EXHIBIT 2.1
================================================================================
STOCK PURCHASE AGREEMENT
by and among
MONARCH DENTAL CORPORATION
(as the Seller),
MIDWEST DENTAL CARE, MONDOVI, INC.,
MIDWEST DENTAL CARE, SHEBOYGAN, INC.,
and
MIDWEST DENTAL MANAGEMENT, INC.
(as the Acquired Companies),
and
MIDWEST DENTAL, INC.
(as the Purchaser)
December 31, 2001
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.....................................................................................1
ARTICLE II PURCHASE AND SALE OF SECURITIES.................................................................5
2.01 SALE OF ACQUIRED STOCK BY THE SELLER............................................................5
2.02 PURCHASE OF ACQUIRED STOCK BY THE PURCHASER.....................................................6
2.03 POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE......................................................6
2.04 ALLOCATION OF PURCHASE PRICE....................................................................8
2.05 THE CLOSING.....................................................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE ACQUIRED COMPANIES.........................8
3.01 ORGANIZATION, STANDING AND QUALIFICATION........................................................8
3.02 AUTHORITY; NO CONFLICTS.........................................................................9
3.03 SUBSIDIARIES AND INVESTMENTS....................................................................9
3.04 CAPITALIZATION; OWNERSHIP OF THE ACQUIRED STOCK................................................9
3.05 FINANCIAL STATEMENTS...........................................................................10
3.06 BOOKS AND RECORDS..............................................................................10
3.07 NO MATERIAL ADVERSE CHANGE.....................................................................11
3.08 LITIGATION.....................................................................................11
3.09 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS.....................................................11
3.10 NO UNDISCLOSED LIABILITIES; NO INDEBTEDNESS....................................................13
3.11 BENEFIT PLANS; ERISA...........................................................................13
3.12 TITLE TO AND LIENS ON PROPERTIES...............................................................14
3.13 PERMITS AND LICENSES...........................................................................15
3.14 TAX MATTERS....................................................................................16
3.15 INTELLECTUAL PROPERTY RIGHTS...................................................................17
3.16 CONTRACTS......................................................................................18
3.17 ENVIRONMENTAL MATTERS..........................................................................19
3.18 ACCOUNTS RECEIVABLE............................................................................20
3.19 MALPRACTICE LIABILITY..........................................................................21
3.20 INSURANCE......................................................................................21
3.21 EMPLOYEE AND LABOR MATTERS.....................................................................22
3.22 ABSENCE OF CERTAIN DEVELOPMENTS................................................................23
3.23 BANK ACCOUNTS..................................................................................25
3.24 BROKERS........................................................................................25
3.25 PURCHASE COMMITMENTS AND OUTSTANDING BIDS......................................................25
3.26 PRODUCT AND SERVICE WARRANTIES.................................................................25
3.27 SOFTWARE AND INFORMATION SYSTEMS...............................................................25
3.28 CUSTOMERS AND SUPPLIERS........................................................................25
3.29 RELATED PARTY TRANSACTIONS.....................................................................26
3.30 DISCLOSURE.....................................................................................26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................................................26
4.01 ORGANIZATION AND STANDING......................................................................26
4.02 AUTHORITY; NO CONFLICTS........................................................................26
4.03 BROKERS........................................................................................27
4.04 LITIGATION.....................................................................................27
ARTICLE v PRE-CLOSING COVENANTS OF THE SELLER AND THE ACQUIRED COMPANIES.................................27
5.01 ACCESS AND INVESTIGATION.......................................................................27
5.02 OPERATION OF BUSINESS..........................................................................27
i
5.03 REQUIRED APPROVALS.............................................................................28
5.04 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE...................................................28
5.05 NO NEGOTIATION.................................................................................29
5.06 EFFORTS TO CLOSE...............................................................................29
ARTICLE VI CLOSING CONDITIONS OF THE PURCHASER............................................................29
6.01 REPRESENTATIONS AND WARRANTIES TRUE............................................................29
6.02 COMPLIANCE WITH AGREEMENT......................................................................29
6.03 CONSENTS AND APPROVALS.........................................................................29
6.04 EXECUTION AND DELIVERY OF CLOSING DOCUMENTS....................................................30
6.05 NO MATERIAL ADVERSE CHANGE.....................................................................30
6.06 XXXXX LITIGATION...............................................................................30
6.07 XXXXXXXX FEES..................................................................................31
6.08 PROCEEDINGS SATISFACTORY.......................................................................31
ARTICLE VII CLOSING CONDITIONS OF THE SELLER AND THE ACQUIRED COMPANIES....................................31
7.01 REPRESENTATIONS AND WARRANTIES TRUE............................................................31
7.02 COMPLIANCE WITH AGREEMENT......................................................................31
7.03 CONSENTS AND APPROVALS.........................................................................31
7.04 EXECUTION AND DELIVERY OF CLOSING DOCUMENTS....................................................31
7.05 PROCEEDINGS SATISFACTORY.......................................................................32
ARTICLE VIII TERMINATION....................................................................................32
8.01 TERMINATION EVENTS.............................................................................32
8.02 PROCEDURE AND EFFECT OF TERMINATION............................................................33
ARTICLE IX INDEMNIFICATION................................................................................33
9.01 INDEMNIFICATION BY THE PURCHASER...............................................................33
9.02 INDEMNIFICATION BY THE SELLER..................................................................34
9.03 LIMITATIONS ON THE SELLER'S INDEMNIFICATION OBLIGATIONS........................................34
9.04 PROCEDURE FOR INDEMNIFICATION OF THIRD PARTY CLAIMS............................................35
9.05 PROCEDURE FOR INDEMNIFICATION OF OTHER CLAIMS..................................................37
9.06 SURVIVAL.......................................................................................37
9.07 EXCLUSIVE REMEDY...............................................................................37
ARTICLE X MISCELLANEOUS..................................................................................38
10.01 GOVERNING LAW..................................................................................38
10.02 EXPENSES.......................................................................................38
10.03 NOTICES........................................................................................38
10.04 POST CLOSING TAX AGREEMENTS....................................................................39
10.05 TRANSITION ASSISTANCE..........................................................................40
10.06 POST CLOSING COLLECTION OF ACCOUNTS RECEIVABLE.................................................40
10.07 POST CLOSING INSURANCE AGREEMENTS..............................................................40
10.08 NO RELIANCE....................................................................................40
10.09 ENTIRE AGREEMENT...............................................................................40
10.10 DISPUTE RESOLUTION.............................................................................40
10.11 AMENDMENTS; CONSENTS; WAIVERS..................................................................41
10.12 SEVERABILITY OF INVALID PROVISION..............................................................41
10.13 SUCCESSORS AND ASSIGNS.........................................................................41
10.14 RULES OF CONSTRUCTION..........................................................................42
10.15 COUNTERPARTS...................................................................................42
10.16 PRESS RELEASES.................................................................................42
ii
EXHIBITS AND SCHEDULES
Exhibits
Exhibit A Escrow Agreement
Exhibit B Non-Competition Agreement
Exhibit C Opinion of the Seller's and Acquired Companies' Legal Counsel
Exhibit D Opinion of the Purchaser's Legal Counsel
Exhibit E Management Indemnification Agreement
Schedules
Disclosure Schedule
iii
STOCK PURCHASE AGREEMENT
This
Stock Purchase Agreement (the "Agreement") is made as of December
31, 2001 by and among
MONARCH DENTAL CORPORATION, a Delaware corporation (the
"Seller"), MIDWEST DENTAL CARE, MONDOVI, INC., a Wisconsin corporation ("Dental
Care - Mondovi"), MIDWEST DENTAL CARE, SHEBOYGAN, INC., a Wisconsin corporation
("Dental Care - Sheboygan"), MIDWEST DENTAL MANAGEMENT, INC., a Wisconsin
corporation (the "Dental Management"), and MIDWEST DENTAL, INC., a
Minnesota
corporation (the "Purchaser"). Dental Care - Mondovi, Dental Care - Sheboygan,
Dental Management, and Midwest Dental Plan, Ltd., a Wisconsin corporation and
majority owned subsidiary of Dental Management ("Dental Plan") are each referred
to in this Agreement as an "Acquired Company" and collectively as the "Acquired
Companies."
BACKGROUND
A. The Seller owns all of the issued and outstanding shares of Dental
Care - Mondovi, Dental Care - Sheboygan and Dental Management, which issued and
outstanding shares are set forth on Schedule 1 (the "Acquired Stock"). Dental
Management owns one thousand one hundred and eighty-five (1,185) shares of the
common stock of Dental Plan (the "Dental Plan Stock"), which constitutes 79% of
the issued and outstanding capital stock of Dental Plan.
B. The Seller desires to sell the Acquired Stock to the Purchaser, and
the Purchaser desires to purchase the Acquired Stock from the Seller, on the
terms and conditions and for the consideration set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the meanings
indicated:
"Acquired Company Benefit Plan" means each Benefit Plan which applies
only to one or more of the Acquired Companies or their employees and not to the
Seller, any Affiliate of the Seller (other than the Acquired Companies) or their
respective employees.
"Acquired Company Qualified Plan" means each Acquired Company Benefit
Plan which is intended to qualify under Section 401 of the Code.
"Affiliate" means, with respect to any Person, (i) any other Person
which directly, or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, such Person, (ii) any other
Person of which five percent (5%) or more of the equity interest is held
beneficially or of record by such Person, (iii) with respect to an individual,
any Family Member of such Person, or (iv) any business of which such Person or
any Family
Member of such Person is a director, officer, employee or equity holder. The
term "control" for purposes of this definition means the possession, directly or
indirectly, of the power to influence the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Ancillary Agreements" means all the agreements, documents and
instruments executed and delivered at the Closing pursuant to the Agreement,
including without limitation the Escrow Agreement and the Non-Competition
Agreement.
"Balance Sheet Date" has the meaning set forth in Section 3.05.
"Benefit Plan" means any Plan established, arranged or maintained by an
Acquired Company or any corporate group of which an Acquired Company is or was a
member, existing at or prior to the Closing Date, to which an Acquired Company
contributes or has contributed, or under which any employee, officer, director
or former employee, officer or director of an Acquired Company or any
beneficiary thereof is covered, is eligible for coverage or has benefit rights.
"Closing" and "Closing Date" have the meanings set forth in Section
2.05.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations adopted pursuant thereto.
"Damages" means all costs, losses (including, without limitation,
diminution in value), liabilities, damages, claims and expenses, including
without limitation, interest, penalties, costs of mitigation, clean-up or
remedial action, consequential and indirect damages, and other losses resulting
from any shutdown or curtailment of operations, reasonable attorneys' fees and
all amounts paid in investigation, defense or settlement of any of the foregoing
(without giving effect to any "Material Adverse Effect" or other materiality
qualification or any similar qualification).
"Defined Benefit Plan" means each Benefit Plan which is subject to Part
3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"Disclosure Schedule" means the disclosure schedule prepared by the
Seller and the Acquired Companies attached to this Agreement which sets forth
the exceptions to the representations and warranties contained in Article III
and certain other information called for by the Agreement.
"Environmental Laws" has the meaning set forth in Section 3.17.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations adopted pursuant thereto.
2
"ERISA Affiliate" means any entity which is a member of a "controlled
group of corporations" or which is or was under "common control" with an
Acquired Company as defined in Section 414 of the Code.
"Escrow Agreement" means the Escrow Agreement between the Seller, the
Purchaser and the escrow agent named therein, substantially in the form attached
as Exhibit A.
"Family Member" means, with respect to an individual, each parent,
spouse, child, grandchild, brother, sister or the spouse of a child, grandchild,
brother or sister of the individual, and each trust created for the benefit of
one or more of such persons and each custodian of a property of one or more of
such persons.
"Financial Statements" has the meaning set forth in Section 3.05.
"GAAP" means United States generally accepted accounting principles,
consistently applied in accordance with historic practices.
"Indebtedness" means, without duplication (i) all indebtedness for
borrowed money, (ii) all indebtedness secured by any mortgage, pledge, security
interest or lien existing on property owned subject to such mortgage, pledge,
security interest or lien whether or not the indebtedness secured thereby shall
have been assumed, (iii) all amounts representing the capitalization of rentals
in accordance with GAAP, (iv) all amounts owing by an Acquired Company to the
Seller or any Affiliate of the Seller, and (v) all guarantees, endorsements and
other contingent obligations with respect to liabilities of a type described in
any of clauses (i) through (iv) above.
"Intellectual Property" means all patents and patent rights, trademarks
and trademark rights, trade names and trade name rights, service marks and
service xxxx rights, service names and service name rights, brand names,
inventions, processes, formulae, copyrights and copyright rights, trade dress,
business and product names, logos, slogans, trade secrets, industrial models,
designs, methodologies, computer programs (including all source codes) and
related documentation, technical information, manufacturing, engineering and
technical drawings, know-how and all pending applications for and registrations
of patents, trademarks, service marks and copyrights.
"Interim Period Financial Statements" has the meaning set forth in
Section 3.05.
"Liabilities" means all indebtedness, obligations and other
liabilities, whether absolute, accrued, contingent, fixed or otherwise, whether
known or unknown.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, assessment, deed of trust, lease, adverse claim,
levy, charge, restriction on transfer, or encumbrance of any kind, or any
conditional sale or title retention agreement or other agreement to give any of
the foregoing in the future.
