Exhibit 2.4
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AFFILIATION AGREEMENT AND ASSET PURCHASE AGREEMENT
THIS AFFILIATION AGREEMENT AND ASSET PURCHASE AGREEMENT is entered into
as of the 31st day of March 1997, by and among Omega Orthodontics, Inc., a
Delaware corporation ("OMEGA" or "Surviving Entity"); Xxxxx X. Xxxxxxx, D.D.S.
("Xx. Xxxxxxx"), who is duly licensed to practice orthodontics in the state of
California (the "State").
RECITALS
A. OMEGA provides professional management and marketing services to
orthodontic practices in the United States, which services include providing
practice management systems, office space, equipment, furnishings and active
administrative personnel necessary for the operation of orthodontic practices,
and which services are provided directly or indirectly through management
service organizations.
B. Xx. Xxxxxxx owns and operates an orthodontic practice (the
"Orthodontic Practice") with offices located at offices located at 0000 Xxxxxxx
Xxxxxx Xxxxxxxxx, Xx. 000, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000 (the "Orthodontic
Offices") and furnishes orthodontic care to the general public. As the owner and
operator of the Orthodontic Practice, Xx. Xxxxxxx is the owner of a leasehold
interest in a lease of the Orthodontic Offices, the owner of certain personal
property located at the Orthodontic Offices, a party to certain contracts
relating to the Orthodontic Practice and the beneficiary of other rights related
to the Orthodontic Practice.
C. OMEGA has conducted a review of the Orthodontic Practice, and has
reviewed the Orthodontic Practice's audited financial statement (the "Financial
Statement"), a copy of which is attached hereto as Exhibit A . Based on its
review of the Orthodontic Practice and the Financial Statement, OMEGA has issued
the report (the "Report"), a copy of which has been furnished to Xx. Xxxxxxx.
Xx. Xxxxxxx have reviewed the Report and OMEGA's literature, and agree with the
Report and the concepts of OMEGA's Exceptional Practice.
D. Subject to the terms and conditions of this Agreement, OMEGA and Xx.
Xxxxxxx have determined that it is in the best interests of each to for OMEGA to
purchase from Xx. Xxxxxxx certain of the assets comprising the Orthodontic
Practice as provided in Section 1.1 hereof.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged to the full
satisfaction of the parties hereto, the parties hereto agree as follows:
ARTICLE I. ASSET PURCHASE
1.1 Purchase; Consideration and Payment.
(a) At the Effective Time (as hereinafter defined) and subject to the
terms and conditions hereinafter set forth, Xx. Xxxxxxx agrees to sell,
transfer, convey, assign and deliver to OMEGA, and OMEGA agrees to purchase and
acquire from Xx. Xxxxxxx and take delivery of, for the consideration hereinafter
provided, all of Xx. Xxxxxxx'x right, title and interest in and to all of the
assets of the Orthodontic Practice, wheresoever situated and whether or not
specifically referred to herein or in any instrument of conveyance delivered
pursuant hereto (such assets and rights of Xx. Xxxxxxx are collectively referred
to as the "Assets"), excepting therefrom the assets listed on Schedule I to the
Xxxx of Sale and Assignment (the "Xxxx of Sale") attached hereto as Exhibit D
(the "Excluded Assets"), and including without limitation the following Assets:
(1) a lease of the Orthodontic Offices, including all rights and
remedies (the "Lease");
(2) all books, records, machinery and equipment used or owned by the
Orthodontic Practice and all other tangible and intangible personal property at
or related to the Orthodontic Office, whether or not located at the Orthodontic
Office, or to the Orthodontic Practice conducted therein, whether or not located
at the Orthodontic Office;
(3) all Contracts (as defined below in Section 2.1);
(4) all prepaid claims, prepaid taxes and other prepaid expense items
and deferred charges, credits, advance payments, security and other deposits
made by Xx. Xxxxxxx to any other person relating to Orthodontic Practice; or.
(5) Any rights of Xx. Xxxxxxx pertaining to any counterclaims, set-offs
or defenses he may have with respect to any of the liabilities assumed by OMEGA;
and
(6) any other rights related in any way whatsoever to the Orthodontic
Practice or the Orthodontic Office.
free and clear of any liens, encumbrances, restrictions or claims of any kind
(other than those liens, encumbrances, restrictions and claims expressly
disclosed to OMEGA and affirmatively accepted by OMEGA prior to the Effective
Time), without any further action on the part of any holder thereof, for an
aggregate consideration (the "Consideration") of:
(i) One Hundred Eighty Nine Thousand, Two Hundred Forty Eight
Dollars ($189,248) in cash (the "Cash Component");
(ii) Eighty Eight Thousand Nine Hundred Forty Seven Dollars
($88,947) to be represented by a promissory note (the "Purchase Note")
payable to Xx. Xxxxxxx (the "Note Component") in the form attached
hereto as Exhibit B; and
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(iii) Two Hundred Eighty Nine Thousand, Five Hundred Forty
Eight ($289,548) Dollars to be represented by issuance to Xx. Xxxxxxx
of shares of OMEGA common stock ("OMEGA Stock") based on a value per
share equal to 100% of the IPO Price (as defined below in Section 1.3)
(the "Stock Component"), which shall thereupon be issued to Xx.
Xxxxxxx, fully paid and nonassessable.
1.2 Adjustment; Allocation.
(a) The Consideration is based on the value of the Assets as determined
by OMEGA from the information set forth in the Financial Statement.
