnified Party (i) whether the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article IX with respect to that Third Party Claim and (ii) if the
Indemnifying Party does not dispute its potential liability to the Indemnified
Party with respect to that Third Party Claim, whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against that Third Party Claim.
(c) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, that Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 9.05(c) and the Indemnified
Party will furnish the Indemnifying Party with all information in its possession
with respect to that Third Party Claim and otherwise cooperate with the
Indemnifying Party in the defense of that Third Party Claim; provided, however,
that the Indemnifying Party shall not enter into any settlement with respect to
any Third Party Claim that purports to limit the activities of, or otherwise
restrict in any way, any Indemnified Party or any Affiliate of any Indemnified
Party without the prior consent of that Indemnified Party (which consent may be
withheld in the sole discretion of that Indemnified Party). The Indemnified
Party is hereby authorized, at the sole cost and expense of the Indemnifying
Party, to file, during the Election Period, any motion, answer or other
pleadings that the Indemnified Party shall deem necessary or appropriate to
protect its interests or those of the Indemnifying Party.
51
The Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this Section 9.05(c) and will bear its own costs and expenses with
respect to that participation; provided, however, that if the named parties to
any such action (including any impleaded parties) include both the Indemnifying
Party and the Indemnified Party, and the Indemnified Party has been advised by
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnifying Party, then
the Indemnified Party may employ separate counsel at the expense of the
Indemnifying Party, and, on its written notification of that employment, the
Indemnifying Party shall not have the right to assume or continue the defense of
such action on behalf of the Indemnified Party.
(d) If the Indemnifying Party (i) within the Election Period (A)
disputes its potential liability to the Indemnified Party under this Article IX,
(B) elects not to defend the Indemnified Party pursuant to Section 9.05(c) or
(C) fails to notify the Indemnified Party that the Indemnifying Party elects to
defend the Indemnified Party pursuant to Section 9.05(c) or (ii) elects to
defend the Indemnified Party pursuant to Section 9.05(c) but fails diligently
and promptly to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and proceedings. Notwithstanding the foregoing, if the
Indemnifying Party has delivered a written notice to the Indemnified Party to
the effect that the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article IX and if such dispute is resolved in favor
of the Indemnifying Party, the Indemnifying Party shall not be required to bear
the costs and expenses of the Indemnified Party's defense pursuant to this
Section 9.05 or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses of such
litigation. The Indemnifying Party may participate in, but not control, any
defense or settlement controlled by the Indemnified Party pursuant to this
Section 9.05(d), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.
(e) In the event any Indemnified Party should have a claim against
any Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice (the
"Indemnity Notice") describing in reasonable detail the nature of the claim, an
estimate of the amount of Damages attributable to that claim to the extent
feasible (which estimate shall not be conclusive of the final amount of such
claim) and the basis of the Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party does not notify the Indemnified
Party within 15 days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the claim specified by the Indemnified
Party in the Indemnity Notice shall be deemed a liability of the Indemnifying
Party hereunder. If the Indemnifying Party has timely disputed such claim, as
provided above, such dispute shall be resolved by proceedings in an appropriate
court of competent jurisdiction if the parties do not reach a settlement of such
dispute within 30 days after notice of a dispute is given.
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(f) Payments of all amounts owing by an Indemnifying Party pursuant
to this Article IX relating to a Third Party Claim shall be made within 30 days
after the latest of (i) the settlement of that Third Party Claim, (ii) the
expiration of the period for appeal of a final adjudication of that Third Party
Claim or (iii) the expiration of the period for appeal of a final adjudication
of the Indemnifying Party's liability to the Indemnified Party under this
Agreement. Payments of all amounts owing by an Indemnifying Party pursuant to
Section 9.05(e) shall be made within 30 days after the later of (i) the
expiration of the 30-day Indemnity Notice period or (ii) the expiration of the
period for appeal of a final adjudication of the Indemnifying Party's liability
to the Indemnified Party under this Agreement.