"Management Representations" means the representations and warranties
of the Seller and the Acquired Companies set forth in Article III other than
those set forth in Sections 3.01,
3
3.02, 3.03, 3.04, 3.14 (to the extent, and only to the extent, it relates to the
filing of a Tax Return for, or payment of, federal or state corporate income
taxes), 3.22(a), 3.22(b), 3.24 and 3.29 (to the extent, and only to the extent,
it relates to a transaction or proposed transaction with the Seller or any of
its subsidiaries (other than the Acquired Companies) or any of their officers
and directors).
"Material Adverse Effect" means, with respect to any Person, any
effect, or series of effects that, individually or in the aggregate, materially
adversely affect (i) the business, properties, financial condition or operations
of such Person, or (ii) the ability of such Person to perform its obligations
under this Agreement or any Ancillary Agreement.
"Net Working Capital" shall mean an amount equal to the Acquired
Companies' total current assets less (i) their total current liabilities and
(ii) an allowance of $370,000, in each case as of the Closing Date determined on
a consolidated basis in accordance with GAAP, consistently applied, but
excluding all intercompany accounts included therein.
"Non-Competition Agreement" means the Non-Competition Agreement between
the Seller and the Purchaser, substantially in the form attached as Exhibit B.
"Permits" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations and similar consents granted or issued
by any governmental or regulatory authority.
"Permitted Encumbrances" means (i) any Liens for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, and (ii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens does not impair the value of the property
subject to such Lien or the use of such property.
"Person" means any natural person, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, other
business organization, trust, union, unincorporated organization or government,
or any agency or political subdivision thereof.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation right, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workers' compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, including, but not limited to, any "employee
benefit plan" within the meaning of Section 3(3) of ERISA.
"Provider Contract" means a contract between a licensed health care
provider or group of health care providers and a third party payor or person
acting on behalf of a third party payor or group of third party payors
(including but not limited to insurance companies, health maintenance
organizations, preferred provider organizations, limited service health plans,
self-insured employers, and third party administrators), under which the
provider or provider group agrees to render professional services to enrollees,
subscribers, insures, plan participants or
4
covered beneficiaries entitled to receive health care benefits pursuant to a
contract, plan or arrangement established or sponsored by such third party
payor.
"Qualified Plan" means each Benefit Plan which is intended to qualify
under Section 401 of the Code.
"Second Level Damages" means the amount of Damages due under Section
9.02 between $150,000 and $350,000 in the aggregate incurred by the Purchaser
Group in connection with, arising out of, resulting from any breach of any
covenant, representation, warranty or agreement made by the Seller or the
Acquired Companies in this Agreement or any Ancillary Agreement, or any
certificate delivered pursuant thereto.
"Seller Benefit Plan" means each Benefit Plan other than an Acquired
Company Benefit Plan.
"Seller Qualified Plan" means each Seller Benefit Plan which is
intended to qualify under Section 401 of the Code.
"Settlement Agreement" means the Settlement Agreement and Mutual
Release by and among Xx. Xxxxx X. Xxxxx, individually and who in certain
circumstances may be doing business as D.L.H. Building Account or other business
entities or as a partner or principal therein, and the Acquired Companies,
containing terms and conditions acceptable to the Purchaser.
"Subsidiary" means any corporation, partnership, limited liability
company or other business entity of which an aggregate of 50% or more of the
outstanding voting stock, membership interests or other ownership interests are
at any time directly or indirectly owned by the Acquired Companies, by one or
more of their Subsidiaries, or by the Acquired Companies and one or more of
their Subsidiaries.
"Taxes" means all taxes, charges, levies, penalties or other
assessments imposed by any United States federal, state, local or foreign taxing
authority, including but not limited to, income, excise, property, sales,
transfer, franchise, payroll, withholding, social security or other taxes,
including any interest, penalties or additions attributable thereto, regardless
of whether such interest, penalties or additions are attributable to a
Pre-Closing Period (as such term is defined in Section 9.03) or any other
period.
"Tax Return" means any return, report, information return, schedule or
other document (including any related or supporting information) filed or
required to be filed with any taxing authority with respect to Taxes.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
2.01 Sale of Acquired Stock by the Seller. Subject to the terms and
conditions of this Agreement, the Seller agrees to sell the Acquired Stock to
the Purchaser and to deliver the certificates evidencing the Acquired Stock to
the Purchaser at the Closing. The certificates for
5
the Acquired Stock will be properly endorsed for transfer to or accompanied by
duly executed stock powers in favor of the Purchaser and otherwise in a form
acceptable for transfer on the books of the Acquired Companies.
2.02 Purchase of Acquired Stock by the Purchaser. Subject to the terms
and conditions of this Agreement, the Purchaser agrees to acquire the Acquired
Stock from the Seller at the Closing for an aggregate purchase price of
$9,655,000 in cash (the "Purchase Price") in the manner and subject to the
adjustments provided for in this Section and Section 2.03 hereof as follows:
(a) Cash Consideration.
(i) Cash Payment at Closing. At the Closing, the
Purchaser shall pay the Estimated Cash Consideration (as defined below)
in cash to the Seller by wire transfer of immediately available funds
to a bank account designated by the Seller.
(ii) Estimated Cash Consideration. The term
"Estimated Cash Consideration" means $9,655,000 (A) plus the amount, if
any, by which the Net Working Capital derived from the Preliminary
Balance Sheet (as defined below) is greater than $130,000, and (B) less
the amount, if any, by which the Net Working Capital derived from the
Preliminary Balance Sheet is less than $130,000.
(iii) Preliminary Balance Sheet. At the Closing, the
Seller shall deliver to the Purchaser a balance sheet as of the Closing
Date (the "Preliminary Balance Sheet"). The Preliminary Balance Sheet
shall be accompanied by a schedule setting forth a calculation of the
Estimated Cash Consideration and a certificate, signed by an officer of
the Seller, certifying (A) that such calculation represents a good
faith estimate of the Estimated Cash Consideration, and (B) that the
Preliminary Balance Sheet has been prepared in accordance with GAAP.
(b) Escrow Amount. Immediately after receiving the Estimated
Cash Consideration, the Seller shall deposit $150,000 in cash (the "Escrow
Amount") with U.S. Bank Trust National Association to be held in an escrow
account pursuant to the terms established under the Escrow Agreement.
2.03 Post-Closing Adjustments to Purchase Price.
(a) Closing Date Balance Sheet. The Purchaser shall prepare a
balance sheet setting forth the Net Working Capital (the "Closing Date Balance
Sheet") and deliver the Closing Date Balance Sheet to the Seller and the
Purchaser within thirty (30) days after the Closing. The Closing Date Balance
Sheet shall be conclusive for the purposes of the adjustments described in this
Section 2.03 except to the extent, if any, that the Seller delivers, within
thirty (30) days after the date on which the Closing Date Balance Sheet is
delivered to the Seller, a written notice to the Purchaser taking exception to
the Closing Date Balance Sheet and specifying in reasonable detail the nature
and extent of any such exception (it being understood that any amounts not so
disputed shall be paid promptly). Upon request by the Seller at any time after
receipt of the
6
Closing Date Balance Sheet, the Purchaser shall make available to the Seller and
its representatives, the work papers used in preparing it together with such
other documents as the Seller may reasonably request in connection with its
review thereof. If an exception raised by the Seller is disputed by the
Purchaser, then the Purchaser and the Seller shall negotiate in good faith to
resolve such dispute. If, after a period of fifteen (15) days following the date
on which the Seller gives notice of any exception to the Purchaser, such
exception still remains disputed, then the Purchaser and the Seller shall engage
a mutually acceptable independent firm of public accountants of nationally
recognized standing (the "Accounting Firm") to resolve any remaining dispute.
The Accounting Firm shall act as an arbitrator to determine only those issues
still in dispute and shall have access to all documents, working papers,
facilities and personnel necessary for the Accounting Firm to make an
independent determination as to the matters in dispute. If the Accounting Firm
reasonably determines it is necessary to conduct an audit of the Closing Date
Balance Sheet to resolve the dispute, then the Accounting Firm may conduct such
an audit. The decision of the Accounting Firm shall be final and binding for
purposes of this Section 2.03. The fees and expenses of the Accounting Firm
shall be paid by the party whose last proposed offer for settlement of the Net
Working Capital was farther from the determination of the Accounting Firm;
provided, however, that in the event that the determinations of the Purchaser
and the Seller of the Net Working Capital were both within five percent (5%) of
the determination of the Net Working Capital by the Accounting Firm, then the
fees and expenses of the Accounting Firm shall be equally split between the
Purchaser and the Seller.
(b) Net Working Capital Adjustment.
(i) Negative Adjustment. To the extent that the Net
Working Capital derived from the Closing Date Balance Sheet is less
than the Net Working Capital derived from the Preliminary Balance Sheet
(the "Preliminary Net Working Capital"), then the Seller shall pay to
the Purchaser the amount by which the Net Working Capital is less than
the Preliminary Net Working Capital by wire transfer of immediately
available funds to an account designated by the Purchaser or by
certified check within ten (10) days of the Balance Sheet Delivery Date
(as defined below).
(ii) Positive Adjustment. To the extent that the Net
Working Capital derived from the Closing Date Balance Sheet is greater
than the Preliminary Net Working Capital, then the Purchaser shall pay
to the Seller the amount by which the Net Working Capital is greater
than the Preliminary Net Working Capital by wire transfer of
immediately available funds to an account designated by the Seller or
by certified check within ten (10) days of the Balance Sheet Delivery
Date.
(c) Balance Sheet Delivery Date. The term "Balance Sheet
Delivery Date" means the later of (A) the date on which the Closing Date Balance
Sheet is delivered pursuant to Section 2.03(a) above, or (B) if the Seller
disputes the Closing Date Balance Sheet in accordance with Section 2.03(a)
above, the date upon which the dispute is settled, whether by the mutual
agreement of the Purchaser and the Seller or by the delivery of a final Closing
Date Balance Sheet by the Accounting Firm.
7
(d) Interest Charge. If any payment required to be made
pursuant to Section 2.03(b) is not made by the date required by such Section,
interest shall accrue on such unpaid amount at the prime rate plus 2% from such
date to the date of payment. For purposes of the foregoing sentence, the prime
rate, with respect to each calendar quarter during which interest accrues, shall
be equal to the prime rate published in The Wall Street Journal on the first
business day of such calendar quarter.
2.04 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Acquired Stock in conformity with the Code and as mutually
agreed to by the Purchaser and the Seller at the Closing (subject to any
adjustments made to the Purchase Price after the Closing).
2.05 The Closing. The consummation of the purchase and sale of the
Acquired Stock under this Agreement (the "Closing") shall occur at the offices
of Xxxxxxxxx & Xxxxxx P.L.L.P. in Minneapolis,
Minnesota, on the date hereof, or
such other date as the parties agree upon for the Closing to occur (the "Closing
Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE ACQUIRED COMPANIES
Each Acquired Company and the Seller, jointly and severally, represent
and warrant to the Purchaser as of the Closing Date, except as expressly
indicated on the Disclosure Schedule which exceptions are deemed to be
representations and warranties as if made within this Article 3 and to modify
the representations and warranties made in this Article 3, as follows:
3.01 Organization, Standing and Qualification.
(a) Each Acquired Company is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation. Each Acquired Company has all requisite corporate power and
authority to carry on its business as now being conducted and to own, lease or
operate its properties as and in the places where such business is now conducted
or proposed to be conducted and such properties are now owned, leased or
operated. Each Acquired Company is duly qualified and in good standing as a
foreign corporation authorized to carry on its business in the states where the
nature of the activities conducted or proposed to be conducted by the Acquired
Company, or the character of the properties owned, leased or operated by the
Acquired Company require such qualification except where the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect on
the Acquired Companies taken as a whole.
(b) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
8
3.02 Authority; No Conflicts.
(a) The execution, delivery and performance of this Agreement
and the Ancillary Agreements by the Seller and each Acquired Company have been
duly authorized by all necessary corporate action on the part of the Seller and
each Acquired Company's Board of Directors and stockholders and do not conflict
with, result in a default, right to accelerate or loss of rights under, or
result in the creation of any Lien pursuant to, any provision of the articles of
incorporation or bylaws of the Seller or any Acquired Company, or any agreement,
law, rule or regulation or any order, judgment or decree to which the Seller or
any Acquired Company is a party or by which the Seller or any Acquired Company
or its properties are bound or affected except where any such conflict, default,
loss of rights or creation of a Lien could not reasonably be expected to have a
Material Adverse Effect on the Acquired Companies taken as a whole. Except as
set forth in the Disclosure Schedule, no consent, approval, or other action is
required to be obtained or taken by the Seller or any Acquired Company in
connection with the execution, delivery and performance by the Seller and each
Acquired Company of this Agreement or the Ancillary Agreements.
(b) Each of the Seller and the Acquired Companies has full
power and authority to enter into this Agreement and the Ancillary Agreements
and to carry out the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Seller and each Acquired Company and
constitutes, and the Ancillary Agreements when executed and delivered will
constitute, valid and binding obligations of the Seller and each Acquired
Company enforceable in accordance with their respective terms, except to the
extent that enforcement may be limited by applicable bankruptcy, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and subject to general equitable principles which may limit
the right to obtain equitable remedies.
3.03 Subsidiaries and Investments. Except as set forth on the
Disclosure Schedule, no Acquired Company currently has, and has not had during
Seller's ownership of the Acquired Companies, any Subsidiary or investment,
equity, or ownership interest (whether controlling or not) of any kind in any
other Person. No Acquired Company is engaged in any joint venture or partnership
with any other Person.