(b) The Consideration shall be subject to adjustments at Closing for:
(i) prepaid and underpaid rent and other lease obligations, if the leases are to
be continued after Closing, as well as for other agreed normal and customary
prepaid and underpaid expenses; (ii) any accrued but unpaid salaries, bonuses
and other compensation, fringe and health insurance benefits, employment or
payroll taxes and related employment obligations and (iii) any accounts payable
of the Orthodontic Practice which have accrued prior to the Effective Time and
which remain unpaid as of such time (the "Accounts Payable") in excess of an
amount equal to one-half (1/2) of one "Average" month of gross income from the
Orthodontic Practice. As used herein, Average shall mean an average of the
Accounts Payable of the Orthodontic Practice using the last twelve months prior
to the end of the month immediately preceding the Effective Time.
(c) The adjustments to the Consideration, if any, shall be applied in
the following order of priority; first to the Cash Component, second, to the
Note Component, and the balance, if any, to the Stock Component.
(d) The parties hereby agree to allocate the Consideration among the
Assets in accordance with Section 1060 of the Code on the basis of the fair
market value of the Assets as of the Closing, which allocation shall be reduced
to writing and acknowledged by the parties hereto within thirty (30) days
following the Closing. The parties agree to file timely any information that may
be required to be filed pursuant to regulations promulgated under Section
1060(b) of the Code. The parties further agree that they shall report the
federal, state, municipal, foreign and local and other tax consequences of the
purchase and sale hereunder in a manner consistent with the allocation
determined pursuant to this section, and that they shall not take any position
inconsistent therewith in connection with any tax return, refund claim,
litigation or otherwise.
1.3 Time and Place of Closing. The closing of the transactions
contemplated hereby (herein called the "Closing") shall be held immediately
before the Effective Time at the offices of Xxxxxxxx & Xxxx, Xxx Xxxxxx Xxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000 on the date of the closing of OMEGA's initial public
offering of its securities (the "IPO Closing") pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") ("IPO"), or at such other place, date or time as may be fixed
by mutual agreement of the parties; provided, however, that in no event shall
the Closing date be extended beyond six months from
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the date of this Agreement. On or before the IPO Closing, OMEGA will notify the
Orthodontic Practice of the projected IPO Closing Date determined by OMEGA, in
its sole discretion. As used herein "IPO Price" shall mean the initial offering
price to the public of OMEGA Stock as reflected on the cover page of its
Prospectus under the Securities Act for the IPO.
1.5 Delivery of Records, Contracts; Transfer of Accounts. At the
Closing Xx. Xxxxxxx shall deliver or cause to be delivered to OMEGA:
(a) all of the Assets, including without limitation, books, records,
leases, contracts, employment agreements, non-compete agreements, commitments
and rights relating to the Orthodontic Practice, with such rights of transfer so
as to allow OMEGA of the full benefit of the same.
(b) Evidence of malpractice insurance coverage for the current and five
(5) prior years, and if applicable, evidence of so-called "tail" insurance for
such period naming Xx. Xxxxxxx (and any successor) as a co-insured or otherwise
assigning to OMEGA and its successor the full benefits thereof.
(c) any documentation necessary for the transfer of any of the Assets,
including the Xxxx of Sale, together with any warranty or other documentation.
Xx. Xxxxxxx shall cooperate with OMEGA in the transfer of any utility accounts
for the Orthodontic Offices.
ARTICLE II. ASSUMED LIABILITIES
2.1 Contracts For purposes of this Article II the term "Contracts"
shall only mean only those leases, licenses, permits, contracts, leases,
subleases, permits, registrations, authorizations, commitments, purchase orders,
contracts to purchase materials, contracts to perform or receive services
(including work in process) and supplies, and all other agreements (whether
written or oral) that relate to the Orthodontic Practice and are set forth on
Exhibit Y attached hereto.
2.2 Transfer. At the Closing, Xx. Xxxxxxx shall assign and transfer to
OMEGA all of Xx. Xxxxxxx'x right, title and interest in and to the Contracts and
OMEGA shall assume and agree to perform all obligations and liabilities on the
part of Xx. Xxxxxxx under the Contracts accruing on and after the Effective
Time; provided that to the extent that the assignment of any Contract is not
permitted without the consent of the other party or parties to such Contract,
this Agreement shall not constitute an agreement to assign such Contract if such
consent is not given; and provided further that Xx. Xxxxxxx and OMEGA, as
appropriate, shall use all reasonable efforts to obtain such consents, it being
understood that such reasonable efforts shall not include any requirement to
offer or grant financial accommodations to any third party.
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2.3 Assumption of Liabilities by OMEGA. At the Closing, Xx. Xxxxxxx
shall assign to OMEGA, and OMEGA shall assume and pay, perform and discharge,
and indemnify and hold Xx. Xxxxxxx harmless from and against, the following
obligations and liabilities of Xx. Xxxxxxx, and none other (collectively, the
"Assumed Liabilities"): all obligations and liabilities on the part of Xx.
Xxxxxxx under the Contracts arising on and after the Effective Time.
2.4 No Enlargement. The assumption by OMEGA of the Assumed Liabilities
shall not enlarge any rights or remedies of any third party under any Contract
with Xx. Xxxxxxx. OMEGA agrees to indemnify, defend and hold Xx. Xxxxxxx and his
employees, harmless from and against any and all liability, loss, cost, damage
and/or expense (including, without limitation, reasonable attorneys' fees and
costs) pertaining to the Assumed Liabilities.
