EXHIBIT 2.13
AFFILIATION AGREEMENT AND AGREEMENT AND PLAN OF MERGER
THIS AFFILIATION AGREEMENT AND AGREEMENT AND PLAN OF MERGER
is entered into as of the 9th day of January, 1998, by and among
Omega Orthodontics of Woodland Hills , Inc., a Delaware
corporation ("Subsidiary" or "Surviving Entity"); Omega
Orthodontics, Inc., a Delaware corporation ("OMEGA"), Xxxxxx X.
Xxxxxxx, D.D.S. ("Xx. Xxxxxxx") and Xxxxx X. Xxxxxxx, D.D.S.
("Xx. Xxxxxxx") who are duly licensed to practice orthodontics in
the State of California (the "State"); and Omega Orthodontics of
Reseda, Inc., a Delaware corporation (the "MSO").
RECITALS
A. OMEGA and its subsidiaries, including the Subsidiary,
provide 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. The MSO provides management services to Xxxxx X.
Xxxxxxx, D.D.S., M.S., Inc., a California professional dental
corporation (the "Orthodontic Entity"), which owns and operates
an orthodontic practice (the "Practice") with offices located at
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000 (the
"Orthodontic Offices") and furnishes orthodontic care to the
general public through the services of Xx. Xxxxxxx affiliated
with the Orthodontic Entity.
C. Xx. Xxxxxxx and Xx. Xxxxxxx presently hold 100% of the
issued and outstanding capital stock of the MSO (the issued and
outstanding capital stock is hereafter referred to herein as the
"Interests") and Xx. Xxxxxxx presently holds 100% of the issued
and outstanding capital stock of the Orthodontic Entity.
D. OMEGA has conducted a review of the Practice, and has
reviewed the unaudited financial and operations statement of the
practice provided by Xx. Xxxxxxx and Xx Xxxxxxx (the "Financial
Statement"), a copy of which is attached hereto as Exhibit A .
Based on its review of the Practice and the Financial Statement,
OMEGA has issued the report (the "Report"), a copy of which has
been furnished to the Orthodontic Entity. The Orthodontic Entity
and Xx. Xxxxxxx have reviewed the Report and OMEGA's literature,
and agree with the Report and the concepts of OMEGA's Exceptional
Practice.
E. Subject to the terms and conditions of this Agreement,
OMEGA, Xx. Xxxxxxx and Xx. Xxxxxxx have determined that it is in
the best interests of each to effect a merger of the MSO with and
into the Subsidiary (the "Merger") as provided in Section 2.1
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 1.
MERGER
a. Merger; Consideration and Payment.
i. At the Effective Time (as hereinafter defined) and
subject to the terms and conditions hereinafter set forth, the
parties hereto agree to cause the Merger to be consummated by
filing with the Delaware Secretary of State and the State
Secretary of State (if required) a Certificate of Merger (the
"Certificate of Merger") in the form required by applicable law,
duly executed and acknowledged by the Surviving Entity, and
taking all such further actions as may be required by law to make
the Merger effective. The Merger shall become effective upon the
filing of the Certificate of Merger with the Delaware Secretary
of State and the State Secretary of State (if required) (the
"Effective Time"), and the Subsidiary will be the surviving
entity.
ii. At the Effective Time, the Interests of the MSO
outstanding immediately prior to the Effective Time shall, on
such date, by virtue of the Merger and upon surrender to OMEGA of
the certificates therefor, duly endorsed and transferable, 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, be converted into the right to
receive an aggregate consideration (the "Consideration") of:
(1) Ninety Thousand Dollars ($90,000) in cash
(the "Cash Component");
(2) One Hundred and Eighty Thousand Dollars
($180,000) to be represented by issuance to Drs. Xxxxxxx and
Xxxxxxx of shares of OMEGA common stock ("OMEGA Stock") based on
a value per share equal to the average daily closing sales price
per share of OMEGA common stock for each business day (Monday
through Friday, not including legal holidiays) of the calendar
week ending on the Friday immediately preceding the Closing Date
(the "Stock Component"), which shall thereupon be issued to Drs.