3.04 Capitalization; Ownership of the Acquired Stock.
(a) The Seller owns beneficially and of record that number of
shares of the Acquired Stock listed on Schedule 1, free and clear of all Liens,
and has, and on the Closing Date will have, good and valid title to such shares.
The delivery of stock certificates representing the Acquired Stock owned by the
Seller in the manner provided in Section 2.01 will transfer to the Purchaser
good and valid title to the Acquired Stock free and clear of all Liens.
(b) The authorized capital stock and the issued and
outstanding capital stock of each Acquired Company is set forth on Schedule 1.
Except as set forth on Schedule 1, all such issued and outstanding shares of
each Acquired Company have been issued to the Seller. The Acquired Stock is duly
authorized, validly issued, fully paid and nonassessable.
(c) There are no (i) rights, options or warrants of any kind
outstanding to purchase or acquire capital stock or any other ownership interest
in any Acquired Company or
9
(ii) other securities, obligations, agreements or rights of any kind outstanding
which are exercisable for, convertible into or exchangeable for any capital
stock or any other ownership interest in any Acquired Company or under the terms
of which the parties thereto have the right to purchase or acquire capital stock
or any other ownership interest in any Acquired Company.
(d) No Acquired Company is subject to any obligation to
repurchase or otherwise acquire or retire any shares of capital stock. There are
no commitments of any Acquired Company to distribute to holders of any class of
its capital stock any evidence of indebtedness or assets, or to pay any dividend
or make any other distribution in respect thereof.
(e) No Person has a contractual right to demand or other right
to cause any Acquired Company to file any registration statement under the
Securities Act of 1933, as amended, relating to any securities of the Acquired
Company or any right to participate in any offering of the Acquired Company's
securities. Except for this Agreement, there are no agreements between or among
any Acquired Company's shareholders or buy-sell agreements of any kind affecting
any Acquired Company's capital stock or other securities.
3.05 Financial Statements. The Seller and the Acquired Companies have
delivered to the Purchaser the following financial statements (collectively, the
"Financial Statements"): (a) the Acquired Companies' unaudited consolidated
balance sheet as of November 30, 2001 (such date being the "Balance Sheet Date")
and related statement of income for the eleven months then ended which are
attached as part of the Disclosure Schedule (the "Interim Period Financial
Statements"); and (b) the Acquired Companies' unaudited consolidated balance
sheets as of December 31, 2000 and December 31, 1999 and the related statements
of income for the fiscal years then ended. All of the Financial Statements have
been prepared from the books and records of the Acquired Companies in accordance
with GAAP and fairly present the financial condition of the Acquired Companies
as of their respective dates and the results of its operations for the periods
covered thereby. Except as and to the extent set forth in the balance sheets
included in the Financial Statements, no Acquired Company had any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
as of the respective dates of such balance sheets that would be required to be
reflected on, or reserved against in, such balance sheets under GAAP. The income
statements included in the Financial Statements do not contain any items of
special or nonrecurring income or any other income not earned in the ordinary
course of business except as expressly specified therein, and the Financial
Statements include all adjustments, which consist only of normal recurring
accruals, necessary for such fair presentation, subject, in the case of the
Interim Period Financial Statements, to normal year-end adjustments (the effect
of which could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Acquired Companies taken as a whole).
3.06 Books and Records. The minute books and other corporate records of
each Acquired Company as made available to the Purchaser contain a true and
complete record, in all material respects, of all actions taken at all meetings
and by all written consents in lieu of meetings of the shareholders, the boards
of directors, and committees of the boards of directors of each Acquired
Company. The stock transfer ledgers and other similar records of each Acquired
Company accurately reflect all issuances and record transfers in the capital
stock of each Acquired Company.
10
3.07 No Material Adverse Change. Since the Balance Sheet Date there has
been no event or occurrence which has had, will have, or may reasonably be
expected to have a Material Adverse Effect on the Acquired Companies taken as a
whole, nor are there any pending changes in the businesses of the Acquired
Companies or in the relationships of the Acquired Companies with their
respective customers or suppliers, or, to the knowledge of the Seller or any of
the Acquired Companies, in any governmental actions or relations affecting the
Acquired Companies' businesses, which if one or more should occur, could
reasonably be expected to have a Material Adverse Effect on the Acquired
Companies taken as a whole.
3.08 Litigation. Except as described in the Disclosure Schedule, there
is no claim, legal action, suit, arbitration, governmental investigation or
other legal or administrative proceeding, nor any order, decree or judgment,
pending or, to the knowledge of the Seller or any of the Acquired Companies,
threatened against (i) any Acquired Company, (ii) any Acquired Company's
stockholders, officers, directors or employees, or health care professionals
employed by or engaged by any Acquired Company, for acts or omissions relating
to any Acquired Company, (iii) any Acquired Company's properties, assets or
business, or (iv) the transactions contemplated by this Agreement.
3.09 Compliance with Laws and Other Instruments.
(a) Each Acquired Company is in compliance, and has complied
with, all existing laws, rules, regulations, ordinances, orders, judgments and
decrees applicable to its business, properties or currently proposed operations
except where the failure to so comply, in each instance and in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on the
Acquired Companies taken as a whole. Neither the ownership nor use of any
Acquired Company's properties, nor the conduct or currently proposed conduct of
its business, conflicts with the rights of any other Person or violates, or with
or without the giving of notice or the passage of time, or both, will violate,
conflict with or result in a default, right to accelerate or loss of rights
under, any terms or provisions of the articles of incorporation or the bylaws of
such Acquired Company, or any Lien, license, agreement, understanding, law,
ordinance, rule, regulation, zoning regulation, order, judgment or decree to
which any Acquired Company is a party or by which it or its assets may be bound
or affected, except for violations, conflicts and defaults which could not
reasonably be expected to have a Material Adverse Effect on the Acquired
Companies taken as a whole.
(b) None of the contracts, arrangements, undertakings or
activities of the Acquired Companies constitute the unauthorized business of
insurance or the unauthorized practice of dentistry or the corporate practice of
dentistry, or constitute an impermissible fee splitting arrangement, in any
state in which an Acquired Company conducts business, except where the violation
of any such statute or regulation could not reasonably be expected to have a
Material Adverse Effect on the Acquired Companies taken as a whole.
(c) Each Provider Contract is in compliance with all
requirements of law and, to the extent applicable, with standards established by
the National Commission for Quality Assurance, Utilization Review Accreditation
Commission, or similar accreditation organization,
11
except where the failure to be in compliance would not reasonably be expected to
have a Material Adverse Effect on the Acquired Companies taken as a whole.
(d) All individually identifiable confidential information
pertaining to any patient, subscriber, enrollee, or covered person has been
maintained in accordance with applicable requirements of law, including without
limitation any privacy laws or laws pertaining to the confidentiality of medical
records, claim records or underwriting data, except where the failure to so
maintain could not reasonably be expected to have a Material Adverse Effect on
the Acquired Companies taken as a whole.
(e) Neither the Seller nor any Acquired Company nor any person
or entities providing professional services for any Acquired Company have
engaged in any activities which are prohibited under 42 U.S.C. Section 1320a-7b,
or the regulations promulgated thereunder pursuant to such statutes, or related
state or local statutes or regulations, or which are prohibited by rules of
professional conduct, including, without limitation, the following: (i)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or payment;
(ii) knowingly and willfully making or causing to be made an false statement or
representation of a material fact for use in determining rights to any benefit
or payment; (iii) failing to disclose knowledge by a claimant of the occurrence
of any event affecting the initial or continued right to any benefit or payment
on its own behalf or on behalf of another, with intent to fraudulently secure
such benefit or payment; and (iv) knowingly and willfully soliciting or
receiving any remuneration (including any kickback, bribe, or rebate), directly
or indirectly, overtly or covertly, in cash or in kind or offering to pay or
receive such remuneration (A) in return for referring an individual to a person
for the furnishing or arranging for the furnishing or any item or service for
which payment may be made in whole or in part by Medicare or Medicaid, or (B) in
return for purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service or item for which
payment may be made in whole or in part by Medicare or Medicaid, except where
any such prohibited activities could not reasonably be expected to have a
Material Adverse Effect on the Acquired Companies taken as a whole.
(f) Except as set forth on the Disclosure Schedule, no
Acquired Company participates in or is otherwise authorized to receive
reimbursement from Medicare and Medicaid or is a party to other third party
payer agreements. All necessary certifications and contracts required for
participation in such programs are in full force and effect and have not been
amended or otherwise modified, rescinded, revoked or assigned, and no condition
exists or event has occurred which in itself or with the giving of notice or the
lapse of time or both would result in the suspension, revocation, impairment,
forfeiture or non renewal of any such third party payer program. Each Acquired
Company is in compliance in all material respects with the requirements or all
such third party payers applicable thereto, except where the failure to be in
compliance could not reasonably be expected to have a Material Adverse Effect on
the Acquired Companies taken as a whole.
12
3.10 No Undisclosed Liabilities; No Indebtedness.
(a) Except as disclosed in the Financial Statements or as set
forth in the Disclosure Schedule, there are no Liabilities relating to or
affecting any Acquired Company or any of its assets and properties, other than
Liabilities incurred after the end of the period covered by the Interim
Financial Statements in the ordinary course of business consistent with past
practice which have not had and could not reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect on the Acquired
Companies taken as a whole.
(b) As of the Closing Date and prior to giving effect to the
transactions contemplated by this Agreement, no Acquired Company will have any
Indebtedness other than (i) Indebtedness included on the Preliminary Balance
Sheet and (ii) inter-company Indebtedness among the Acquired Companies (but not
between any of the Acquired Companies and the Seller).
3.11 Benefit Plans; ERISA.
(a) The Disclosure Schedule lists each Benefit Plan together
with a brief description of the type of plan and benefit provided thereunder. No
Acquired Company has any commitment, proposal, or communication to employees
regarding the creation of an additional Plan or any increase in benefits under
any Benefit Plan. The Seller and the Acquired Companies have provided to the
Purchaser (i) a copy of each Benefit Plan (including amendments) or, where
substantially similar arrangements exist, a sample copy and a list of persons
participating in such arrangement, (ii) the three most recent annual reports on
the Form 5500 series for each Benefit Plan required to file such report, and
(iii) the most recent trustee's report for each Benefit Plan funded through a
trust.
(b) No Acquired Company nor any ERISA Affiliate or any
predecessor thereof has, since September 1, 1996 or, to the knowledge of the
Seller or any of the Acquired Companies, since January 1, 1995, maintained,
contributed to or been obligated to contribute to any Defined Benefit Plan or
multiemployer plan (as defined in Section (3)(37) or 4001(a)(3) of ERISA) and no
condition exists that presents a material risk to any Acquired Company or an
ERISA Affiliate of incurring a liability under Title IV of ERISA.
(c) Except with respect to Acquired Company Benefit Plans, no
Acquired Company has any liability under or with respect to any employee benefit
pension plan or employee welfare benefit plan (as these terms are defined in
ERISA) of the Seller or any ERISA Affiliate.
(d) Each Seller Benefit Plan and, to the knowledge of Seller
or any of the Acquired Companies, each Acquired Company Benefit Plan, has been
operated and administered in all material respects in accordance with its terms
and, as of the Closing Date, will be in material compliance, in form and
operation, with all applicable laws (including but not limited to ERISA and the
Code). The reserves reflected in the Financial Statements for the obligations of
each Acquired Company under all Benefit Plans were determined in accordance with
GAAP.
(e) Each Seller Qualified Plan and, to the knowledge of Seller
or any of the Acquired Companies, each Acquired Company Qualified Plan, has
received a determination or
13
opinion letter from the Internal Revenue Service confirming that it qualifies
under Section 401(a) of the Code and nothing has occurred since the issuance of
that letter which would adversely affect such qualified status or the plan
sponsor's ability to rely on such determination or opinion letter.
(f) Except as set forth in the Disclosure Schedule, no Seller
Benefit Plan or, to the knowledge of Seller and the Acquired Companies, Acquired
Company Benefit Plan, provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees of any Acquired Company or any ERISA Affiliate beyond their
termination of service other than (i) coverage mandated by applicable law, (ii)
benefits under a Qualified Plan, (iii) deferred compensation benefits accrued as
liabilities on the books of any such Acquired Company or any ERISA Affiliate, or
(iv) benefits the full cost of which is borne by the current or former employee,
or his or her beneficiary.
(g) Except as set forth in the Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not, either
immediately or upon the occurrence of any event thereafter, (i) entitle any
current or former employee or officer or director of any Acquired Company or any
ERISA Affiliate to severance pay, unemployment compensation, or any other
payment, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation otherwise due any such individual.
(h) Except as set forth on the Disclosure Schedule, there are
no pending or, to the knowledge of the Seller or any of the Acquired Companies,
anticipated or threatened claims by or on behalf of any Benefit Plan, by any
employee or beneficiary covered under any such Benefit Plan, or otherwise
involving any such Benefit Plan (other than routine claims for benefits).
3.12 Title to and Liens on Properties.
(a) The Disclosure Schedule contains a complete and accurate
description of each parcel of real property leased by each Acquired Company (as
lessee or lessor) (the "Leased Real Property"). The Acquired Companies do not
own any real property. All real property used in or relating to the conduct of
the Acquired Companies' business are subject to valid and subsisting leases
described in the Disclosure Schedule.