2.5 No Other Liabilities Assumed. OMEGA and Xx. Xxxxxxx intend that
OMEGA shall not assume or be obligated to pay, perform or discharge any of Xx.
Xxxxxxx'x obligations other than the Assumed Liabilities specified in Section
2.4. Except for the Assumed Liabilities specified in Section 2.4, OMEGA and Xx.
Xxxxxxx expressly agree OMEGA is acquiring the Assets free and clear of all
liens, claims and encumbrances.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Representations and Warranties of Xx. Xxxxxxx in the attached
Schedule 1 are hereby incorporated as if fully set forth herein. The
Representations and Warranties of OMEGA in the attached Schedule 2 are hereby
incorporated as if fully set forth herein. Capitalized words and expressions
used in this Agreement and which are defined in said Schedules 1 and 2 shall
have the same meaning as they are given therein.
ARTICLE IV. COVENANTS OF XX. XXXXXXX
AND THE ORTHODONTIC PRACTICE
Xx. Xxxxxxx hereby covenants and agrees with OMEGA as follows:
4.1 Conduct of Business. Between the date of this Agreement and the
Closing, he will do the following unless OMEGA shall otherwise consent in
writing:
(a) conduct his business only in the ordinary course, and
refrain from changing or introducing any method of management or operations
except in the ordinary course of business and consistent with prior practices;
(b) refrain from making any purchase, sale or disposition of
any asset or property other than in the ordinary course of business, from
purchasing any capital asset costing more than $1,000 and from mortgaging,
pledging, subjecting to a lien or otherwise encumbering any of the Assets;
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(c) refrain from incurring any contingent or fixed obligations
or liabilities except those that are usual and normal in the ordinary course of
business;
(d) use his best efforts to keep available his present
employees and to preserve the goodwill of all patients, suppliers, and others
having business relations with him;
(e) not commit or fail to commit any act which would cause
Xx. Xxxxxxx to suffer the revocation, suspension or limitation of Xx. Xxxxxxx'x
license.
(f) permit OMEGA and its authorized representatives to have
full access to all his properties, assets, records, tax returns, records,
contracts and documents and furnish to OMEGA or its authorized representatives
such financial and other information with respect to his business or properties
as OMEGA may from time to time reasonably request.
4.2 Authorization from Others. Prior to the Closing, he will have
obtained all assignments, authorizations, consents and permits of others
required to permit the consummation by Xx. Xxxxxxx of the transactions
contemplated by this Agreement.
4.3 Breach of Representations and Warranties. Promptly upon becoming
aware of the actual, impending or threatened occurrence of any event which would
cause or constitute a breach, or would have caused or constituted a breach had
such event occurred or been known to them prior to the date hereof, of any of
their representations and warranties contained in or referred to in this
Agreement, he shall give detailed written notice thereof to and shall use his
best efforts to prevent or promptly remedy the same.
4.4 Consummation of Agreement. He shall use his best efforts to perform
and fulfill all conditions and obligations on his or its part to be performed
and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be fully carried out.
ARTICLE V. COVENANTS OF OMEGA.
OMEGA hereby covenants and agrees with Xx. Xxxxxxx as follows:
5.1 Authorization from Others. Prior to the Closing, it will have
obtained all authorizations, consents and permits of others required to permit
the consummation by it of the transactions contemplated by this Agreement.
5.2 Consummation of Agreement. It shall use its best efforts to perform
and fulfill all conditions and obligations on its part to be performed or
fulfilled under this Agreement, to the end that the transactions contemplated by
this Agreement shall be fully carried out.
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ARTICLE VI. CONDITIONS TO OBLIGATIONS OF OMEGA
The obligations of OMEGA to consummate this Agreement and the
transactions contemplated hereby are subject to the condition that on or before
the Closing the actions required by this Article 6 will have been accomplished.
6.1 Representations; Warranties; Covenants. Each of the representations
and warranties of Xx. Xxxxxxx contained in Schedule 1 shall be true and correct
as though made on and as of the Closing, and Xx. Xxxxxxx shall have performed
all of his obligations hereunder which by the terms hereof are to be performed
on or before the Closing.
6.2 New PC. Xx. Xxxxxxx shall have formed the New PC under the laws of
the State in order to commence the practice of orthodontics through the New PC.
Xx. Xxxxxxx shall have furnished (i) a certificate of the State Secretary of
State as to the legal existence and professional corporation good standing of
New PC; and (ii) a copy of the resolutions adopted by the board of directors and
stockholders of New PC authorizing and approving the Management Services
Agreement and the Stock Put/Call Option and Successor Designation Agreement.
6.3 Other Agreements. Xx. Xxxxxxx shall have executed and delivered, or
shall have caused the New PC to execute and deliver, to OMEGA a Management
Services Agreement and a Stock Put/Call Option and Successor Designation
Agreement, each having substantially the terms and conditions of the forms
hereof collectively attached hereto as Exhibit E .
6.4 Initial Public Offering. OMEGA shall have completed the IPO.
6.5 Absence of Certain Litigation. There shall not be any injunction,
restraining order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided, or suit, action
or other proceeding which in the reasonable opinion of counsel for OMEGA is
likely to result in the restraint or prohibition of the consummation of any
material transaction contemplated hereby.
6.6 Notices. Xx. Xxxxxxx shall, at OMEGA's expense, notify all patients
and obligors of accounts receivable, and third party payors and others
designated by OMEGA of the Asset purchase and the other transactions
contemplated hereunder pursuant to notices substantially in the form
collectively attached hereto as Exhibit C.