Xxxxxxx and Xxxxxxx, fully paid and nonassessable.
iii. The Cash Component shall be allocated and paid,
$67,500 to Xx. Xxxxxxx and $22,500 to Xx. Xxxxxxx. The stock
component shall be allocated and paid $83,000 to Xx. Xxxxxxx and
$97,000 to Xx. Xxxxxxx.
b. Adjustment and Audit.
i. The Consideration is based on the value of the
Interests as determined by OMEGA from the information set forth
in the Financial Statement. At OMEGA's option, OMEGA will cause
an audit (the "Audit") of the Financial Statement and the books
and records of the Orthodontic Entity to be completed prior to
Closing to confirm the accuracy and completeness of the
information in the Financial Statement.
ii. The Consideration shall be subject to adjustments
at Closing for: (i) prepaid and underpaid rent and other lease
obligations, if any 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 MSO which have accrued
prior to the Effective Time and which remain unpaid as of such
time (the "Accounts Payable").
iii. The adjustments to the Consideration, if any,
shall be applied in the following order of priority: first to the
Cash Component, and the balance, if any, to the Stock Component.
c. 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 Lewitt, Hackman, et al., 00000 Xxxxxxx Xxxxxxxxx, 00xx
Xxxxx, Xxxxxx, Xxxxxxxxxx 00000 on January 9, 1998, or at such
other place, date or time as may be fixed by mutual agreement of
the parties.
d. Filing Certificate of Merger. Contemporaneous with the
Closing, a duly executed Certificate(s) of Merger shall be filed
with the Delaware Secretary of State and the State Secretary of
State (if required).
e. Delivery of Records, Contracts, Interests. At the
Closing Drs. Xxxxxxx and Xxxxxxx shall deliver or cause to be
delivered to the Subsidiary:
i. all of the MSO's minute books, stock records and
other company books and records and the MSO's leases, contracts,
employment agreements, non-compete agreements, commitments and
rights, with such consents to the Merger as are necessary to
assure the Subsidiary of the full benefit of the same.
ii. Evidence of malpractice insurance coverage for
Xxxxxx X. Xxxxxxx, D.D.S., Inc. for the current and five (5)
prior years.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
The Representations and Warranties of Xx. Xxxxxxx, Xx.
Xxxxxxx and the MSO in the attached Schedule 1 are hereby
incorporated as if fully set forth herein. The Representations
and Warranties of OMEGA and the Subsidiary 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 3.
COVENANTS OF XX. XXXXXXX, XX. XXXXXXX,
THE MSO AND THE ORTHODONTIC ENTITY
Xx. Xxxxxxx, Xx. Xxxxxxx, the MSO and the Orthodontic Entity
hereby covenant and agree with OMEGA as follows:
a. Conduct of Business. Between the date of this
Agreement and the Closing, they will do the following, unless
OMEGA shall otherwise consent in writing:
i. conduct the business of the Orthodontic Entity and
the MSO 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;
ii. 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 Interests, the property
or other assets of the MSO or the Orthodontic Entity;
iii. refrain from incurring any contingent or fixed
obligations or liabilities except those that are usual and normal
in the ordinary course of business;
iv. refrain from making any change or incurring any
obligation to make a change in its Charter or By-laws of the
Orthodontic Entity or the MSO (certified copies of which are
attached hereto as Exhibit C) or authorized or issued capital
stock, except as contemplated by this Agreement;
v. refrain from declaring, setting aside or paying
any dividend or making any other distribution in respect of
capital stock, or making any direct or indirect redemption,
purchase or other acquisition of capital stock, of the MSO or the
Orthodontic Entity;
vi. use their best efforts to keep intact their
business organization, to keep available its present agents and
employees and to preserve the goodwill of all patients,
suppliers, and others having business relations with it;
vii. not commit or fail to commit any act which would
cause Xx. Xxxxxxx, Xx. Xxxxxxx or the Orthodontic Entity to
suffer the revocation, suspension or limitation of Xx. Xxxxxxx'x,
Xx. Xxxxxxx'x or the Orthodontic Entity's license to practice
dentistry.
viii. permit OMEGA and its authorized
representatives to have full access to all the properties,
assets, records, tax returns, company records, contracts and
documents of the Orthodontic Entity and the MSO and furnish to
OMEGA or its authorized representatives such financial and other
Information with respect to their business or properties as OMEGA
may from time to time reasonably request.
b. Authorization from Others. Prior to the Closing, they
will have obtained all assignments, authorizations, consents and
permits of others required to permit the consummation by Xx.