(b) Each Acquired Company has a valid leasehold interest in
all Leased Real Property. Each Acquired Company has rights of ingress and egress
with respect to the Leased Real Property and all buildings, structures,
facilities, fixtures, and other improvements thereon used in the operation of
such Acquired Company's business. There is no pending or, to the knowledge of
the Seller or any of the Acquired Companies, contemplated or threatened
condemnation of any of the respective parcels of Leased Real Property or any
part thereof. Except as set forth on the Disclosure Schedule, to the knowledge
of the Seller or any of the Acquired Companies, none of the Leased Real
Property, buildings, structures, facilities, fixtures or other improvements, or
the use thereof, contravenes or violates any building, zoning, fire protection,
administrative, occupational safety and health or other applicable law, rule, or
regulation except for any contravention or violation which individually or in
the aggregate will
14
not and could not reasonably be expected to result in a Material Adverse Effect
on the Acquired Companies taken as a whole.
(c) Each lease with respect to the Leased Real Property is a
legal, valid and binding agreement of the Acquired Company which is a party
thereto, is in full force and effect, enforceable in accordance with its terms
and, except as set forth in the Disclosure Schedule, there is no, and no
Acquired Company has received written notice of any material default (or any
condition or event which, after notice or lapse of time or both, would
constitute a material default) thereunder. Each Acquired Company has performed
all of its required obligations under, and is not in material violation or
breach of or material default under, each lease with respect to the Leased Real
Property and, to the knowledge of the Seller or any of the Acquired Companies,
the other parties to each such lease are not in material violation or breach of
or material default under such lease. No Acquired Company owes any brokerage
commissions with respect to any of the Leased Real Property.
(d) Except as set forth in the Disclosure Schedule, each
Acquired Company is in possession of and has good and marketable title to, or
has valid leasehold interests in or valid rights under written agreements to
use, all tangible personal property, equipment, plants, buildings, structures,
facilities and all other assets and properties used in the conduct of such
Acquired Company's business, including all tangible personal property reflected
in the Financial Statements and any tangible personal property acquired since
the Balance Sheet Date other than property disposed of since such date in the
ordinary course of business consistent with past practice (the "Fixed Assets").
All such tangible personal property, equipment, plants, buildings, structures,
facilities and all other assets and properties with a book value in excess of
$5,000 are listed in the Disclosure Schedule and are free and clear of all Liens
other than Permitted Encumbrances. The Leased Real Property and the Fixed Assets
owned or leased by the Acquired Companies constitute all the property used in
the conduct of the Acquired Companies' business in the manner and to the extent
presently conducted by the Acquired Companies.
3.13 Permits and Licenses. The Disclosure Schedule contains a true and
complete list of all Permits used in and material, individually or in the
aggregate, to each Acquired Company's business held by such Acquired Company or
any health care provider employed or engaged by any Acquired Company (the
"Acquired Company Permits"). All of the Acquired Company Permits are currently
effective and valid and have been validly issued. Except as set forth in the
Disclosure Schedule, no additional Permits are necessary to enable any Acquired
Company to conduct its business in compliance with all applicable federal,
state, local, and foreign laws, including without limitation Permits as a third
party administrator, utilization review company, preferred provider
organization, or dental practice, except where the failure to have such a Permit
could not reasonably be expected to result in a Material Adverse Effect on the
Acquired Companies taken as a whole. Neither the execution, delivery or
performance of this Agreement nor the mere passage of time (except as
specifically noted in the Disclosure Schedule) will have any effect on the
continued validity or sufficiency of the Acquired Company Permits, nor will any
additional Permits be required by virtue of the execution, delivery or
performance of this Agreement to enable any Acquired Company to conduct its
business as now operated. There is no action, suit, arbitration, governmental
investigation or other legal or administrative proceeding, nor any order, decree
or judgment, pending, or, to the knowledge of the Seller or any
15
of the Acquired Companies, threatened or anticipated which could affect the
Acquired Company Permits or their sufficiency for the current conduct of any
Acquired Company's business or of the conduct of any Acquired Company's business
after the Closing. The Seller and the Acquired Companies have provided the
Purchaser with true and complete copies of all of the Acquired Company Permits.
No Acquired Company has received written notice of, with respect to itself or
any health care provider employed by or engaged by any Acquired Company, any act
or threat of action to deny, review, curtail, suspend or condition any: (i)
license to practice dentistry or prescribe or dispense drugs; (ii) privilege or
credential to admit or practice at a health care facility; or (iii) credential
or status as to participation in any plan maintained by a third party payor.
3.14 Tax Matters.
(a) The Seller or the Acquired Companies have filed and will
file with the appropriate federal, state, local and foreign taxing authorities
all Tax Returns required to be filed by each Acquired Company on or before the
Closing Date or with respect to the activities or operations of each Acquired
Company up to and including the Closing Date.
(b) Each Acquired Company has paid in full or has made
adequate provision in the current liabilities of the Interim Period Financial
Statements (in accordance with GAAP) for all Taxes which are due or claimed to
be due from it by any taxing authority, or will become due for periods up to and
including the Closing Date, including any Taxes later determined to be due for
any such period as a result of untrue, incorrect or incomplete Tax Returns filed
by Seller or any Acquired Company.
(c) Except as set forth in the Disclosure Schedule, there are
no Liens for Taxes upon the assets, properties, earnings or business of any
Acquired Company except for statutory liens for current Taxes not yet due. The
reserves for Taxes reflected in the current liabilities of the Interim Period
Financial Statements are sufficient for payment of all unpaid Taxes (whether or
not currently disputed and whether or not a Tax Return has been filed or is
required to have been filed with respect thereto) accrued through the date
thereof.
(d) No Acquired Company has requested any extension of time
within which to file any Tax Return, which Tax Return has not since been filed,
or, except as set forth in the Disclosure Schedule, waived any statute of
limitations for, or agreed to any extension of time with respect to, the
assessment of Taxes. Except as set forth in the Disclosure Schedule, the statute
of limitations for all Tax Returns of each Acquired Company has expired for all
federal, state, local or foreign Taxes, or the Tax Returns of each Acquired
Company have been examined by the appropriate taxing authorities for all
periods.
(e) Except as set forth in the Disclosure Schedule, no
Acquired Company has received any written notice of deficiency or assessment
from any federal, state, local or foreign taxing authority with respect to
liabilities for Taxes which have not been fully paid or finally settled, and any
such deficiency or assessment shown on the Disclosure Schedule is being
contested in good faith through appropriate proceedings, and, except as set
forth in the Disclosure Schedule, no issue has been raised by any federal,
state, local or foreign taxing
16
authority which could reasonably be expected to result in a proposed deficiency
for any subsequent period.
(f) Except as set forth in the Disclosure Schedule, no
Acquired Company is a party to any agreement, contract or other arrangement that
has provided or will provide severance payments to any current or former
employee of an Acquired Company. The consummation of the transactions
contemplated herein will not result, separately or in the aggregate, in the
payment of any "excess parachute payment" within the meaning of Section 280G of
the Code.
(g) No assessments have been made or asserted against any of
the Acquired Companies by any state guarantee fund, comprehensive health
insurance plan (CHIP plan), or similar state plan or program. None of the
activities, contracts, undertakings or arrangements of any Acquired Company
gives rise to any premium tax liability of the company in any state.
(h) None of the Acquired Companies has any liability for the
Taxes of any Person other than the Acquired Companies (i) under Reg. Section
1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
3.15 Intellectual Property Rights.
(a) The Disclosure Schedule lists all marks, trade names,
brand names, copyrights or other trade rights currently owned or used by each
Acquired Company in the conduct of its business. No Acquired Company has any
patents, trademarks, copyrights or other that is registered with federal or
state authorities, and no applications therefor are currently pending.
(b) The Seller and the Acquired Companies have delivered to
the Purchaser complete and accurate copies of each agreement and other documents
relating to the Intellectual Property set forth on the Disclosure Schedule.
(c) Each Acquired Company owns or possesses adequate and
enforceable licenses or other rights to use all Intellectual Property of every
kind that is used in, possessed by or necessary for the conduct of each Acquired
Company's business. Entry into this Agreement and consummation of the
transactions contemplated hereby will not impair any Acquired Company's
ownership, use or possession of such Intellectual Property.
(d) Except as set forth in the Disclosure Schedule, no Person
has a right to receive a royalty or similar payment in connection with any
Intellectual Property pursuant to any contractual arrangements entered into by
any Acquired Company. No Acquired Company has granted any license, sub-license
or other similar agreement relating in whole or in part to any Intellectual
Property. Neither the Seller nor any Acquired Company has received any notice
that its or any third party's use of any item of Intellectual Property is
interfering with, infringing upon or otherwise violating the rights of any
Acquired Company or any third party in or to such Intellectual Property, and no
proceedings have been instituted against or notices received by the Seller or
any Acquired Company alleging that the use or proposed use of any Intellectual
17
Property by any Acquired Company or any third party infringes upon or otherwise
violates any rights of any Acquired Company or a third party in or to such
Intellectual Property, and there is no basis for such claim or proceeding. To
the knowledge of the Seller or any of the Acquired Companies, no third party is
interfering with, infringing upon, or otherwise violating the rights of any
Acquired Company in any Intellectual Property.
3.16 Contracts.
(a) The Disclosure Schedule contains a true and complete list
of each of the following written or oral contracts, agreements or other
arrangements to which each Acquired Company is a party or by which any of its
assets and properties is bound (and, to the extent oral, accurately describes
the terms of such contracts, agreements and arrangements) (the "Scheduled
Contracts"):
(i) all collective bargaining or similar labor
agreements;
(ii) all contracts for the employment of any officer,
employee or other person or entity on a full time, part time,
consulting or other basis;
(iii) all loan agreements, indentures, debentures,
notes or letters of credit relating to the borrowing of money or to
mortgaging, pledging or otherwise placing a Lien on any material asset
or material group of assets of any Acquired Company;
(iv) all guarantees of any obligation;
(v) all leases or agreements under which any Acquired
Company is lessee or lessor of, or holds, or operates, any property,
real or personal, except for any lease under which the aggregate annual
rental payments do not exceed $100,000;
(vi) all commitments, contracts, sales contracts,
purchase orders, or groups of related agreements with the same party or
any group of affiliated parties which require or may in the future
require payment of aggregate consideration to or by any Acquired
Company in excess of $100,000;
(vii) all contracts or commitments in any way
restrict any Acquired Company from carrying on its business anywhere in
the world;
(viii) any power of attorney granted by or to any
Acquired Company;
(ix) any contract with any shareholder, director,
officer, employee, agent or Affiliate of any Acquired Company;
(x) any material contract or agreement not entered
into in the ordinary course of business which is not cancelable without
penalty within 30 days;
18
(xi) all material other contracts and agreements that
(A) involve the payment or potential payment, pursuant to the terms of
any such contract or agreement, to or by any Acquired Company of more
than $100,000, or (B) cannot be terminated within 30 days after giving
notice of termination without resulting in any cost or penalty to any
Acquired Company.
(b) Each Scheduled Contract is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in accordance with
its terms, of each party thereto. Each Acquired Company has performed all of its
required obligations under, and is not in violation or breach of or default
under, any Scheduled Contract. To the knowledge of the Seller or any of the
Acquired Companies, the other parties to any Scheduled Contract are not in
violation or breach of or default under such Scheduled Contract. To the
knowledge of the Seller or any of the Acquired Companies, none of the present
employees, officers, directors or shareholders of any Acquired Company is a
party to any oral or written contract or agreement prohibiting any of them from
freely competing with other parties or engaging in any Acquired Company's
business as now operated.
(c) The Seller and the Acquired Companies have provided to the
Purchaser a true, correct and complete copy of each written Scheduled Contract,
and a true, correct and complete written description of each oral Scheduled
Contract.
3.17 Environmental Matters.
(a) To the knowledge of the Seller or any of the Acquired
Companies, each Acquired Company is in compliance with all applicable
Environmental Laws (as defined below). Except as disclosed in the Disclosure
Schedule, neither the Seller nor any Acquired Company has received any
communication (whether written or oral), whether from a governmental or
regulatory authority, citizen group, employee or otherwise, that alleges that
any Acquired Company or any of the assets or properties used in any Acquired
Company's business is not in full compliance with Environmental Laws. All
Permits, registrations and other governmental authorizations currently held by
each Acquired Company pursuant to Environmental Laws (the "Environmental
Permits") are identified in the Disclosure Schedule and represent all
Environmental Permits used in its business as currently conducted. Neither
Seller nor any Acquired Company has been notified by any relevant governmental
or regulatory authority that any Environmental Permit will be modified,
suspended or revoked or cannot be renewed in the ordinary course of business,
and, to the knowledge of the Seller or any of the Acquired Companies, no
Environmental Permit will be modified, suspended or revoked, or cannot be
renewed in the ordinary course of business. Neither the execution, delivery or
performance of this Agreement nor the mere passage of time (except as
specifically noted in the Disclosure Schedule) will have any effect on the
continued validity or sufficiency of the Environmental Permits.
