SECOND AMENDMENT TO MERGER AGREEMENT
This Second Amendment to Merger Agreement ("Amendment") is made and entered
into this 31st day of July, 1998, by and between Gentle Dental Service
Corporation, a Washington corporation ("GDSC"), Gentle Dental Merger
Corporation, a California corporation ("GD Merger"), Dedicated Dental Systems,
Inc., a California corporation ("DDS"), Xxxxxx X. Xxxxxx, D.D.S, and Xxxxxx X.
Xxxxxx.
RECITALS
The parties listed above are parties to that certain Merger Agreement dated
September 21, 1997 ("Agreement") as amended by Amendment to Merger Agreement
dated February 28, 1998 (collectively the "Agreement") pursuant to which GDSC
agreed to acquire all of the outstanding stock of DDS through a taxable stock
purchase. The parties mutually desire to make certain amendments to the
Agreement as set forth in this Second Amendment. Capitalized terms used in this
Second Amendment and not otherwise defined shall have the meanings ascribed to
such terms in the Agreement.
In consideration of the mutual covenants contained herein and in the
Agreement, the parties agree as follows:
1. The definition of "EBITDA" in Section 1.02-3 is amended to read as
follows:
"EBITDA" means the combined net income before any reduction for interest,
income taxes, depreciation or amortization of:
(a) DDS,
(b) the Professional Corporations (as defined in the Acquisition
Agreements, which term is itself defined in Section 1.03-2 below), and
(c) GDSC from the provision of services to the Professional Corporations,
excluding any allocation of GDSC corporate or regional overhead expense,
as reflected on a combined income statement prepared in conformity with
generally accepted accounting principles applied in a manner consistent with the
application of such principles to the preparation of GDSC's audited financial
statements, and excludes all revenues and expenses attributable to any dental
office other than the 15 dental offices that are either presently owned by DDS
or subject to the Acquisition Agreements. The parties understand and agree that
during the Earnout Period the business of DDS, including but not limited to the
businesses of the dental offices owned by DDS as of the Closing Date, as well as
the businesses of the four dental offices subject to the Acquisition Agreements,
will be operated in the same general manner as those businesses were operated
prior to the Closing Date.
2. Section 12.02-1 is amended to read as follows:
12.02-1 Notwithstanding any investigation by GDSC, from and after the
Closing, Shareholders shall indemnify, hold harmless and, to the extent provided
in Section 12.04-1, defend GDSC, its subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors and assigns (collectively,
"GDSC's Indemnified Persons") from and against, and reimburse each of GDSC's
Indemnified Persons with respect to, any and all losses, damages, liabilities,
costs and expenses, including interest from the date of such loss to the time of
payment, penalties and reasonable attorneys' fees (collectively, "Damages")
incurred by any of GDSC's Indemnified Persons by reason of or arising out of or
in connection with:
(a) any breach or inaccuracy of any representation or warranty of DDS
or Shareholders made in this Agreement or any Related Document;
(b) any failure by DDS or Shareholders to perform any covenant
required to be performed by them pursuant to this Agreement or any Related
Document; or
(c) any Damages arising out of claims made by Xxxxxxxxx Xxxxx, D.D.S.
or claims made with respect to taxes owed by or on account of Xx. Xxxxx, to the
extent such Damages exceed the amount paid by insurance of DDS or amounts
recovered by DDS from Xx. Xxxxx.
3. Section 12.05 is amended to read as follows:
12.05 Limitation on Indemnification Obligations. The indemnification
obligations set forth in Section 12.02 and 12.03 shall not apply unless the
total amount of Damages incurred either by GDSC's Indemnified Persons or by
Shareholders (as the case may be) exceeds $500,000 in the aggregate, as a result
of all matters giving rise to rights to indemnification under those Sections;
provided that the preceding provision shall not apply to Damages described in
Section 12.02-1(c), with respect to which GDSC shall be indemnified in full. In
the event that the amount of Damages exceeds $500,000 in the aggregate, GDSC's
Indemnified Persons or Shareholders (as the case may be) shall be entitled to
indemnification for the full amount of all Damages for which indemnification is
to be provided under Section 12.02 or 12.03, except that the indemnification
obligations set forth in Sections 12.02 or 12.03 shall not exceed $6,250,000
under either Section.
4. Except as expressly provided in this Second Amendment, the Agreement is
not otherwise modified and remains in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Second Amendment as of
the date first written above.
GDSC: GENTLE DENTAL SERVICE CORPORATION
By: X. X. XXX XXXXXX
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Title: Executive Vice President
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GD Merger: GENTLE DENTAL MERGER CORPORATION.
By: X. X. XXX XXXXXX
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Title: Executive Vice President
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DDS: DEDICATED DENTAL SYSTEMS, INC.
By: XXXXXX X. XXXXXX, D.D.S.
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Title: PRESIDENT
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The Shareholders: XXXXXX X. XXXXXX, D.D.S.
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Xxxxxx X. Xxxxxx, D.D.S.
XXXXXX X. XXXXXX
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Xxxxxx X. Xxxxxx
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