6.7 Financial Condition. The financial condition of the Orthodontic
Practice shall not be materially adversely different from the Financial
Statement, as determined by OMEGA. During the period from the date of the
Financial Statement to the Closing, there shall not have been any material
adverse change in the financial condition, results of operations, business or
prospects of the Orthodontic Practice, nor any material loss or damage to the
Assets, whether or not insured, which materially affects the ability of the
Orthodontic Practice to conduct its business. Xx. Xxxxxxx shall have delivered
to OMEGA a certificate, dated the date of Closing, to
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the foregoing effect, and further to the effect that there are no Accounts
Payable or other liabilities as of the date of Closing that are not reflected on
the Financial Statement other than those which have been disclosed in writing to
and accepted in writing by OMEGA and which incurred since the date of the
Financial Statement in the ordinary course of business.
6.8 Due Diligence. OMEGA, acting in good faith and in its sole
discretion, shall be reasonably satisfied with the results of its "Due
Diligence" on Xx. Xxxxxxx as not reflecting any data or information which
individually or in the aggregate, if previously disclosed, would have indicated
that there was a material adverse change in the business of the Orthodontic
Practice or in the condition or prospects (financial or otherwise) of the Assets
from the information provided prior to the date hereof. As used herein, Due
Diligence shall mean, without limitation, the results of the any matters
(financial or otherwise) related to, or otherwise deemed material by OMEGA,
regarding Xx. Xxxxxxx, including location of the Orthodontic Offices and its
demographics, the leases, the Equipment, insurance, licensing, malpractice
issues, liabilities, compliance with laws and regulations and health surveys.
ARTICLE VII. CONDITIONS TO OBLIGATIONS OF XX. XXXXXXX
The obligations of Xx. Xxxxxxx to consummate this Agreement and the
transactions contemplated hereby are subject to the condition that on or before
the Closing the actions required by this Article 7 will have been accomplished.
7.1 Representations; Warranties; Covenants. Each of the representations
and warranties of OMEGA contained in Schedule 2 shall be true and correct as
though made on and as of the Closing and each of OMEGA shall have performed all
of its obligations hereunder which by the terms hereof are to be performed on or
before the Closing.
7.2 Intentionally Omitted.
7.3 Other Agreements. OMEGA shall have executed and delivered to Xx.
Xxxxxxx and New PC a Management Services Agreement and a Stock Put/Call Option
and Successor Designation Agreement, each having substantially the terms and
conditions of the forms hereof collectively attached hereto as Exhibit E.
7.4 Initial Public Offering. OMEGA shall have completed the IPO.
7.5 Absence of Certain Litigation. There shall not be any injunction,
restraining order or order of any nature issued by any court of competent
jurisdiction which directs that this Agreement or any material transaction
contemplated hereby shall not be consummated as herein provided, or suit, action
or other proceeding which in the reasonable opinion of counsel for Xx. Xxxxxxx
is likely to result in the restraint or prohibition of the consummation of any
material transaction contemplated hereby.
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ARTICLE VIII. OBLIGATIONS AFTER CLOSING.
8.1 OMEGA Exceptional Practice and the Report Suggestions. On and after
the Closing, Xx. Xxxxxxx agrees to cause the New PC to implement the suggestions
in the Report and the concepts of OMEGA's Exceptional Practice.
8.2 Books and Records. OMEGA shall permit Xx. Xxxxxxx, his accountants
and attorneys, reasonable access to such books and records for the purpose of
preparing such tax returns of Xx. Xxxxxxx as may be required after the Closing
and for other proper purposes approved by OMEGA.
8.3 License. Xx. Xxxxxxx shall maintain all licenses necessary to
practice orthodontics in the State. Xx. Xxxxxxx shall not commit or fail to
commit any act which would cause Xx. Xxxxxxx or the New PC to suffer the
revocation, suspension or limitation of Xx. Xxxxxxx'x or the New PC's license.
ARTICLE IX. INDEMNIFICATION.
9.1 Indemnification By Xx. Xxxxxxx. Subject to the limitations set
forth in Section 9.3, Xx. Xxxxxxx agrees to defend, indemnify and hold each of
OMEGA harmless from and against any damages, liabilities, losses and expenses
(including reasonable counsel fees) of any kind or nature whatsoever which may
be sustained or suffered by OMEGA based upon a breach of any representation,
warranty or covenant made by Xx. Xxxxxxx in this Agreement or in any exhibit,
certificate, schedule or financial statement delivered hereunder, or by reason
of any claim, action or proceeding asserted or instituted growing out of any
matter or thing covered by such representations, warranties or covenants. OMEGA
may at their option recover such indemnification claims by OMEGA by set-off
against amounts of principal and interest due under the Purchase Note, but shall
not be required to recover said claims in such manner and may proceed against
Xx. Xxxxxxx and his transferees in liquidation at any time or times for recovery
of indemnification claims.
9.2 Indemnification By OMEGA. Subject to the limitations set forth in
Section 9.3, OMEGA, jointly and severally, each agrees to defend, indemnify and
hold Xx. Xxxxxxx harmless from and against any damages, liabilities, losses and
expenses (including reasonable counsel fees) of any kind or nature whatsoever
which may be sustained or suffered by Xx. Xxxxxxx based upon a breach of any
representation, warranty or covenant made by OMEGA in this Agreement or in any
exhibit, certificate, schedule or financial statement delivered hereunder, or by
reason of any claim, action or proceeding asserted or instituted growing out of
any matter or thing covered by such representations, warranties or covenants.