(b) Except as set forth in the Disclosure Schedule, to the
knowledge of the Seller or any of the Acquired Companies, there are no past or
present actions, activities, circumstances, conditions, events or incidents
arising from the operation, ownership or use of any property currently or
formerly owned, operated or used by any Acquired Company (or any
19
entity currently or formerly an Affiliate of any Acquired Company), including
without limitation, the release, emission, discharge or disposal of any Material
(as defined below) into the Environment (as defined below), that (i) could
reasonably be expected to result in the incurrence of costs by any Acquired
Company under Environmental Laws, or (ii) could reasonably be expected to form
the basis of any Environmental Notice against or with respect to any Acquired
Company or against any Person whose liability for any Environmental Notice may
have been retained or assumed by or could be imputed or attributed to any
Acquired Company.
(c) For purposes of this Agreement:
(i) "Environment" means any surface water, ground
water, drinking water supply, land surface or subsurface strata,
ambient air and any indoor workplace.
(ii) "Environmental Notice" means any written notice
by any Person alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental costs, harm or damages to person, property, natural
resources or other fines or penalties) arising out of, based on or
resulting from (A) the emission, discharge, disposal, release or
threatened release in or into the Environment of any Material or (B)
circumstances forming the basis of any violation, or alleged violation,
of any applicable Environment Law.
(iii) "Environmental Laws" means all national, state,
local and foreign laws, codes, regulations, common law, requirements,
directives, orders, and administrative or judicial interpretations
thereof relating to pollution, the protection of the Environment or the
emission, discharge, disposal, release or threatened release of
Materials in or into the Environment.
(iv) "Material" means pollutants, contaminants or
chemical, industrial, hazardous or toxic materials or wastes,
including, without limitation, bio-hazardous materials, petroleum and
petroleum products.
3.18 Accounts Receivable. Except as set forth in the Disclosure
Schedule, the accounts receivable, unbilled invoices and all other receivables
shown on the Closing Date Balance Sheet and on the books and financial
statements of each Acquired Company, are bona fide receivables represent amounts
due with respect to actual, arm's length transactions entered into in the
ordinary course of business of such Acquired Company, and (subject to (i)
reserves for non-collectibility as reflected in the Interim Period Financial
Statements and the books and financial statements of such Acquired Company and
(ii) an additional cumulative allowance for non-collectibility of $370,000) are
collectible, legal, valid and binding obligations of the obligors, and will be
collected by such Acquired Company without counterclaim or setoff within 6
months of the Closing Date. Such reserves have been reflected in the Interim
Period Financial Statements and the books and financial statements of the
Acquired Companies in accordance with GAAP. Since the Balance Sheet Date, no
Acquired Company has discounted any accounts receivable except in the ordinary
course of business consistent with past practices.
20
3.19 Malpractice Liability. Except as set forth in the Disclosure
Schedule, there are no claims outstanding, pending or, to the knowledge of the
Seller or any of the Acquired Companies, threatened against any Acquired Company
or any health care professional employed by or engaged by any Acquired Company
in connection with, arising out of, resulting from or incident to any personal
injury, property damage, adverse health effect, adverse business effect, or any
claim of any of the foregoing by a third party arising out of any service
provided by any Acquired Company or the ownership, use, possession or physical
contact with any product manufactured, sold, leased or delivered by any Acquired
Company which would reasonably be expected to have a Material Adverse Effect on
the Acquired Companies taken as a whole.
3.20 Insurance.
(a) Set forth on the Disclosure Schedule is a complete and
accurate list of all primary, excess and umbrella policies, malpractice and
credentialing policies, bonds and other forms of insurance currently owned or
held by or on behalf of and/or providing insurance coverage to each Acquired
Company, its assets and properties, or any of such Acquired Company's directors,
officers, salespersons, agents or employees (including, with specific notation
as such on the Disclosure Schedule, any insurance policies maintained by the
Seller which will no longer provide insurance coverage to the Acquired Companies
as a result of, and upon consummation of, the transactions contemplated by this
Agreement) (collectively, the "Insurance Policies" and each individually, an
"Insurance Policy"). Set forth on the Disclosure Schedule is the following
information for each Insurance Policy: (i) type of insurance coverage provided;
(ii) name of insurer; (iii) effective dates; (iv) policy number; (v) per
occurrence and annual aggregate deductibles or self-insured retentions; (vi) per
occurrence and annual aggregate limits of liability, and (vii) the extent, if
any, to which the limits of liability have been exhausted.
(b) All Insurance Policies are in full force and effect and
all premiums currently payable or previously due with respect to such Insurance
Policies have been paid. No notice of cancellation or termination has been
received with respect to any Insurance Policy.
(c) The Insurance Policies are sufficient for compliance with
all requirements of law and all agreements to which each such Acquired Company
is a party or otherwise bound. The Insurance Policies are valid, outstanding,
collectable and enforceable policies and will remain in full force and effect
through the respective dates set forth in the Disclosure Schedule.
(d) No Insurance Policy contains a provision that would permit
the termination, limitation, lapse, exclusion or change in the terms of coverage
of such Insurance Policy (including, without limitation, change in the limits of
liability) by reason of the consummation of the transactions contemplated by
this Agreement. Except as set forth in the Disclosure Schedule, the Seller and
the Acquired Companies have provided to the Purchaser complete and accurate
copies of all Insurance Policies and related documentation.
(e) Except as set forth in the Disclosure Schedule, (i) no
Acquired Company nor, to the knowledge of the Seller or any of the Acquired
Companies, any health care provider employed or engaged by any Acquired Company
has filed a written application for any insurance coverage relating to the
company's business or property within the last 12 months which has
21
been denied by an insurance agency or carrier and (ii) each Acquired Company and
each health care provider employed by or engaged by an Acquired Company while
employed by or engaged by an Acquired Company have been continuously insured for
professional malpractice claims. None of the Acquired Companies or any health
care provider employed by or engaged by an Acquired Company is in material
default with respect to any provision contained in any such policy and none of
them has failed to give any notice or present any claim under any such policy in
due and timely fashion.
(f) After giving effect to the Closing, the Seller's
employment practices liability insurance policy referenced in the Disclosure
Schedule will continue to provide insurance coverage to the Acquired Companies
for all claims of the type generally covered by such policy with respect to any
event, circumstance or occurrence that occurred on or after September 30, 1999
and prior to the Closing Date involving an Acquired Company or any of its
employees (each, an "Employment Practices Claim").
(g) The Seller's directors and officers liability insurance
policy referenced in the Disclosure Schedule will continue to provide insurance
coverage to the Acquired Companies for all claims of the type generally covered
by such policy with respect to any event, circumstance or occurrence that
occurred on or after June 30, 1997 and prior to the Closing Date involving an
Acquired Company or any of its officers or directors (each, a "Directors and
Officers Claim").
3.21 Employee and Labor Matters. Except to the extent that the breach
of any of the following representations could not reasonably be expected to have
a Material Adverse Effect on the Acquired Companies, taken as a whole.
(a) To the knowledge of the Seller or any of the Acquired
Companies, no officer, executive or group of employees of any Acquired Company
has or have any plans to terminate his, her or their employment with such
Acquired Company.
(b) Except as set forth in the Disclosure Schedule, there have
not been any material labor problems and/or work stoppages involving any
Acquired Company or its respective predecessors or any application filed by a
union or employee thereof with the National Labor Relations Board.
(c) There are no (i) unfair labor practice charges or
complaints pending or, to the knowledge of the Seller or any of the Acquired
Companies, threatened against any Acquired Company; (ii) labor strikes,
disputes, slow downs or stoppages pending or, to the knowledge of the Seller or
any of the Acquired Companies, threatened against any Acquired Company; (iii)
formal employee grievances filed with any Acquired Company or, to the knowledge
of the Seller or any of the Acquired Companies, threatened against any Acquired
Company; and (iv) to the knowledge of the Seller or any of the Acquired
Companies, trade union organizing efforts underway in any facility of any
Acquired Company.
(d) No Acquired Company has received a notice or charge
asserting any violation of or liability under, the federal Occupational Safety
and Health Act of 1970 or any
22
other federal, state or foreign acts (including rules and regulations
thereunder) regulating or otherwise affecting employee health and safety.
(e) There are no uninsured workers' compensation claims
pending or, to the knowledge of the Seller or any of the Acquired Companies,
threatened against any Acquired Company. No Acquired Company is or will become
liable for any retroactive workers' compensation insurance premiums relating to
any period of time prior to the Closing Date in excess of reserves to be set
aside for the payment of such premiums on the Interim Financial Statements.
(f) The qualifications of each employee of each Acquired
Company for employment under applicable immigration laws have been reviewed by
such Acquired Company and a properly completed Form I-9 is on file with respect
to each employee. To the knowledge of the Seller or any of the Acquired
Companies, there is no basis for any claim that any Acquired Company is not in
compliance with the terms of the U.S. Immigration and Nationality Act, as
amended from time to time, and the rules and regulations promulgated thereunder.
(g) Each Acquired Company has paid, or will pay prior to the
Closing Date, all bonuses earned by directors, officers or employees through the
Closing Date.
(h) None of the Acquired Companies employs or purchases
services from any individual who has been convicted of a criminal offense
related to health care, who is listed as debarred, excluded or otherwise
ineligible for participation in federal health care programs, or who has been
sanctioned by the United States Department of Health and Human Services Office
of Inspector General.
3.22 Absence of Certain Developments. Since November 30, 2001, except
as set forth in the Disclosure Schedule, each Acquired Company has conducted its
business only in the ordinary course of business and no Acquired Company has,
except where such action or event would not reasonably be expected to have a
Material Adverse Effect on the Acquired Companies, taken as a whole:
(a) issued any stock, bonds or other corporate securities or
any right, options or warrants with respect thereto;
(b) borrowed any amount, obtained any letters of credit or
incurred or become subject to any Liabilities except Liabilities incurred in the
ordinary course of business consistent with past practices;
(c) discharged or satisfied any Lien or paid any obligation or
Liability, other than current Liabilities paid in the ordinary course of
business and other than current federal income tax liabilities;
(d) declared or made any payment or distribution of cash or
other property to shareholders with respect to its stock, or purchased or
redeemed any shares of its capital stock;
23
(e) mortgaged or pledged any of its assets or properties, or
subjected them to any Lien, except Liens for current property taxes not yet due
and payable;
(f) sold, leased, subleased, assigned or transferred any of
its assets or properties, except in the ordinary course of business consistent
with past practices, or canceled any debts or claims;
(g) made any changes in any employee compensation, severance
or termination agreement, commitment or transaction other than routine salary
increases consistent with past practice;
(h) entered into any material transaction or modified any
existing transaction (the aggregate consideration for which is in excess of
$100,000);
(i) suffered any damage, destruction or casualty loss, whether
or not covered by insurance, in excess of $100,000;
(j) made any capital expenditures, additions or improvements
or commitments for the same, except those made in the ordinary course of
business which in the aggregate do not exceed $100,000;
(k) entered into any transaction or conducted business
operations, including the incurrence of any Indebtedness, outside the ordinary
course of its business or inconsistent with its past practices;
(l) made any change in its accounting methods or practices or
ceased making accruals for taxes, obsolete inventory, doubtful or uncollectible
accounts, vacation and other customary accruals consistent with its past
practices;
(m) ceased reserving cash to pay taxes, principal and interest
on borrowed funds, and other customary expenses and payments;
(n) caused to be made any reevaluation of any of its assets or
properties;
(o) caused to be entered into any amendment or termination of
any material lease, customer or supplier contract or other material contract or
agreement to which it is a party;
(p) made any material change in any of its business policies,
including, without limitation, advertising, distributing, marketing, pricing,
purchasing, personnel, sales, returns, budget or product acquisition or sale
policies;
(q) terminated or failed to renew, or received any written
threat (that was not subsequently withdrawn) to terminate or fail to renew, any
contract or other agreement that is or was material to its business or its
financial condition;
24
(r) permitted to occur or be made any other event or condition
of any character which has had, or could reasonably be expected to result in, a
Material Adverse Effect on the Acquired Companies taken as a whole;
(s) waived any rights material to its business or its
financial condition;
(t) made any illegal payment or rebates; or
(u) entered into any agreement to do any of the foregoing.
3.23 Bank Accounts. The Disclosure Schedule contains a complete and
accurate list of each deposit account or asset maintained by or on behalf of
each Acquired Company with any bank, brokerage house or other financial
institution, specifying with respect to each the name and address of the
institution, the name under which the account is maintained, the account number,
and the name and title or capacity of each Person authorized to have access
thereto.
3.24 Brokers. Neither the Seller nor any Acquired Company have retained
any broker in connection with the transactions contemplated hereunder, nor has
any action been taken by or on behalf of the Seller or any Acquired Company that
would result in an obligation to pay any broker's, finder's, investment
banker's, financial advisor's or similar fee in connection with this Agreement
or the transactions contemplated hereby.
3.25 Purchase Commitments and Outstanding Bids. No material purchase
commitment of any Acquired Company is in excess of normal, ordinary and usual
requirements of its business, or was made at any price in excess of the then
current market price, or contains terms and conditions more onerous than those
usual and customary in the industry. There is no outstanding material bid, sales
proposal, contract or unfilled order of any Acquired Company which (i) will, or
could if accepted, require such Acquired Company to supply goods or services at
a cost to such Acquired Company in excess of the revenue to be received
therefrom, or (ii) quotes prices which do not include a xxxx-up over reasonably
estimated costs consistent with past xxxx-ups on similar business or market
conditions current at the time.
3.26 Product and Service Warranties. No Acquired Company has provided
any express warranties in connection with the products and/or services provided
by it, and there are no claims or breach of warranty outstanding, pending, or,
to the knowledge of the Seller or any of the Acquired Companies, relating to any
products sold or services provided by the Acquired Companies prior to the date
hereof.