Xxxxxxx, Xx. Xxxxxxx, the MSO and the Orthodontic Entity of the
transactions contemplated by this Agreement.
c. 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, they shall give detailed written notice
thereof to OMEGA and shall use their best efforts to prevent or
promptly remedy the same.
d. Consummation of Agreement. Each shall use his, her or
its 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 4.
COVENANTS OF OMEGA
OMEGA each hereby covenants and agrees with Xx. Xxxxxxx, Xx.
Xxxxxxx, the MSO and the Orthodontic Entity as follows:
a. Authorization from Others. Prior to the Closing, OMEGA
will have obtained all authorizations, consents and permits of
others required to permit the consummation by it of the
transactions contemplated by this Agreement.
b. Consummation of Agreement. OMEGA 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.
ARTICLE 5.
CONDITIONS TO OBLIGATIONS OF OMEGA AND THE SUBSIDIARY
The obligations of OMEGA and the Subsidiary 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 V will have been accomplished.
a. Representations; Warranties; Covenants. Each of the
representations and warranties of the Orthodontic Entity, the
MSO, Xx. Xxxxxxx and Xx. Xxxxxxx contained in Schedule 1 shall be
true and correct as though made on and as of the Closing, and Xx.
Xxxxxxx, Xx. Xxxxxxx, the MSO and the Orthodontic Entity shall
have performed all of their or its obligations hereunder which by
the terms hereof are to be performed on or before the Closing.
b. Orthodontic Entity. Xx. Xxxxxxx shall have formed the
Orthodontic Entity under the laws of the State in order to
conduct the Practice through the Orthodontic Entity. 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 the Orthodontic Entity; and (ii) a copy of the
resolutions adopted by the board of directors and stockholders of
the Orthodontic Entity authorizing and approving the Management
Services Agreement and the Stock Put/Call Option and Successor
Designation Agreement.
c. Other Agreements. Xx. Xxxxxxx and Xx. Xxxxxxx shall
have executed and delivered, or shall have caused the Orthodontic
Entity and deliver, to the MSO Management Services Agreements
having substantially the terms and conditions of the form hereof
collectively attached hereto as Exhibit D.
d. 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.
e. Notices. The Orthodontic Entity shall, at OMEGA's
expense, notify all of its patients and obligors of accounts
receivable, and third party payors and others designated by OMEGA
of the Merger and the other transactions contemplated hereunder
pursuant to notices substantially in the form collectively
attached hereto as Exhibit B.
f. Financial Condition. The financial condition of the
Orthodontic Entity and the MSO 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 Entity or the MSO , nor any material loss or
damage to its assets, whether or not insured, which materially
affects the ability of Orthodontic Entity or the MSO to conduct
its business. The Orthodontic Entity shall have delivered to
OMEGA a certificate, dated the date of Closing, to 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.
g. 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, Xx. Xxxxxxx, the MSO and
the Orthodontic Entity 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 Entity and the MSO or in the
condition or prospects (financial or otherwise) of the assets,
properties, operations, patients, employees or equipment of the
business of the Orthodontic Entity and the MSO from the
information provided prior to the date hereof. As used herein,
Due Diligence shall mean, without limitation, the results of the
Audit of the Financial Statement and of all other matters
(financial or otherwise) related to, or otherwise deemed material
by OMEGA, regarding Xx. Xxxxxxx, Xx. Xxxxxxx, the MSO and the
Orthodontic Entity, 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.
h. Performance of Letter of Intent. Xx. Xxxxxxx and Xx.
Xxxxxxx shall have duly performed their obligations under
Paragraphs 2, 3, 4, 5 and 7 of that certain Letter of Intent by
and among Xx. Xxxxxxx and Xx. Xxxxxxx, dated October 30, 1997
(the "Letter of Intent").
ARTICLE 6.
CONDITIONS TO OBLIGATIONS OF THE
ORTHODONTIC ENTITY AND XX. XXXXXXX
The obligations of the Orthodontic Entity, the MSO, Xx.
Xxxxxxx and 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 dVI will have been accomplished.
a. 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 OMEGA shall have performed all of its obligations hereunder
which by the terms hereof are to be performed on or before the
Closing.
b. 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 and Xx. Xxxxxxx is likely to result in the restraint or
prohibition of the consummation of any material transaction
contemplated hereby.
ARTICLE 7.
OBLIGATIONS AFTER CLOSING
a. OMEGA Exceptional Practice and the Report Suggestions.