9.3 Exclusions. Notwithstanding Sections 9.1 and 9.2:
(a) no indemnification shall be payable to the extent any
claim is covered by insurance; and
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(b) no indemnification shall be payable with respect to claims
asserted more than five (5) years after the Closing.
9.4 Notice: Defense of Claims. Prompt written notice of each claim for
indemnification hereunder shall be given to the other party, specifying the
amount and nature of the claim, and of any matter which in the opinion of the
claimant is likely to give rise to an indemnification claim. The indemnifying
party shall have the right to participate at its own expense in the defense of
any such matter or its settlement. If, in the opinion of the indemnified party,
its financial condition or business would not be impaired thereby, such party
may authorize the indemnifying party to take over the defense of such matter so
long as such defense is expeditious. Failure to give notice of a matter which
may give rise to an indemnification claim shall not affect the rights of any
party to collect such claim from the other party or its transferees in
liquidation.
9.5 Payment of Claims; Alternative Dispute Resolution. Indemnification
claims by OMEGA may be paid or otherwise satisfied as an offset against the
Purchase Note as set forth under Section 9.1, and, in the alternative or after
any such offset, the indemnification claims (or any balance thereof) shall be
paid or otherwise satisfied by Xx. Xxxxxxx, or Xx. Xxxxxxx'x transferees in
liquidation, within 30 days after notice thereof is given by OMEGA. In the event
Xx. Xxxxxxx indicates in a writing delivered to OMEGA that he disputes the
nature or amount of the claim, in which event the dispute upon the election of
any party hereto after said 30-day period shall be referred to the American
Arbitration Association to be settled by alternative dispute resolution in
Boston, Massachusetts in accordance with the commercial alternative dispute
resolution rules of said Association, with the fees and expenses thereof to be
borne 50% by OMEGA and 50% by the New PC and Xx. Xxxxxxx.
ARTICLE X. MISCELLANEOUS.
10.1 Termination.
(a) At any time prior to the Closing, this Agreement may be terminated
(i) by mutual consent of the parties with the approval of their respective board
of directors or members, (ii) by either if there has been a material
misrepresentation, breach of warranty or breach of covenant by the other party
in its representations, warranties and covenants set forth herein, (iii) by
OMEGA if the conditions stated in Article VI have not been satisfied at or prior
to the Closing, or (iv) by Xx. Xxxxxxx if the conditions stated in Article VII
have not been satisfied at or prior to the Closing.
(b) If the IPO is not successfully completed within six (6) months of
this Agreement, this Agreement may be terminated by OMEGA or Xx. Xxxxxxx upon
written notice to the other party, and if so terminated, all obligations of the
parties hereunder shall terminate without any further liability of either party
to the other, except that each party shall remain obligated in respect of the
provisions of Section 10.3 and 10.7 which shall survive any such termination.
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10.2 Survival of Warranties and Other Obligations. All representations,
warranties, agreements, covenants and obligations herein or in any schedule,
exhibit, certificate or financial statement delivered by either party to the
other party incident to the transactions contemplated hereby are material, shall
be deemed to have been relied upon by the other party and shall survive the
Closing regardless of any investigation and shall not merge in the performance
of any obligation by either party hereto.
10.3 Fees and Expenses. Each of the parties will bear its or his own
expenses in connection with the negotiation and the consummation of the
transactions contemplated by this Agreement.
10.4 Notices. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram or facsimile transmission) addressed as provided below and if either
(a) actually delivered at said address, or (b) in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mail, postage prepaid and registered or certified, return receipt
requested, or sent by reputable overnight courier:
If to Xx. Xxxxxxx, to:
Xxxxx X. Xxxxxxx, D.D.S.
6325 Topanga Canyon Boulevard, No. 424
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
If to the OMEGA, to:
Omega Orthodontics, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of
delivery thereof.
10.5 Entire Agreement. This Agreement (including all exhibits or
schedules appended to this Agreement and all documents delivered pursuant to the
provisions of this Agreement, all of which are hereby incorporated herein by
reference) together with the Management Services Agreement and the Stock
Put/Call Option and Successor Designation Agreement (including all exhibits and
schedules thereto), taken together, constitute the entire agreement between the
parties, and all promises, representations, understandings, warranties and
agreements with reference to the subject matter hereof and inducements to the
making of this Agreement relied upon by my party hereto, have been expressed
herein or therein.
10.6 Binding Agreement, Successors. This Agreement shall be binding
upon, and shall be
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enforceable by and inure to the benefit of, the parties named herein and their
respective successors and assigns; provided, however, that this Agreement may
not be assigned by any of the parties without the prior written consent of all
the other parties.
10.7 Confidentiality. As used herein, "Confidential Information" means
any information or data that a party has acquired from another party that is
confidential or not otherwise available to the public, whether oral or written,
including without limitation any analyses, computations, studies or other
documents prepared from such information or data by or for the directors,
officers, employees, agents or representatives of such party (collectively, the
"Representatives"), but excluding information or data which (i) became available
to the public other than as a result of such party's violation of this
Agreement, (ii) became available to such party from a source other than the
other party if that source was not bound by a confidentiality agreement with
such other party and such source lawfully obtained such information or data, or
(iii) is required to be disclosed by applicable law, provided that promptly
after being compelled to disclose any such information or data, the party being
so compelled shall provide prompt notice thereof to the other party so that such
other party may seek a protective order or other appropriate remedy. Each party
covenants and agrees that it and its Representatives shall keep confidential and
shall not disclose all Confidential Information, except to its Representatives
and lenders who need to know such information and agree to keep it confidential.