3.27 Software and Information Systems. The software and information
systems (including all management information and accounting systems) currently
used by each Acquired Company are functioning properly and, to the knowledge of
the Seller or any of the Acquired Companies, contain no flaws or inadequacies
which could reasonably be expected to have a Material Adverse Effect on the
Acquired Companies taken as a whole.
3.28 Customers and Suppliers. The Disclosure Schedule contains a list
of the customers from which the Acquired Companies received in excess of
$100,000 in revenues in
25
any of the past three completed fiscal years or the current fiscal year and the
suppliers to which the Acquired Companies expended sums in excess of $100,000 in
any of the past three completed fiscal years or the current fiscal year, and
includes the net sales or purchases by the Acquired Companies attributable to
each such customer or supplier for each such period. To the knowledge of the
Seller or any of the Acquired Companies, no customer or supplier listed on the
Disclosure Schedule, nor any customer or supplier material to the business of
the Acquired Companies which is not listed on the Disclosure Schedule, intends
to cease doing business with the Acquired Companies or decrease the amount of
business it does with the Acquired Companies in any material respect. Neither
the Seller nor any Acquired Company has received any notice that any hospital,
health benefit plan, health insurance company or managed care organization,
supplier, employer or associated provider intends to cease doing business with
the Acquired Companies.
3.29 Related Party Transactions. Except as set forth in the Disclosure
Schedule, no Acquired Company is a party to any transaction or proposed
transaction, including, without limitation, the leasing of property, the
purchase or sale of raw materials or finished goods, or the furnishing of
services, with the Seller, any officer, director or subsidiary (excluding other
Acquired Companies) of the Seller or any entities owned or controlled by any
such officers or directors.
3.30 Disclosure. To the knowledge of the Seller or any of the Acquired
Companies, no representation or warranty by the Seller or the Acquired Companies
in this Agreement or any of the Ancillary Agreements, nor any certificate
delivered by the Seller or any Acquired Company pursuant to this Agreement or
any of the Ancillary Agreements, contains any untrue statement of a material
fact, or omits to state any material fact required to be provided by such
representation or warranty to make the facts stated therein, in light of the
circumstances in which made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller, as of the Closing
Date, as follows:
4.01 Organization and Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and has full power and authority to execute and deliver this Agreement
and the Ancillary Agreements to which it is a party and to purchase the Acquired
Stock as provided in this Agreement.
4.02 Authority; No Conflicts.
(a) The execution, delivery and performance of this Agreement
and the Ancillary Agreements by the Purchaser have been duly authorized by all
necessary corporate action on the part of the Purchaser's Board of Directors and
do not conflict with, result in a default, right to accelerate or loss of rights
under, or result in the creation of any Lien pursuant to, any provision of the
Purchaser's Articles of Incorporation or Bylaws, or any agreement, law, rule or
regulation or any order, judgment or decree to which the Purchaser is a party or
by which
26
the Purchaser or its respective properties are bound or affected, except for any
such Lien created under or pursuant to this Agreement or the Ancillary
Agreements. No consent, approval, or other action is required to be obtained or
taken by the Purchaser in connection with the execution, delivery and
performance by the Purchaser of this Agreement or the Ancillary Agreements.
(b) The Purchaser has full power and authority to enter into
this Agreement and the Ancillary Agreements and to carry out the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Purchaser and constitutes, and the Ancillary Agreements when executed and
delivered will constitute, valid and binding obligations of the Purchaser
enforceable in accordance with their respective terms, except to the extent that
enforcement may be limited by applicable bankruptcy, reorganization, moratorium
or similar laws of general applicability affecting the enforcement of creditors'
rights and subject to general equitable principles which may limit the right to
obtain equitable remedies.
4.03 Brokers. The Purchaser has not retained any broker other than
Wellington Associates, Inc. in connection with the transactions contemplated
hereunder, nor has any action been taken by or on behalf of the Purchaser that
would result in an obligation to pay any broker's, finder's, investment
banker's, financial advisor's or similar fee in connection with this Agreement
or the transactions contemplated hereby, except for the fees to be paid by the
Purchaser to Wellington Associates, Inc.
4.04 Litigation. There is no action, suit or proceeding pending or, to
the Purchaser's knowledge, threatened against the Purchaser or any of its
Affiliates that would prevent or hinder the consummation of the transactions
contemplated by this Agreement.
ARTICLE V
PRE-CLOSING COVENANTS OF THE SELLER
AND THE ACQUIRED COMPANIES
5.01 Access and Investigation. During the period from the date of this
Agreement through the Closing, the Seller and the Acquired Companies will (i)
provide the Purchaser and its representatives and prospective lenders full and
free access to the Acquired Companies' personnel, properties, contracts, books
and records, and other documents and information relating to the Acquired
Companies; (ii) provide the Purchaser with copies of all such contracts, books
and records, and other documents and information as the Purchaser may reasonably
request; and (iii) provide the Purchaser with such additional financial,
operating, and other data and information as the Purchaser may reasonably
request.
5.02 Operation of Business. During the period from the date of this
Agreement through the Closing, the Seller and the Acquired Companies will (i)
conduct the business and operations of the Acquired Companies in the ordinary
course and in substantially the same manner as such business and operations have
been conducted prior to the date of this Agreement; (ii) use their respective
best efforts to preserve intact the current business organization of the
Acquired Companies, keep available the services of the current officers,
employees and agents of the Acquired Companies, and maintain the relations and
good will with all suppliers, customers,
27
distributors, landlords, creditors, employees, agents and other Persons having
business relationships with the Acquired Companies; (iii) confer with the
Purchaser concerning operational matters of a material nature; (iv) report
periodically to the Purchaser concerning the status of the business, operations
and finances of the Acquired Companies; and (v) without the prior written
consent of the Purchaser, not take any affirmative action, or fail to take any
reasonable action within their control, which is likely to result in a change or
event listed in Section 3.22.
5.03 Required Approvals. As promptly as practicable after the date of
this Agreement, the Seller and the Acquired Companies will make all filings
required by applicable law to be made by them to consummate the transactions
contemplated by this Agreement. During the period from the date of this
Agreement through the Closing, the Seller and the Acquired Companies will (i)
cooperate with the Purchaser with respect to all filings that the Purchaser
elects to make or is required by applicable law to make in connection with the
transactions contemplated by this Agreement, and (ii) cooperate with the
Purchaser in obtaining all consents identified in the Disclosure Schedule
pursuant to Section 3.02.
5.04 Notification; Updates to Disclosure Schedule.
(a) During the period from the date of this Agreement through
the Closing, the Seller and the Acquired Companies will promptly notify the
Purchaser in writing if they become aware of (i) any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that causes or constitutes an inaccuracy in or breach of any representation
or warranty made by the Seller or any of the Acquired Companies in this
Agreement; (ii) any event, condition, fact or circumstance that occurs, arises
or exists after the date of this Agreement and that would cause or constitute an
inaccuracy in or breach of any representation or warranty made by the Seller or
any of the Acquired Companies in this Agreement if (A) such representation or
warranty had been made as of the time of the occurrence, existence or discovery
of such event, condition, fact or circumstance, or (B) such event, condition,
fact or circumstance had occurred, arisen or existed on or prior to the date of
this Agreement; (iii) any breach of any covenant or obligation of the Seller or
the Acquired Companies under this Agreement; and (iv) any event, condition, fact
or circumstance that would make the timely satisfaction of any of the conditions
set forth in Article VI impossible or unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 5.04(a) requires any material
change in the Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a material change assuming the Disclosure
Schedule were dated as of the date of the occurrence, existence or discovery of
such event, condition, fact or circumstance, then the Seller and the Acquired
Companies will promptly deliver to the Purchaser an update to the Disclosure
Schedule specifying such change. No such update will be deemed to supplement or
amend the Disclosure Schedule for the purpose of (i) determining the accuracy of
any of the representations and warranties made by the Seller or any of the
Acquired Companies in this Agreement, or (ii) determining whether any of the
conditions set forth in Article VI has been satisfied, but all such updates will
be deemed to
28
supplement and amend the Disclosure Schedule for the purpose of the
indemnification provisions set forth in Article IX.
5.05 No Negotiation. Until this Agreement is terminated pursuant to
Article VIII, the Seller and the Acquired Companies will not, and will not
permit any representative to, directly or indirectly: (i) solicit, initiate or
encourage any inquiry, proposal or offer from any Person relating to any
transaction involving the sale of the business or assets (other than in the
ordinary course of business) of any Acquired Company, or any of the capital
stock of any Acquired Company, or any merger, consolidation, business
combination, or similar transaction involving any Acquired Company (an
"Acquisition Transaction"); (ii) participate in any discussions or negotiations
or enter into any agreement with, or provide any non-public information to, any
Person (other than the Purchaser) relating to or in connection with a possible
Acquisition Transaction; or (iii) consider, entertain or accept any proposal or
offer from any Person (other than the Purchaser) relating to a possible
Acquisition Transaction. The Seller and the Acquired Companies will promptly
notify the Purchaser in writing of any material inquiry, proposal or offer
relating to a possible Acquisition Transaction that is received by the Seller or
the Acquired Companies during such period.
5.06 Efforts to Close. During the period from the date of this
Agreement through the Closing, the Seller and the Acquired Companies will use
their reasonable best efforts to cause the conditions set forth in Article VI to
be satisfied.
ARTICLE VI
CLOSING CONDITIONS OF THE PURCHASER
The obligations of the Purchaser under this Agreement are subject to
fulfillment prior to or at Closing of each of the following conditions, unless
waived in writing (in whole or in part) by the Purchaser.
6.01 Representations and Warranties True. The representations and
warranties of the Seller or any of the Acquired Companies in this Agreement must
be true and correct in all material respects (except for those representations
and warranties that are qualified by their terms as to materiality, which such
representations and warranties as so qualified must be true and correct in all
respects) on the date hereof and as of the Closing Date.
6.02 Compliance with Agreement. The Seller and the Acquired Companies
must have performed and complied in all material respects with all agreements or
conditions required by this Agreement to be performed and complied with by them
prior to or as of the Closing Date.
6.03 Consents and Approvals. All releases, consents and approvals
required to be obtained by the Seller and the Acquired Companies pursuant to
this Agreement for the transactions contemplated by this Agreement must have
been obtained, and no suit or other legal proceeding shall have been commenced
seeking to restrict or prohibit the transactions contemplated by this Agreement.
29
6.04 Execution and Delivery of Closing Documents. The Seller and the
Acquired Companies must deliver to the Purchaser (or such other party as
appropriate), the following, duly executed as appropriate:
(a) this
Stock Purchase Agreement;
(b) the stock certificates evidencing the Acquired Stock
properly endorsed for transfer to the Purchaser or accompanied by duly executed
stock powers in favor of the Purchaser and otherwise in a form acceptable for
transfer on the books of the Acquired Companies;
(c) the Escrow Agreement;
(d) the Non-competition Agreement;
(e) a certificate dated as of the Closing Date, signed by an
officer of the Seller and the Acquired Companies certifying that the conditions
specified in Sections 6.01 through 6.03 have been satisfied;
(f) a certificate from the Seller and each Acquired Company
dated as of the Closing Date, signed by the Secretary thereof and in form and
substance satisfactory to the Purchaser certifying (i) that resolutions have
been duly adopted by the Board of Directors and shareholders (if necessary)
thereof authorizing the execution of this Agreement and the Ancillary Agreements
and all of the other transactions to be consummated pursuant hereto, (ii) the
names and incumbency of its officers who are empowered to execute the foregoing
documents for and on behalf of the Seller or such Acquired Company, (iii) the
authenticity of attached copies of the Articles or Certificate of Incorporation
and Bylaws of the Seller or such Acquired Company, and (iv) the continued good
standing of the Seller or such Acquired Company in the state of its
incorporation, as evidenced by a reasonably current Certificate of Good
Standing;
(g) a favorable opinion of the legal counsel to the Seller and
the Acquired Companies as to the matters referred to on Exhibit C, with reliance
language in favor of the Purchaser's lenders in connection with the transactions
contemplated by this Agreement; and
(h) such other documents, certificates, instruments or
opinions as the Purchaser may reasonably request, in form reasonably
satisfactory to the Purchaser.
6.05 No Material Adverse Change. There must have been no material
adverse change in the business, operations or condition (financial or otherwise)
of the Acquired Companies taken as a whole.
6.06 Xxxxx Litigation. Xx. Xxxxx X. Xxxxx and the Acquired Companies
must have entered into the Settlement Agreement, and the Acquired Companies must
deliver a fully executed copy of the Settlement Agreement to the Purchaser along
with evidence of either (i) payment in full of all amounts due to Xx. Xxxxx
under the Settlement Agreement or (ii) inclusion of such amounts as accounts
payable in the Preliminary Balance Sheet.
30
6.07 Xxxxxxxx Fees. The Seller or the Acquired Companies must have
satisfied in full all claims for legal fees and disbursements owing by any of
the Acquired Companies to the law firm of Reinhart, Boerner, Van Deuren s.c.,
except for legal fees and disbursements not to exceed $2,000 for services
provided to the Acquired Companies relating to Xxxxx Xxxxx, Dental Plan, and
general business consultation. The Seller or the Acquired Companies must deliver
documentation satisfactory to the Purchaser evidencing such satisfaction.