On and after the Closing, Xx. Xxxxxxx agrees to cause the
Orthodontic Entity to implement the suggestions in the Report and
the concepts of OMEGA's Exceptional Practice.
b. Books and Records. OMEGA shall permit Xx. Xxxxxxx and
Xx. Xxxxxxx, their accountants and attorneys, reasonable access
to such books and records for the purpose of preparing such tax
returns of Xx. Xxxxxxx and Xx. Xxxxxxx as may be required after
the Closing and for other proper purposes approved by OMEGA.
c. 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 Orthodontic Entity to suffer the revocation,
suspension or limitation of Xx. Xxxxxxx'x the Orthodontic
Entity's license.
ARTICLE 8.
INDEMNIFICATION
a. Indemnification By Drs. Xxxxxxx and Xxxxxxx. Subject
to the limitations set forth in Section 8.3, Xx. Xxxxxxx and Xx.
Xxxxxxx jointly and severally agree to defend, indemnify and hold
OMEGA and the Subsidiary 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 or the Subsidiary based upon a breach of any
representation, warranty or covenant made by the Orthodontic
Entity, the MSO, Xx. Xxxxxxx or 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.
b. Indemnification By OMEGA. Subject to the limitations
set forth in Section 9.3, OMEGA agrees to defend, indemnify and
hold Xx. Xxxxxxx and 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 and 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.
c. Exclusions. Notwithstanding Sections 8.1 and 8.2:
i. no indemnification shall be payable to the extent
any claim is covered by insurance; and
ii. no indemnification shall be payable with respect
to claims asserted more than five (5) years after the Closing.
d. 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.
e. Payment of Claims; Alternative Dispute Resolution.
i. Indemnification claims by OMEGA or the Subsidiary
shall be paid or otherwise satisfied by Xx. Xxxxxxx or Xx.
Xxxxxxx, within 30 days after notice thereof is given by OMEGA
or the Subsidiary, respectively. In the event Xx. Xxxxxxx or Xx.
Xxxxxxx indicates in a writing delivered to OMEGA that either
disputes the nature or amount of the claim, the dispute shall,
upon the election of any party hereto after said 30-day period,
be settled in accordance with Section 8.5(b).
ii. If a dispute arises under this Agreement that
cannot be resolved informally by the parties, any party may
invoke the procedures set forth in Exhibit E hereto and the
parties agree to use these procedures, except paragraph (c) of
this Section 8.5, prior to any party pursuing other available
remedies. The parties will meet and attempt in good faith to
resolve any controversy or claim arising out of or relating to
this Agreement.
iii. Notwithstanding anything in this Section 8.5 to
the contrary, nothing shall preclude any party from seeking a
preliminary injunction or other provisional relief, either prior
to or during the proceeding provided for in this section, if in
its judgment such action is necessary to avoid irreparable damage
or to preserve the status quo.
ARTICLE 9.
MISCELLANEOUS
a. Termination. 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 or Xx. Xxxxxxx if the conditions stated in
Article VII have not been satisfied at or prior to the Closing.
b. 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.
c. 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.
d. 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 and the Orthodontic Entity, to:
Xxxxxx X. Xxxxxxx, D.D.S.
000 Xxxxx Xxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000
If to Xx. Xxxxxxx, to:
Xxxxx X. Xxxxxxx, D.D.S.
0000 Xxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
If to 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.
e. 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 Letter of Intent, 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.
f. Binding Agreement, Successors. This Agreement shall be
binding upon, and shall be 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.
g. 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.
h. 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.
i. 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 MSO and is not in any way
related to or dependent upon referrals by and between OMEGA, the
Subsidiary and Xx. Xxxxxxx or Xx. Xxxxxxx.
j. Further Assurances. Following the execution of this
Agreement, Xx. Xxxxxxx, Xx. Xxxxxxx, Orthodontic Entity, the MSO,
the Subsidiary and OMEGA each agrees:
i. 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;
ii. 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
iii. to provide the other (or its counsel) promptly
with copies of all filings made by such party with any state or
federal governmental entity in connection with this Agreement or
the transactions contemplated hereby.
k. 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.
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.
/s/ Xxxxxx X. Xxxxxxx, D.D.S /s/ Xxxxx X.
Xxxxxxx, D.D.S .
Xxxxxx X. Xxxxxxx, D.D.S. Xxxxx X. Xxxxxxx,
D.D.S.