Each party shall be responsible for any breach of this provision by its
Representatives. In the event that the Closing does not occur, each party will
promptly return to the other all copies of such other party's Confidential
Information.
10.8 Governing Law; Severability. This Agreement shall be deemed a
contract made under the laws of the State of Delaware and, together with the
rights and obligations of the parties hereunder, shall be construed under and
governed by the laws of such state. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof.
10.9 Referrals. Nothing in this Agreement shall be construed as an
offer or payment to the other party or any affiliate of the other party of any
cash or other remuneration whether directly or indirectly, overtly or covertly,
specifically for patient referrals or for recommending or arranging the
purchase, lease or order of any item or service. The Consideration to be
received upon consummation of the Merger represents the fair market value of the
Orthodontic Practice and is not in any way related to or dependent upon
referrals by and between OMEGA and Xx. Xxxxxxx.
10.10 Further Assurances. Following the execution of this Agreement,
Xx. Xxxxxxx and OMEGA each agrees:
(a) to deliver such other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or instruments, in
form reasonably acceptable to the party requesting the same and its counsel, as
may be reasonably necessary to carry out and/or to comply with the terms of this
Agreement, and the transactions contemplated herein;
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(b) to confer on a regular basis with the other, report on material
operational matters and promptly advise the other orally or in writing of any
change or event resulting in or which, insofar as can reasonably be foreseen
could result in, a material adverse effect on such party or which would cause or
constitute a material breach of any of the representations, warranties or
covenants of such party contained herein; and
(c) to provide the other (or its counsel) promptly with copies of all
filings made by such party with any state or federal governmental Practice in
connection with this Agreement or the transactions contemplated hereby.
10.11 Termination of Prior Agreement. OMEGA, Xx. Xxxxxxx, Xx. Xxxxx X.
Xxxxxxx D.D.S., M.S. Inc., a California professional corporation (the
"Orthodontic Entity"); and Omega Orthodontics of Woodland Hills, Inc., a
Delaware corporation to be formed and to become a wholly owned subsidiary of
OMEGA ("Acquisition") entered into an Affiliation Agreement and Agreement and
Plan of Merger (the "Original Agreement") dated as of March 31, 1997. Subsequent
to executing the Original Agreement, the parties thereto desired to modify the
structure of the transaction from a merger to an asset purchase agreement.
Neither the Orthodontic Entity or Acquisition was formed for purposes of this
Agreement, and thus neither is a party to this Agreement. OMEGA and Xx. Xxxxxxx
hereby agree that the Original Agreement is hereby terminated.
10.12 Counterparts; Section Headings; Gender. This Agreement may be
executed, accepted and delivered in any number of counterparts, but all
counterparts shall together constitute but one and the same instrument. The
underlined section headings are inserted for convenience of reference only and
are not to be construed as part of this Agreement. The use of the masculine or
neuter gender includes each of the other genders.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
D.D.S.
--------------------------------------
Printed Name: Xxxxx X. Xxxxxxx, D.D.S.
OMEGA ORTHODONTICS, INC.
By:
-----------------------------------
Printed Name: Xxxxxx X. Xxxxxxxx
Its President and Chief Executive Officer
Duly Authorized
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Exhibit A
---------
Financial Statement
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Exhibit B
---------
Purchase Note
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Exhibit C
---------
Notices
-17-
Exhibit D
---------
XXXX OF SALE AND ASSIGNMENT
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XXXX OF SALE AND ASSIGNMENT
The undersigned, Xx. Xxxxx X. Xxxxxxx, (the "Xx. Xxxxxxx") for good and
valuable consideration the receipt of which is hereby acknowledged, hereby
sells, assigns, transfers, delivers and conveys to OMEGA Orthodontics, a
Delaware corporation, having a usual place of business in Acton, California (the
"OMEGA"), all of his right, title and interest in and to the assets of the
Orthodontic Practice operated by Xx. Xxxxxxx at 0000 Xxxxxxx Xxxxxx Xxxxxxxxx,
Xx. 000, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000, wheresoever situated and whether or
not specifically referred to herein (such assets and rights of Xx. Xxxxxxx are
collectively referred to as the "Assets"), excepting therefrom the assets listed
on Schedule I (the "Excluded Assets"), attached hereto and made a part hereof,
and including without limitation, the following Assets:
(a) a lease at 0000 Xxxxxxx Xxxxxx Xxxxxxxxx, Xx. 000, Xxxxxxxx Xxxxx,
Xxxxxxxxxx 00000, including all rights and remedies (the "Orthodontic Offices");
(b) all machinery and equipment ("Equipment"), books and records used
or owned by the Orthodontic Practice and all other tangible and intangible
personal property at or related to the Orthodontic Office, whether or not
located at the Orthodontic Office, or to the Orthodontic Practice conducted
therein, whether or not located at the Orthodontic Office;
(c) all contracts, licenses, permits, registrations, authorizations,
leases, subleases, commitments, purchase orders, contracts to purchase
materials, contracts to perform or receive services (including work in process)
and supplies, and all other agreements (whether written or oral) relating to the
Orthodontic Practice listed on the attached Exhibit Y (the "Contracts");
(d) all prepaid claims, prepaid taxes and other prepaid expense items
and deferred charges, credits, advance payments, security and other deposits
made by Xx. Xxxxxxx to any other person relating to Orthodontic Practice; or.