6.08 Proceedings Satisfactory. All proceedings to be taken in
connection with the transactions contemplated by this Agreement and all
documents incident to such transaction are reasonably satisfactory in form and
substance to the Purchaser.
ARTICLE VII
CLOSING CONDITIONS OF THE SELLER
AND THE ACQUIRED COMPANIES
The obligations of the Seller and the Acquired Companies under this
Agreement are subject to fulfillment prior to or at the Closing of each of the
following conditions, unless waived in writing (in whole or in part) by the
Seller and the Acquired Companies.
7.01 Representations and Warranties True. The representations and
warranties of the Purchaser in this Agreement must be true and correct in all
material respects on the date hereof and as of the Closing Date.
7.02 Compliance with Agreement. The Purchaser must have performed and
complied in all material respects with all agreements or conditions required by
this Agreement to be performed and complied with by it prior to or as of the
Closing Date.
7.03 Consents and Approvals. All releases, consents and approvals
required to be obtained by the Purchaser pursuant to this Agreement for the
transactions contemplated by this Agreement must have been obtained, and no suit
or other legal proceeding shall have been commenced seeking to restrict or
prohibit the transactions contemplated by this Agreement.
7.04 Execution and Delivery of Closing Documents. The Purchaser must
deliver to the Seller and the Acquired Companies (as appropriate), the
following, duly executed as appropriate:
(a) this
Stock Purchase Agreement;
(b) the Escrow Agreement;
(c) a certificate dated as of the Closing Date, signed by an
officer of the Purchaser certifying that the conditions specified in Sections
7.01 through 7.03 have been satisfied;
(d) a certificate dated as of the Closing Date, signed by the
Secretary of the Purchaser and in form and substance satisfactory to the
Purchaser certifying (i) that resolutions
31
have been duly adopted by the Purchaser's Board of Directors authorizing the
execution of this Agreement and the Ancillary Agreements and all of the other
transactions to be consummated pursuant hereto, (ii) the names and incumbency of
its officers who are empowered to execute the foregoing documents for and on
behalf of the Purchaser, (iii) the authenticity of attached copies of the
Articles of Incorporation and Bylaws of the Purchaser, and (iv) the continued
good standing of the Purchaser in the State of
Minnesota, as evidenced by a
reasonably current Certificate of Good Standing;
(e) a favorable opinion of the Purchaser's legal counsel as to
the matters referred to on Exhibit D;
(f) a Management Indemnification Agreement in substantially
the form attached as Exhibit E signed by Xx. Xxxxxxx Xxxx DDS, Xxxxxx Xxxxxxxx
and Xxxxx Xxxx, which such agreement shall be in full force and effect as of the
Closing; and
(g) such other documents, certificates, instruments or
opinions as the Seller and the Acquired Companies may reasonably request, in
form reasonably satisfactory to the Seller and the Acquired Companies.
7.05 Proceedings Satisfactory. All proceedings to be taken in
connection with the transactions contemplated by this Agreement and all
documents incident to such transaction are satisfactory in form and substance to
the Seller and the Acquired Companies.
ARTICLE VIII
TERMINATION
8.01 Termination Events. This Agreement may be terminated at any time
prior to the Closing as follows:
(a) by mutual agreement of the Purchaser, the Seller and the
Acquired Companies;
(b) by the Purchaser if:
(i) the Seller or the Acquired Companies have
committed a material breach of this Agreement and such breach has not
been waived in writing by the Purchaser;
(ii) the transactions contemplated by this Agreement
have not been consummated on or before December 31, 2001, provided that
such failure is not due substantially to the failure of the Purchaser
to comply with its obligations under this Agreement; or
(iii) any of the conditions set forth in Article VI
is not satisfied as of December 31, 2001 or if satisfaction of such a
condition is or becomes impossible to
32
fulfill (other than through the failure of the Purchaser to comply with
its obligations under this Agreement) and the Purchaser has not waived
such condition in writing; or
(c) by the Seller and the Acquired Companies if:
(i) the Purchaser has committed a material breach of
this Agreement and such breach has not been waived in writing by the
Seller and the Acquired Companies;
(ii) the transactions contemplated by this Agreement
have not been consummated on or before December 31, 2001, provided that
such failure is not due substantially to the failure of the Seller and
the Acquired Companies to comply with its obligations under this
Agreement; or
(iii) any of the conditions set forth in Article VII
is not satisfied as of December 31, 2001 or if satisfaction of such a
condition is or becomes impossible to fulfill (other than through the
failure of the Seller and the Acquired Companies to comply with their
obligations under this Agreement) and the Seller and the Acquired
Companies have not waived such condition in writing.
8.02 Procedure and Effect of Termination.
(a) If the Purchaser or the Seller and the Acquired
Companies desire to terminate this Agreement pursuant to Section 8.01, the party
or parties desiring termination must give written notice of termination to the
other party or parties.
(b) Each party's right of termination under Section 8.01 is in
addition to any other rights it may have under the Agreement or otherwise, and
the exercise of a right of termination will not constitute an election of
remedies. Upon receipt of a notice of termination by the non-terminating party
or parties, this Agreement will terminate without further action by any party
and each party will have no further obligation under this Agreement, except that
Sections 8.03 and 9.05 and Article X will survive the termination of the
Agreement. Notwithstanding the foregoing, if the Agreement is terminated by a
party because of the material breach of the Agreement by the other party or
because one or more of the material conditions to the terminating party's
obligations under the Agreement is not satisfied as a result of the other
party's failure to comply with its obligations under the Agreement, the
terminating party's right to pursue all legal remedies with survive the
termination of the Agreement unimpaired.
ARTICLE IX
INDEMNIFICATION
9.01 Indemnification by the Purchaser. The Purchaser agrees to
indemnify, reimburse, defend and hold harmless the Seller and its Affiliates,
agents, successors and assigns, from and against any and all Damages, incurred
in connection with, arising out of, resulting from or incident to any breach of
any covenant, representation, warranty or agreement made by
33
Purchaser in this Agreement or any Ancillary Agreement, or any certificate
delivered pursuant thereto.
9.02 Indemnification by the Seller.
(a) General Indemnification. Subject to Section 9.03 hereof,
the Seller agrees to indemnify, reimburse, defend and hold harmless the
Purchaser and its respective officers, governors, members, employees, agents,
successors, assigns and Affiliates, including, after the Closing Date, the
Acquired Companies (collectively the "Purchaser Group"), from and against any
and all Damages incurred in connection with, arising out of, or resulting from
any breach of any covenant, representation, warranty or agreement made by the
Seller or the Acquired Companies in this Agreement or any Ancillary Agreement,
or any certificate delivered pursuant thereto. Subject to and conditioned upon
the Closing, the Seller waives any and all rights of contribution it may have
against the Acquired Companies with respect to its obligations under this
Agreement, including without limitation, this Article IX.
(b) Insurance Matters. Subject to Section 9.03 hereof, for a
period of two years after the Closing, the Seller agrees to indemnify,
reimburse, defend and hold harmless the Purchaser Group for, from and against
all Damages asserted against or incurred by the Purchaser Group in connection
with, arising out of, or resulting from any Employment Practices Claim or
Directors and Officers Claim to the extent of any retention, deductible or
maximum limit of liability applicable to the policies referenced in Sections
3.20(f) and (g) hereof.
9.03 Limitations on the Seller's Indemnification Obligations.
(a) (i) Subject to Section 9.03(c) below, the Seller will have
no liability for amounts payable to any member of the Purchaser Group
pursuant to its indemnification obligations under Section 9.02 until
the total of all Damages exceeds $100,000 in the aggregate, after which
such indemnification obligations of the Seller will include all such
Damages as if this Section 9.03(a) were not part of this Agreement.
(ii) To the extent an indemnification claim by the
Purchaser Group under Section 9.02(a) for Second Level Damages is based
on a breach by the Seller or the Acquired Companies of one or more of
the Management Representations, the Purchaser Group must prove that
Xxxxxx Xxxxxxxx (with respect to $87,500 of the Second Level Damages),
Xx. Xxxxxxx Xxxx (with respect to $87,500 of the Second Level Damages)
or Xxxxx Xxxx (with respect to $25,000 of the Second Level Damages) had
knowledge (defined as actual knowledge or knowledge that such person
would be expected to have had after conducting a reasonable
investigation of other information actually known to such person) of
the facts underlying a breach of such Management Representations prior
to Closing that form the basis of the breach upon which such claim is
made before the Purchaser Group will be entitled to indemnification for
the portion of the Second Level Damages related to such breach of the
Management Representations. The foregoing sentence will not limit the
Purchaser Group's right to indemnification under Section 9.02(a) with
respect to all or any portion of the Second Level Damages if such right
to indemnification is not based on a breach of a Management
Representation. In addition,
34
the Purchaser may elect to treat the Second Level Damages as a
deductible whereby the Purchaser Group would be entitled to seek
indemnification for Damages in excess of the Second Level Damages
without having to prove that any such individual had knowledge of the
breach of the Management Representation resulting in the Second Level
Damages. In no event will any claim by the Purchaser Group for Damages
in excess of Second Level Damages be delayed in any way pending any
action by the Purchaser Group to prove knowledge of a breach of a
Management Representation.
(b) Subject to Section 9.03(c) below, the Seller will have no
liability for amounts payable to any member of the Purchaser Group pursuant to
its indemnification obligations under Section 9.02 for Damages in excess of
$2,413,750.
(c) The limitations provided in Section 9.03(a) and (b) shall
not apply to (i) any breach of any representation or warranty made by the Seller
or the Acquired Companies in this Agreement, or any Ancillary Agreement of which
the Seller or any Acquired Company had actual knowledge at the time such
representation or warranty was made; (ii) any breach of the representation and
warranty made in Section 3.04(a); or (iii) any breach by the Seller or any
Acquired Company of any covenant or obligation set forth in Article II or X (but
excluding Section 10.07) of this Agreement, the Non-Competition Agreement or the
Escrow Agreement.
(d) Any claims for indemnification by the Purchaser Group
under Section 9.03 hereof shall first be satisfied out of the Escrow Amount and
thereafter by the Seller subject in all cases to the other limitations set forth
in this Section 9.03.
(e) No Damages shall be deemed to have been incurred by the
Purchaser Group for purposes of Section 9.03 hereof (i) to the extent of the
insurance proceeds received by the Purchaser Group with respect thereto and (ii)
to the extent of any net tax benefit received by the Purchaser Group with
respect thereto.
(f) No member of the Purchaser Group shall be entitled to
recover punitive, exemplary or multiple damages against the Seller in litigation
arising out of this Agreement or any of the transactions or other agreements
contemplated hereby.
9.04 Procedure for Indemnification of Third Party Claims.
(a) Notice of Third Party Claims. If any action, claim, suit,
proceeding, arbitration, order, or governmental investigation or audit is filed
or initiated by any third party (a "Third Party Claim") against any party
entitled to the benefit of indemnity under this Agreement (an "Indemnified
Party"), written notice of such Third Party Claim will be given to the party
owing indemnity (an "Indemnifying Party") as promptly as practicable (and in any
event within 10 days after the service of the citation or summons); provided,
however, that the failure of any Indemnified Party to give timely notice will
not affect any rights to indemnification hereunder except to the extent that the
Indemnifying Party demonstrates actual damage caused by such failure.
35
(b) Defense and Settlement by Indemnifying Party.
(i) After notice of a Third Party Claim is given
under Section 9.04(a), if and only if the Indemnifying Party
acknowledges in writing that it is obligated to indemnify the
Indemnified Party under the terms of this Article IX for such Third
Party Claim, the Indemnifying Party may (A) take control of the defense
and investigation of the Third Party Claim, (B) employ and engage
attorneys of its own choice to handle and defend the Third Party Claim
at the Indemnifying Party's cost, risk and expense, which attorneys
must be reasonably satisfactory to the Indemnified Party, and (C)
subject to Section 9.04(b)(ii) below, compromise or settle the Third
Party Claim.
(ii) Notwithstanding Section 9.04(b)(i)(C) above, no
such compromise or settlement of the Third Party Claim may be made
without the written consent of the Indemnified Party, which consent
will not be unreasonably withheld or delayed. The Indemnified Party may
withhold such consent if such compromise or settlement would adversely
affect the conduct of the Acquired Companies' business or requires less
than an unconditional release with respect to the Third Party Claim.
(iii) The Indemnifying Party will provide the
Indemnified Party access to all records, documents and personnel of the
Indemnifying Party and keep the Indemnified Party informed relating to
any Third Party Claim under this Section 9.04 so long as there is no
Conflict of Interest or other circumstance that would render such
access inappropriate.
(iv) The Indemnified Party may engage separate legal
counsel at the cost and expense of the Indemnifying Party if a Conflict
of Interest (as defined in the following sentence) exists. The term
"Conflict of Interest" means that the named parties to a Third Party
Claim include both the Indemnifying Party and the Indemnified Party and
the Indemnified Party has been advised in writing by counsel that the
representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct.
(c) Defense and Settlement by Indemnified Party.
(i) If the Indemnifying Party fails to assume the
defense of such Third Party Claim within 15 days after receipt of
notice thereof pursuant to Section 9.04(a), the Indemnified Party may
(A) take control of the defense and investigation of the Third Party
Claim, (B) employ and engage attorneys of its own choice to handle and
defend the Third Party Claim at the Indemnifying Party's cost, risk and
expense (to the extent and only to the extent that the Indemnifying
Party is ultimately required to indemnify the Indemnified Party for
such Third Party Claim), which attorneys must be reasonably
satisfactory to the Indemnifying Party, and (C) subject to Section
9.04(c)(ii) below, compromise or settle the Third Party Claim.