XXXXXX X. XXXXXXX, INC. OMEGA ORTHODONTICS, INC.
By:/s/ Xxxxxx X. Xxxxxxx, D.D.S. By:/s/ Xxxxxx X.
Xxxxxxxx
Xxxxxx X. Xxxxxxx, D.D.S. Xxxxxx X.
Xxxxxxxx
Its President Its President
and Chief Executive Officer
Duly Authorized Duly Authorized
OMEGA ORTHODONTICS OF OMEGA ORTHODONTICS OF
WOODLAND HILLS, INC. RESEDA, INC.
By/s/ Xxxxxx X. Xxxxxxxx By:/s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx Xxxxxx X.
Xxxxxxxx
Its President Its President
and Chief Executive Officer
Duly Authorized Duly Authorized
Exhibit A
Financial Statement
Exhibit B
Notices
Exhibit C
Orthodontic Entity's Charter and
By-Laws
Exhibit D
Draft Management Services Agreements and
Stock Put/Call Option and Successor Designation Agreement
Exhibit E
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
A. Method of Invoking ADR Procedures
1. These procedures may be invoked by any party to an
agreement which incorporates these procedures by giving written
notice to the other of the dispute and designating a person with
decision-making authority (the "representative") to act on behalf
of the disputing party regarding the dispute. The other party
shall be required to respond to the disputing party's notice
within five (5) business days by designating in writing its own
representative. A party may choose more than one person to
represent it. If a party appoints only one representative, one
or more of its officers may nonetheless attend such meetings.
2. The parties, each acting through its representative,
shall meet at a mutually acceptable time and place within five
business days after the non-disputing party designates its
representative to the other. At that meeting, the parties shall
attempt in good faith to negotiate a resolution of the dispute,
or failing that, to agree on a method for resolving the claim or
dispute.
3. If, within ten (10) business days after the first
meeting or within such longer period of time as the parties may
mutually agree, the parties have not succeeded in negotiating a
resolution of the claim or dispute or agreeing on a dispute
resolution mechanism, they shall submit the dispute to mediation
in accordance with the procedures set forth herein.
4. The parties will jointly appoint a mutually acceptable
mediator to mediate the dispute. If the parties are unable to
agree on a mutually acceptable mediator within five (5) days
after the conclusion of the negotiations described in paragraph 3
above, then the parties shall select a neutral third party with
the assistance of the American Arbitration Association, unless
the parties agree otherwise in finding a mutually acceptable
mediator.
5. Each party to a dispute shall bear an equal share of
the fees and costs of the mediator and any fees and costs of the
American Arbitration Association.
6. The parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of thirty
(30) days from appointment of a mediator by any of the parties or
the American Arbitration Association.
B. Mediation procedures
1. The mediator shall be neutral and impartial.
2. The mediator shall control the procedural aspects of
the mediation. The parties will cooperate fully with the
mediator.
(a) The mediator is free to meet and
communicate separately with each party.
(b) The mediator will decide when to
hold joint meetings with the parties and when to
hold separate meetings. There shall be no
stenographic record of any meeting. Formal rules
of evidence will not apply.
(c) The mediator may request that there
be no direct communication between the parties or
between their attorneys without the concurrence of
the mediator.
3. Each party may be represented by more than one person,
e.g., one or more of its officers and an attorney. Each party
will have a representative fully authorized to negotiate a
settlement of the dispute present.
4. The process will be conducted expeditiously.
5. The mediator will not transmit information received
from any party to another party or any third person unless
authorized to do so by the party transmitting the information.
6. The entire process is confidential. The parties and
the mediator will not disclose information regarding the process,
including settlement terms, to third persons, unless the parties
otherwise agree. The process shall be treated as a compromise
negotiation for purposes of the Federal Rules of Evidence and
state rules of evidence.
7. The parties will refrain from pursuing administrative
and/or judicial remedies during the mediation process, except as
otherwise expressly provided in the agreement which incorporates
these procedures.
8. Unless all parties and the mediator otherwise agree in
writing,
(a) The mediator will be disqualified
as a witness, consultant or expert in any pending
or future investigation, action or proceeding
relating to the subject matter of the mediation
(including any investigation, action or proceeding
which involves persons not party to this
mediation); and
(b) The mediator and any documents and
information in the mediator's possession will not
be subpoenaed in any such investigation, action or
proceeding, and all parties will oppose any effort
to have the mediator and documents subpoenaed.