(e) Any rights of Xx. Xxxxxxx pertaining to any counterclaims, set-offs
or defenses he may have with respect to any of the liabilities assumed by OMEGA;
and
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(f) any other rights related in any way whatsoever to the Orthodontic
Practice or the Orthodontic Office.
Xx. Xxxxxxx represents that he has good and marketable title in fee
simple to all of the Assets, free of liens and encumbrances. All of the Assets
are in good repair, have been well maintained, substantially conform with all
applicable ordinances, regulations and zoning or other laws. The Equipment is in
good working order.
OMEGA assumes and agrees to pay, perform and discharge, and indemnify
and hold Xx. Xxxxxxx harmless from and against, the following obligations and
liabilities of Xx. Xxxxxxx, and none other: (a) obligations and liabilities
under the Lease and the Contracts arising on and after the Effective Time and
Any and all claims, liabilities, losses, costs, damages or expenses (including
reasonable attorneys' fees and expenses) resulting from or arising out of
ownership of the Assets or the operation and maintenance of the Orthodontic
Practice, or caused by or occurring upon the Assets, on and after the Effective
Time (the "Assumed Liabilities").
The assumption by OMEGA of the Assumed Liabilities shall not enlarge
any rights or remedies of any third party under any Contract with Xx. Xxxxxxx.
OMEGA agrees to indemnify, defend and hold Xx. Xxxxxxx and his employees,
harmless from and against any and all liability, loss, cost, damage and/or
expense (including, without limitation, reasonable attorneys' fees and costs)
pertaining to the Assumed Liabilities.
OMEGA and Xx. Xxxxxxx intend that OMEGA shall not assume or be
obligated to pay, perform or discharge any of Xx. Xxxxxxx'x obligations other
than the Assumed Liabilities. Except for the Assumed Liabilities, OMEGA and Xx.
Xxxxxxx expressly agree OMEGA is acquiring the Assets free and clear of all
liens, claims and encumbrances.
This Xxxx of Sale and Assignment is executed and delivered in
connection with an Amended and Restated Affiliation Agreement entered into by
and between the Xx. Xxxxxxx and OMEGA dated June __, 1997.
WITNESS the execution under seal this _____ day of ____, 1997.
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Schedule I
----------
Excluded Assets
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Exhibit Y
---------
List of Contracts
-22-
Exhibit E
---------
Draft Management Services Agreement and
Stock Put/Call Option and Successor Designation Agreement
-23-
Schedule 1
----------
Representations and Warranties of
Xx. Xxxxxxx to OMEGA
Xx. Xxxxxxx hereby represents and warrants to OMEGA as follows:
1. The Orthodontic Practice. The Assets of Orthodontic Practice are
owned 100% by Xx. Xxxxxxx. Xx. Xxxxxxx has the full power to conduct business as
currently conducted by the Orthodontic Practice and to own and lease the
property he purports to own.
2. Authorization of Transaction. All necessary action has been taken by
Xx. Xxxxxxx to authorize the execution of the Agreement by Xx. Xxxxxxx, and the
delivery and performance of this Agreement and the transactions contemplated
hereby, and the Agreement is the valid and binding obligation of Xx. Xxxxxxx,
enforceable against Xx. Xxxxxxx in accordance with its terms.
3. Present Compliance with Obligations and Laws. Except as disclosed on
Exhibit X attached to this Schedule, there is not: (a) a default in the
performance of any obligation, agreement or condition of any debt instrument
from Xx. Xxxxxxx which (with or without the passage of time or the giving of
notice) affords to any person the right to accelerate any material indebtedness
or terminate any right; (b) a default of or breach of (with or without the
passage of time or the giving of notice) any other contract to which Xx. Xxxxxxx
is a party or by which he assets are bound; or (d) any violation of any law,
regulation, administrative order or judicial order applicable to Xx. Xxxxxxx, or
his business or assets.
4. No Conflict of Transaction With Obligations and Laws.
(a) Neither the execution, delivery and performance of this Agreement,
nor the performance of the transactions contemplated hereby, will: (i) conflict
with or constitute (with or without the passage of time or the giving of notice)
a breach of, or default under, any debt instrument to which Xx. Xxxxxxx is a
party, or give any person the right to accelerate any indebtedness or terminate
any right; (ii) constitute (with or without the passage of time or giving of
notice) a default under or breach of any other agreement, instrument or
obligation to which Xx. Xxxxxxx is a party or by which his assets are bound; or
(iv) result in a violation of any law, regulation,
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administrative order or judicial order applicable to Xx. Xxxxxxx, his business
or assets.
(b) Except as disclosed on the attached Exhibit X to this Schedule, the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby by Xx. Xxxxxxx do not require the consent, waiver, approval,
authorization, exemption of or giving of notice to any governmental authority.
5. Investigations and Licenses.
(a) Xx. Xxxxxxx has all necessary licenses to practice orthodontics in
the State.
(b) Xx. Xxxxxxx is not subject to any investigation, whether
threatened, current or pending, under which Xx. Xxxxxxx may be required to
forfeit or suffer the revocation, suspension or limitation of Xx. Xxxxxxx'x
license to practice orthodontics and Xx. Xxxxxxx is not subject to any
investigation, whether threatened, current or pending by a commercial
third-party payor.
6. Financial Statement. Attached as Exhibit A to the Agreement is the
Financial Statement of the Orthodontic Practice. To the best knowledge of Xx.
Xxxxxxx, the Financial Statement is complete and correct and fairly presents in
all material respects the financial position of the Orthodontic Practice as at
the date of such statements and the results of its operations for the period
then ended, in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby for the periods
covered thereby.