(ii) Subject to Section 9.04(d), no compromise or
settlement of the Third Party Claim may be made without the written
consent of the Indemnifying Party, which consent will not be
unreasonably withheld or delayed.
36
(d) Participation and Payment Obligations. The Indemnified
Party may, at its own cost, participate in the investigation, trial and defense
of any Third Party Claim and any appeal arising therefrom. The Indemnifying
Party will pay all expenses for which it is responsible (either as agreed by the
Indemnifying Party or as finally determined in accordance with the terms and
conditions of this Agreement) pursuant to its indemnification obligations
hereunder as such expenses become due. In the event such expenses are not so
paid, the Indemnified Party will be entitled to settle any Third Party Claim
under this Section 9.04 without the consent of the Indemnifying Party and
without waiving any rights the Indemnified Party may have against the
Indemnifying Party; provided that the Indemnifying Party has been given 30 days
prior written notice thereof.
9.05 Procedure for Indemnification of Other Claims. A claim for
indemnification for any matter not involving a Third Party Claim may be asserted
by notice to the party from whom indemnification is sought.
9.06 Survival.
(a) The representations, warranties, covenants, and
obligations of the Seller and the Acquired Companies contained in this Agreement
or any Ancillary Agreement, or any certificate delivered pursuant thereto, will
survive the execution and delivery of this Agreement and the Closing until the
second anniversary of the Closing Date; provided, however, that (i) the
representations and warranties contained in Sections 3.01, 3.02 and 3.04 will
survive indefinitely after the Closing Date; (ii) the representation and
warranties contained in Section 3.17 shall continue until the sixth anniversary
of the Closing Date; and (iii) the representations and warranties in Sections
3.11 and 3.14 will survive after the Closing Date until the expiration of the
applicable statutes of limitations.
(b) For all purposes of this Agreement, including without
limitation any claims for indemnification that the Purchaser Group may have
under this Article IX, the knowledge of the Acquired Companies and of any
director, officer, employee, agent, or representative of the Acquired Companies,
including without limitation Xx. Xxxxxxx Xxxx, Xxxxxx Xxxxxxxx and Xxxxx Xxxx,
will not be attributed to the Purchaser.
9.07 Exclusive Remedy. The indemnification in this Article IX shall be
the sole and exclusive remedy available to any indemnified party against any
indemnifying party for any claims arising out of or based upon the matters set
forth in this Agreement and the transactions contemplated hereby, no indemnified
party shall have the right to rescind the transactions contemplated by this
Agreement and no party shall seek relief against any other party to this
Agreement other than through indemnification provided by this Article IX;
provided, however, that nothing herein shall limit the non-monetary equitable
remedies of any party hereto in respect to any breach of any covenant or other
agreement of any party required to be performed after the Closing.
37
ARTICLE X
MISCELLANEOUS
10.01 Governing Law. This Agreement and the Ancillary Agreements will
be construed and enforced in accordance with the substantive laws of the State
of
Minnesota without giving effect to its conflict of laws principles.
10.02 Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, each party will pay its own costs and expenses incurred in
connection with the negotiation, execution and closing of this Agreement and the
transactions contemplated hereby. The Seller will be responsible for the payment
of any transfer Taxes payable with respect to the transfer of the Acquired Stock
pursuant to this Agreement.
10.03 Notices. All notices and other communications under this
Agreement must be in writing and will be deemed given (i) when received if
delivered personally or by courier (with written confirmation of receipt), (ii)
on the date of transmission if sent by facsimile (with written confirmation of
receipt), or (iii) 5 days after being deposited in the mail if sent by
registered or certified mail (postage prepaid, return receipt requested), to the
addresses set forth below (or such other address as is furnished in writing by
either party to the other parties):
(a) If to the Purchaser:
Midwest Dental, Inc.
c/o Bayview Capital Partners LP
Attn: Xxxx Xxxxxx
000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Tel.: 000-000-0000
Fax: 000-000-0000
with a copy to:
Xxxxxxxxx & Xxxxxx P.L.L.P.
Attn: Xxxxxx X. Xxxxxxx
4200 IDS Center
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Tel.: 000-000-0000
Fax: 000-000-0000
38
(b) If to the Seller or the Acquired Companies:
Monarch Dental Corporation
Attn: Xx. Xxxx X. Xxxxxxxx
Tollway Plaza II
00000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Tel.: 000-000-0000
Fax: 000-000-0000
with a copy to:
Xxxxxxx Procter LLP
Attn: Xxxxxx X. Xxxxxxx III, P.C.
Exchange Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Tel.: 000-000-0000
Fax: 000-000-0000
10.04 Post Closing Tax Agreements.
(a) Tax Sharing Agreements. Any Tax Sharing Agreement between
Seller and any of the Acquired Companies is terminated as of the Closing Date
and will have no further effect for any taxable year (whether the current year,
a future year or a past year).
(b) Returns for Periods through the Closing Date. To the
extent required by the Code or other applicable law, Seller will include the
income of the Acquired Companies on the Seller's consolidated Tax Returns for
all periods through the Closing Date and pay any Taxes attributable to such
income. The Acquired Companies will furnish Tax information to Seller for
inclusion in Seller's consolidated Tax Returns for the period which includes the
Closing Date (and prior periods as Seller may reasonably require) in accordance
with the Acquired Companies' past custom and practice as is necessary to
complete such Tax Returns. Seller will allow Purchaser an opportunity to review
and comment upon such Tax Returns to the extent that they relate to the Acquired
Companies. Income of the Acquired Companies will be apportioned to the period up
to and including the Closing Date and the period after the Closing Date by
closing the books of the Acquired Companies as of the end of the Closing Date.
(c) Audits. If a governmental taxing authority proposes an
adjustment to a consolidated Tax Return of the Seller for any period beginning
prior to the Closing Date, and such adjustment would have a material adverse
effect on the tax liability of an Acquired Company for any period beginning on
or after the Closing Date, then Seller shall notify Purchaser of such proposed
adjustment, and Purchaser shall have a reasonable opportunity to provide
comments and analysis to Seller regarding such adjustment prior to its final
resolution. Similarly, if a governmental taxing authority proposes an adjustment
to a Tax Return of an Acquired Company (or a consolidated Tax Return which
includes an Acquired Company) for any period beginning on or after the Closing
Date, and such adjustment would have a material
39
adverse effect on the tax liability of Seller or an Acquired Company for any
period beginning prior to the Closing Date, then Purchaser shall notify Seller
of such proposed adjustment, and Seller shall have a reasonable opportunity to
provide comments and analysis to Purchaser regarding such adjustment prior to
its final resolution.
10.05 Transition Assistance. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
this Agreement). The parties acknowledge that this transition assistance may
include, but not be limited to (i) maintenance of electronic mail functions for
the employees of the Acquired Companies on the Seller's system for a period not
to exceed thirty (30) days following Closing; and (ii) the grant by Seller of a
sublicense to use the Quality Systems Inc. software currently used by the
Acquired Companies provided that the Purchaser pays the cost of such sublicense
as assessed by Quality Systems Inc.
10.06 Post Closing Collection of Accounts Receivable. Purchaser and the
Acquired Companies covenant and agree with the Seller that they will use
commercially reasonable efforts to collect the full balance of the accounts
receivable of the Acquired Companies outstanding as of the Closing Date.
10.07 Post Closing Insurance Agreements. Seller shall keep in full
force and effect the employment practices insurance coverage and the director
and officer insurance coverage referenced in Sections 3.20 (f) and (g),
respectively, for a period of no less than two (2) years following the Closing
Date (whether pursuant to the existing insurance policies or new policies that
provide comparable coverage).
10.08 No Reliance. The Purchaser hereby represents and warrants that it
has relied only on the representations and warranties of the Seller and Acquired
Companies contained herein and, based on such representations and warranties,
has made its own independent analysis and decision to enter into this Agreement.
10.09 Entire Agreement. This Agreement and the Ancillary Agreements,
including the other documents referred to herein, contain the entire
understanding of the parties hereto with respect to the subject matter contained
herein. There are no restrictions, promises, warranties, covenants, or
undertakings, other than those expressly provided for herein. This Agreement and
the Ancillary Agreements supersede all prior agreements and undertakings between
the parties with respect to such subject matter.
10.10 Dispute Resolution.
(a) Except as provided below or as provided in Section 2.03
hereof with respect to disputes regarding the determination of the Closing Date
Balance Sheet (as opposed to the enforcement of Section 2.03 hereof, which shall
be subject to this Section 10.10), any dispute arising out of or relating to
this Agreement or the breach, termination or validity hereof (a
40
"Dispute") shall be resolved solely and exclusively by binding arbitration
conducted expeditiously in accordance with the Commercial Arbitration Rules of
the American Arbitration Association ("AAA"). The place of arbitration shall be
Minneapolis,
Minnesota. The Arbitration will be conducted by one (1) independent
and impartial arbitrator selected by mutual agreement of the Purchaser and the
Seller. In the event the parties are unable to mutually select an arbitrator
within thirty (30) days of the first demand for arbitration, then they will each
select a separate arbitrator who will jointly select a third arbitrator, and
such third arbitrator will be the sole arbitrator to conduct the arbitration. If
either party fails to select an arbitrator within 10 days of the end of the 30
day period, then the arbitrator selected by the other party will conduct the
arbitration. A decision of the arbitrator will be binding on the parties, and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. If it is determined by the arbitrator that one
party has generally prevailed on the issues, then the other party will bear the
cost of the arbitration proceedings, including without limitation the
arbitrator's compensation and expenses; otherwise, the cost of the arbitration
will be borne by the parties equally. In addition, if the arbitrator determines
that one party's position in the arbitration was frivolous or unreasonable, the
arbitrator may award reasonable attorneys' fees to the other party as part of
the arbitration award.
(b) Notwithstanding the foregoing, if any Dispute relates to
an indemnification claim involving a pending lawsuit or governmental
administrative proceeding brought by a third party against an Indemnified Party,
such Indemnified Party may, at its option, bring the Indemnifying Party or
parties in as a party to such lawsuit or administrative proceeding and have the
Dispute determined as a part of such lawsuit or administrative proceeding.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of this Section 10.10 shall not apply with regard to any claims
arising between the parties for which equitable remedies are the only remedies
being sought.
10.11 Amendments; Consents; Waivers. No waiver, modification, amendment
of any provision of this Agreement, or any consent will be effective unless
specifically made in writing and duly signed by the party to be bound thereby.
No waiver of any term or condition of this Agreement, in any one or more
instances, will constitute a waiver of the same term or condition of this
Agreement on any future occasion.
10.12 Severability of Invalid Provision. If any one or more covenants
or agreements provided in this Agreement should be contrary to law, then such
covenants or agreements will be null and void and will in no way affect the
validity of the other provisions of this Agreement, which will otherwise be
fully effective and enforceable.
10.13 Successors and Assigns. This Agreement and the various
instruments and agreements delivered in connection with the consummation of this
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Neither this Agreement nor any
right, interest or obligation under this Agreement may be assigned by any party
to this Agreement without the prior written consent of the other parties hereto
and any attempt to do so will be void; provided, however, that the Purchaser may
assign its rights under this Agreement to any Affiliate which is a successor to
the Purchaser whether by
41
merger or otherwise, or to any third party that acquires substantially all of
the assets, business, or stock of the Purchaser.
10.14 Rules of Construction. Section headings contained in this
Agreement are inserted only as a matter of convenience and in no way define,
limit, extend or describe the scope of this Agreement or the intent of any of
the provisions hereof. This Agreement and the Ancillary Agreements have been
negotiated on behalf of the parties with the advice of legal counsel and no
general rule of contract construction requiring an agreement to be more
stringently construed against the drafter or proponent of any particular
provision will be applied in the construction or interpretation of this
Agreement or the Ancillary Agreements.
10.15 Counterparts. This Agreement may be executed in one or more
counterparts, and will become effective when one or more counterparts have been
signed by each of the parties.
10.16 Press Releases. The Seller and the Acquired Companies agree not
to issue any press release or make any general public announcement or statement
with respect to the execution of this Agreement or the transactions hereunder
without the approval of the Purchaser, which approval shall not be unreasonably
withheld. Notwithstanding the foregoing, the Seller shall have the right to make
any disclosure of the transactions contemplated hereby which the Seller is
advised by counsel are necessary for its compliance with its reporting
obligations under the Securities Exchange Act of 1934, as amended, or the
Securities Act of 1933 or any of the rules and regulations promulgated
thereunder.
* * * * *
42
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
THE PURCHASER: THE SELLER:
MIDWEST DENTAL, INC.
MONARCH DENTAL CORPORATION
By: /s/ Xxxxxxx X. Xxxx, DDS By: /s/ Xxxx X. Xxxxxxxx
------------------------ ------------------------------
Its: President Its: Chief Financial and
--------------------- Administrative Officer
--------------------------
THE ACQUIRED COMPANIES:
MIDWEST DENTAL CARE,
MONDOVI, INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------
Its: Vice President
---------------------------
MIDWEST DENTAL CARE,
SHEBOYGAN, INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------
Its: Vice President
---------------------------
MIDWEST DENTAL MANAGEMENT, INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------
Its: Vice President
---------------------------
43