9. If the dispute goes into arbitration, the mediator
shall not serve as an arbitrator, unless the parties and the
mediator otherwise agree in writing.
10. The mediator, if a lawyer, may freely express views to
the parties on the legal issues of the dispute.
11. The mediator shall not be liable for any act or
omission in connection with the mediation.
12. The mediator may withdraw at any time by written notice
to the parties (i) for overriding personal reasons, (ii) if the
mediator believes that a party is not acting in good faith, or
(iii) if the mediator concludes that further mediation efforts
would not be useful.
C. Binding Arbitration
If the parties do not resolve the dispute through mediation
within the period provided in Part A above, the parties shall
submit the matter to binding arbitration in Los Angeles,
California before a qualified sole arbitrator in accordance with
the then current commercial arbitration rules of the American
Arbitration Association. The sole arbitrator shall be agreed
upon by the parties within twenty (20) days after either party
elects to submit any issue to arbitration or, failing that, shall
be selected by the American Arbitration Association. A qualified
arbitrator is one who is familiar with the principal subject
matter of the issues to be arbitrated such as by way of example,
healthcare services industry matters, management consulting
services generally or business law/corporate matters generally.
Judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction. The arbitrator shall not have
the authority to award multiple, punitive or consequential
damages under any circumstances.
Schedule 1
Representations and Warranties of
Xx. Xxxxxxx, Xx. Xxxxxxx, the MSO and Orthodontic Entity to OMEGA
Each of the Orthodontic Entity, the MSO, Xx. Xxxxxxx and Xx.
Xxxxxxx, individually, hereby represent and warrant to OMEGA and
the Subsidiary as follows; provided however, that each such
party's representations and warranties contained herein relate
only to those matters which apply to such party; and further
provided that the representations and warranties of the MSO
contained herein are made by each of Xx. Xxxxxxx and Xx. Xxxxxxx
on behalf of the MSO:
1. Organization and Qualification of the Orthodontic
Entity. The Orthodontic Entity is a duly formed and organized
professional corporation under the laws of the State. The
Orthodontic Entity is a legally existing professional corporation
under the State Professional Corporation Act (the "Act") and no
event has occurred which alone or after the passage of time would
result in the dissolution of the Orthodontic Entity. The
Orthodontic Entity has the full power to conduct its business as
currently conducted and to own and lease the property it purports
to own. The copies of any articles of organization or
incorporation and by-laws of the Orthodontic Entity which are
currently in effect, and all amendments thereto (collectively,
the "Charter and By-Laws"), certified by Xx. Xxxxxxx, attached
hereto as Exhibit C are complete and correct.
2. Authorization of Transaction. All necessary action,
company or otherwise, has been taken by the Orthodontic Entity 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 the Orthodontic Entity, Xx. Xxxxxxx and Xx.
Xxxxxxx, enforceable against the Orthodontic Entity, Xx. Xxxxxxx
and 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) any violation of the Charter or By-Laws; (b) a default in the
performance of any obligation, agreement or condition of any debt
instrument from Xx. Xxxxxxx, Xx. Xxxxxxx, or the Orthodontic
Entity 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; (c) 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, Xx. Xxxxxxx, or
the Orthodontic Entity is a party or by which their assets are
bound; or (d) any violation of any law, regulation,
administrative order or judicial order applicable to Xx. Xxxxxxx,
Xx. Xxxxxxx, or the Orthodontic Entity, or their 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) constitute a breach or violation of the
Orthodontic Entity's Charter or By-Laws; (ii) 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, Xx. Xxxxxxx, or the Orthodontic Entity is a
party, or give any person the right to accelerate any
indebtedness or terminate any right; (iii) 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 the Orthodontic Entity, Xx. Xxxxxxx or Xx. Xxxxxxx is a
party or by which their assets are bound; or (iv) result in a
violation of any law, regulation, administrative order or
judicial order applicable to the Orthodontic Entity, Xx. Xxxxxxx
or Xx. Xxxxxxx, their 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 the
Orthodontic Entity do not require the consent, waiver, approval,
authorization, exemption of or giving of notice to any
governmental authority.
5. Investigations and Licenses.
(a) The Orthodontic Entity, Xx. Xxxxxxx and Xx. Xxxxxxx
have all necessary licenses to practice orthodontics in the
State.