7. Property; Liens; Condition.
(a) Except as set forth on Exhibit X to this Schedule, Xx. Xxxxxxx has
good and marketable title in fee simple to all of the Assets, including without
limitation, all real and personal property, machinery and equipment used or
owned by the Orthodontic Practice (the "Equipment"), free of liens and
encumbrances (the "Property"). All the Property owned or leased by Xx. Xxxxxxx
is in good repair, has been well maintained, substantially conforms with all
applicable ordinances, regulations and zoning or other laws. The Equipment is in
good working order.
(b) No other Practice or person owns any of the assets necessary for
the
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operation of the Orthodontic Practice. The Orthodontic Practice does not operate
any of its practice through any other entities or persons.
9. Payment of Taxes. Xx. Xxxxxxx has filed all federal, state and local
income, excise or franchise tax returns, real estate and personal property tax
returns, sales and use tax returns and other tax returns required to be filed
and has paid all taxes owing except taxes which have not yet accrued or
otherwise become due for which adequate provision has been made in the Financial
Statement. All transfer, excise or other taxes payable by reason of the Asset
purchased pursuant to the Affiliation Agreement shall be paid or provided for by
Xx. Xxxxxxx after the Closing out of the Consideration to be received upon
consummation of the Affiliation Agreement.
10. Absence of Undisclosed Liabilities and Changes.
(a) As of the date of the Financial Statement, Xx. Xxxxxxx had no
liabilities of any nature, whether accrued, absolute, contingent or otherwise
(including without limitation liabilities as guarantor or otherwise with respect
to obligations of others, or liabilities for taxes due or then accrued or to
become due) relating to the Orthodontic Practice, except (i) liabilities stated
or adequately reserved against on the Financial Statement, (ii) liabilities not
in excess of $5,000 arising in the ordinary course of business since the date of
the Financial Statement, and (iii) liabilities disclosed in Exhibit X to this
Schedule. There is no fact which materially adversely affects, or may in the
future (so far as can now be reasonably foreseen) materially adversely affect,
the business, properties, operations or condition of the Orthodontic Practice
which has not been specifically disclosed herein or in Exhibit X to this
Schedule.
(b) Except as disclosed in Exhibit X to this Schedule, since the date
of the Financial Statement there has not been:
(i) any change in the financial condition, properties, assets,
liabilities, business or operations of Xx. Xxxxxxx or the Orthodontic Practice,
which change by itself or in conjunction with all other such changes, whether or
not arising in the ordinary course of business, has been materially adverse with
respect to Xx. Xxxxxxx or the Orthodontic Practice;
(ii) any mortgage, encumbrance or lien placed on any of the
Property,
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or the property subject to any lease, or which remains in existence on the date
hereof or at the time of Closing; or
(iii) any obligation or liability incurred by Xx. Xxxxxxx
relating to the Orthodontic Practice other than obligations and liabilities
incurred in the ordinary course of business and disclosed on Exhibit X attached
to this Schedule.
11. Litigation. Except for matters described on Exhibit X to this
Schedule, there is no action, suit, claim, proceeding or investigation pending
or, to the knowledge of Xx. Xxxxxxx, threatened against the Orthodontic Practice
or Xx. Xxxxxxx, at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality or governmental inquiry pending or, to the knowledge of Xx.
Xxxxxxx, threatened against or involving Xx. Xxxxxxx or the Orthodontic
Practice, and there is no basis for any of the foregoing, and there are no
outstanding court orders, court decrees, or court stipulations to which the
Orthodontic Practice or Xx. Xxxxxxx is a party which question this Agreement or
affect the transactions contemplated hereby, or which will result in any
materially adverse change in the business, properties, operations, prospects,
assets or in the condition, financial or otherwise, of Xx. Xxxxxxx or the
Orthodontic Practice.
12. Insurance. Xx. Xxxxxxx has possessed adequate occurrence
Professional liability coverage for the five (5) years prior to the date of this
Agreement protecting the Orthodontic Practice and Xx. Xxxxxxx from any
professional malpractice liability that might arise because of the Orthodontic
Practice's or Xx. Xxxxxxx'x practice activities over the preceding five (5)
years. Prior to the Closing, the New PC shall have obtained and shall continue
to maintain, at its cost, Occurrence Medical Malpractice Liability Insurance for
Xx. Xxxxxxx and the New PC. The Orthodontic Practice possesses adequate
insurance coverage for its Property.
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EXHIBIT X
---------
Exceptions to Representations and
Warranties of Xx. Xxxxxxx and
Orthodontic Practice to OMEGA
-28-
Schedule 2
----------
Representations and Warranties of
OMEGA to Xx. Xxxxxxx
OMEGA hereby represents and warrants to Xx. Xxxxxxx as follows:
1. Organization of OMEGA. That it is a corporation duly organized,
validly existing and in good standing under the laws of Delaware with full
corporate power to own or lease its properties and to conduct its business in
the manner and in the places where such properties are owned or leased or such
business is conducted by it.
2. Authorization of Transaction. All necessary action, corporate or
otherwise, has been taken by it to authorize the execution, delivery and
performance of this Agreement, and this Agreement is a valid and binding
obligation of it enforceable against it in accordance with its terms, subject to
laws of general application affecting creditor's rights generally.
3. Litigation. There is no litigation pending or, to its knowledge,
threatened against it which would prevent or hinder the consummation of the
transactions contemplated by this Agreement.
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