Section 9.06 REMEDIES NOT EXCLUSIVE. The remedies provided in this
Agreement shall not be exclusive of any other rights or remedies available to
one party against the other, either at law or in equity.
Section 9.07 LIMITATIONS ON INDEMNIFICATION. (a) Notwithstanding the
provisions of Section 9.03(a), neither the Company nor any of the Stockholders
shall be required to indemnify or hold harmless any of the Apple Indemnified
Parties on account of any Apple Indemnified Loss under Section 9.03(a) unless
the liability of the Company and the Stockholders in respect of that Apple
Indemnified Loss, when aggregated with the liability of the Company and the
Stockholders in respect of all Apple Indemnified Losses under Section 9.03(a),
exceeds, and only to the extent the aggregate amount of all those Apple
Indemnified Losses does exceed, the Threshold Amount. In no event shall (i) the
aggregate joint and several liability of the Company and the Stockholders under
this Agreement, including Section 9.03(a), exceed the Transaction Value or (ii)
the aggregate liability of each Stockholder under this Agreement, including
Sections 9.03(a) and 9.03(b), exceed that Stockholder's Pro Rata Share of the
Transaction Value. For purposes of determining the amount of Apple Indemnified
Losses, no effect will be given to any resulting Tax benefit to any Apple
Indemnified Party.
(b) Notwithstanding the provisions of Section 9.04, Apple shall not
be required to indemnify or hold harmless any of the Stockholder Indemnified
Parties on account of any Stockholder Indemnified Loss unless the liability of
Apple in respect of that Stockholder Indemnified Loss, when aggregated with the
liability of Apple in respect of all Stockholder Indemnified Losses, exceeds,
and only to the extent the aggregate amount of all those Stockholder Indemnified
Losses does exceed, the Threshold Amount. In no event shall Apple be liable
under this Agreement, including Section 9.04, for any amount in excess of the
Transaction Value. For purposes of determining the amount of Stockholder
Indemnified Losses, no effect will be given to any resulting Tax benefit to any
Stockholder Indemnified Party.
ARTICLE XI
GENERAL PROVISIONS
Section 11.15 TREATMENT OF CONFIDENTIAL INFORMATION. (a) Each of the
Company and the Stockholders, severally and not jointly with any other Person,
acknowledges that it has or may have had in the past, currently has and in the
future may have access to Confidential
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Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and Apple and its Subsidiaries. Each of the
Company and the Stockholders, severally and not jointly with any other Person,
agrees that it will keep confidential all such Confidential Information
furnished to it and, except with the specific prior written consent of Apple
will not disclose such Confidential Information to any Person except (a)
Representatives of Apple, (b) its own Representatives, provided that these
Representatives (other than counsel) agree to the confidentiality provisions of
this Section 11.15; and provided, further, that Confidential Information shall
not include (i) such information which becomes known to the public generally
through no fault of any Stockholder, (ii) information required to be disclosed
by law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii), each
Stockholder shall, if possible, give prior written notice thereof to Apple and
provide Apple with the opportunity to contest such disclosure, or (iii) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by any Stockholder of the provisions of
this Section 11.15 with respect to any Confidential Information, Apple shall be
entitled to an injunction restraining such Stockholder from disclosing, in whole
or in part, that Confidential Information. Nothing herein shall be construed as
prohibiting Apple from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.15(a), and because
of the immediate and irreparable damage that would be caused to Apple for which
it would have no other adequate remedy, each of the Company and the Stockholders
agrees that Apple may enforce the provisions of Section 11.15(a) by injunctions
and restraining orders against each of them who breaches any of those
provisions.
(c) The obligations of Apple set forth in Section 6.02(d) are
incorporated in this Section 11.15 by this reference.
(d) The obligations of the parties under this Section 11.15 shall
survive the termination of this Agreement.
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