(b) Neither the Orthodontic Entity nor Xx. Xxxxxxx nor Xx.
Xxxxxxx is subject to any investigation, whether threatened,
current or pending, under which the Orthodontic Entity, Xx.
Xxxxxxx or Xx. Xxxxxxx may be required to forfeit or suffer the
revocation, suspension or limitation of Xx. Xxxxxxx'x, Xx.
Xxxxxxx'x or the Orthodontic Entity's license to practice
orthodontics and neither the Orthodontic Entity nor Xx. Xxxxxxx
nor Xx. Xxxxxxx is 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 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 Practice as at the date of such
statement 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. Capitalization and the Interests. The authorized capital
of the MSO consists of the Interests. All of the Interests have
been validly issued and are fully paid and non-assessable. There
are no options, warrants, rights or other agreements or
commitments obligating the MSO, Xx. Xxxxxxx or Xx. Xxxxxxx to
issue or sell the Interests and there are no pre-emptive rights
with respect to any Interests. Drs. Xxxxxxx and Xxxxxxx together
are the beneficial and record owners of all of the Interests.
Xx. Xxxxxxx and Xx. Xxxxxxx together have good title to the
Interests, free and clear of any liens, encumbrances or
restrictions of any kind. The Interests are not subject to any
voting or similar agreement.
8. Property; Liens; Condition.
(a) Except as set forth on Exhibit X to this Schedule, the
Orthodontic Entity has good and marketable title in fee simple to
all of its owned real and personal property, including without
limitation, all machinery and equipment used or owned by the
Orthodontic Entity (the "Equipment") free of liens and
encumbrances (the "Property"). All the Property owned or leased
by the Orthodontic Entity 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 entity or person other than the MSO and the
Orthodontic Entity owns any of the assets necessary for the
operation of the Orthodontic Entity. The Orthodontic Entity does
not operate any of its practice through any other entities or
persons.
9. Payment of Taxes. The Orthodontic Entity 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 Merger pursuant to the Agreement shall
be paid or provided for by Drs. Xxxxxxx and Xxxxxxx after the
Closing out of the Consideration to be received upon consummation
of the Merger.
10. Absence of Undisclosed Liabilities and Changes.
(a) As of the date of the Financial Statement, the
Orthodontic Entity 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), 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, 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 Entity 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 the Orthodontic
Entity, 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 the
Orthodontic Entity;
(ii) any mortgage, encumbrance or lien placed on any
of the Interests or the Property of the Orthodontic Entity or the
Interests of the MSO, 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 the
Orthodontic Entity 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 the Orthodontic
Entity, Xx. Xxxxxxx or Xx. Xxxxxxx, threatened against or
involving the Orthodontic Entity, the MSO, Xx. Xxxxxxx 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, 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 Entity, Xx. Xxxxxxx 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, Xx. Xxxxxxx, or the Orthodontic Entity.
12. Insurance. Xxxxxx X. Xxxxxxx, D.D.S., Inc. (the "PC")
has possessed adequate occurrence professional liability coverage
for the five (5) years prior to the date of this Agreement
protecting the PC and Xx. Xxxxxxx from any professional
malpractice liability that might arise because of the PC's or Xx.
Xxxxxxx'x practice activities over the preceding five (5) years.
Prior to the Closing, the PC shall have obtained and shall
continue to maintain, at its cost, Occurrence Medical Malpractice
Liability Insurance for Xx. Xxxxxxx and the PC. The Orthodontic
Entity possesses adequate insurance coverage for its Property.
EXHIBIT X
Exceptions to Representations and
Warranties of Drs. Crowder, Feldman, the MSO and
Orthodontic Entity to OMEGA
Schedule 2
Representations and Warranties of
OMEGA to Xx. Xxxxxxx, Xx. Xxxxxxx and Orthodontic Entity
OMEGA hereby represents and warrants to the Orthodontic
Entity, Xx. Xxxxxxx and Xx. Xxxxxxx as follows:
1. Organization of OMEGA. That it and the Subsidiary are
corporations duly organized, validly existing and in good
standing under the laws of Delaware with full corporate power to
own or lease their properties and to conduct their business in
the manner and in the places where such properties are owned or
leased or such business is conducted by them.
2. Authorization of Transaction. All necessary action,
corporate or otherwise, has been taken by it and the Subsidiary
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.
