ASSET PURCHASE AGREEMENT
between
GENTLE DENTAL SERVICE CORPORATION,
GENTLE DENTAL MANAGEMENT, INC.
and
ORANGE DENTAL SERVICES
Dated June 30, 1998
TABLE OF CONTENTS
Page
----
ARTICLE I - Purchase and Sale of Assets.............................. 2
1.01 Purchase and Sale.................................. 2
1.02 Excluded Assets.................................... 3
1.03 Assumption of Liabilities.......................... 3
1.04 Purchase Price..................................... 3
1.05 Instruments of Conveyance and Transfer............. 5
1.06 Further Assurances................................. 5
1.07 Closing .......................................... 5
1.08 Sales Tax.......................................... 5
1.09 Allocation of Purchase Price....................... 5
ARTICLE II - Representations and Warranties of GD Sub and GDSC....... 5
2.01 Authorization...................................... 5
2.02 Compliance......................................... 6
2.03 Consents........................................... 6
2.04 Accuracy of Representations & Warranties........... 6
ARTICLE III - Representations and Warranties of Orange and Partners.. 6
3.01 Corporate Existence; Authority..................... 7
3.02 No Adverse Consequences............................ 7
3.03 Brokers and Finders................................ 8
3.04 Litigation......................................... 8
3.05 Compliance with Laws............................... 8
3.06 Employment Matters................................. 8
3.07 [Reserved]......................................... 10
3.08 [Reserved]......................................... 10
3.09 [Reserved]......................................... 10
3.10 [Reserved]......................................... 10
3.11 [Reserved]......................................... 10
3.12 Indebtedness....................................... 10
3.13 Other Liabilities.................................. 10
3.14 Absence of Certain Changes or Events............... 10
3.15 Leases .......................................... 11
3.16 Certain Contracts and Arrangements................. 11
3.17 Status of Contracts and Leases..................... 12
3.18 Title and Condition of Tangible Assets............. 13
3.19 Insurance.......................................... 13
3.20 Taxes .......................................... 14
3.21 No Restrictions.................................... 14
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Page
----
3.22 Permits and Licenses............................... 14
3.23 Certain Payments................................... 15
3.24 Environmental Conditions........................... 15
3.25 Consents and Approvals............................. 15
3.26 Records .......................................... 15
3.27 Reliance........................................... 16
3.28 Accuracy of Representations and Warranties......... 16
ARTICLE IV - Covenants of Orange and Partners........................ 16
4.01 Access to Properties, Books and Records............ 16
4.02 Negative Covenants................................. 16
4.03 Affirmative Covenants.............................. 17
4.04 No Negotiations With Others........................ 18
4.05 Employees.......................................... 19
4.06 Offset of Notes.................................... 19
ARTICLE V - Joint Covenants.......................................... 19
5.01 Governmental Consents.............................. 19
5.02 Best Efforts; No Inconsistent Action............... 19
ARTICLE VI - Conditions to Obligations of GD Sub..................... 19
6.01 Governmental Approvals............................. 19
6.02 Consents........................................... 20
6.03 Representations, Warranties and Covenants.......... 20
6.04 Adverse Proceedings................................ 20
6.05 No Adverse Change.................................. 20
6.06 Management Agreement............................... 20
6.07 Shares Acquisition Agreement....................... 20
6.08 Dentist Employment Agreements...................... 21
6.09 Closing and Signing of Related Transactions........ 21
6.10 Actions Satisfactory to GD Sub's Counsel........... 21
ARTICLE VII - Conditions to Obligations of Orange.................... 21
7.01 Representations, Warranties and Covenants.......... 21
7.02 Adverse Proceedings................................ 22
ARTICLE VIII - Termination........................................... 22
8.01 Right of Parties to Terminate...................... 22
8.02 Effect of Termination.............................. 22
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Page
----
ARTICLE IX - Survival; Indemnification............................... 23
9.01 Survival........................................... 23
9.02 Indemnification by Orange and Partners............. 23
9.03 Indemnification by GD Sub.......................... 24
9.04 Indemnification Procedure.......................... 24
9.05 Right of Offset.................................... 26
9.06 Rights Not Exclusive............................... 26
ARTICLE X - Confidentiality; Press Releases.......................... 26
10.1 Confidentiality.................................... 26
10.2 Press Releases..................................... 27
ARTICLE XI - Other Provisions........................................ 27
11.01 Benefit and Assignment............................. 27
11.02 Entire Agreement................................... 27
11.03 Fees and Expenses.................................. 27
11.04 Amendment, Waiver, etc............................. 28
11.05 Headings........................................... 28
11.06 Governing Law...................................... 28
11.07 Notices .......................................... 28
11.08 Breach; Equitable Relief........................... 28
11.09 Attorneys' Fees.................................... 29
11.10 Guarantee.......................................... 29
11.11 Counterparts....................................... 29
iii
INDEX OF DEFINED TERMS
Term Location of Definition
---- ----------------------
Admin Charge......................................... 1.04-3
Adjusted Cash Consideration Amount................... 1.04-1
Administrative Office................................ 1.04-3
Assets............................................... 1.01
Assumed Liabilities.................................. 1.04-2
Cash Consideration Amount............................ 1.04-1
Closing.............................................. 1.08
Closing Date......................................... 1.08
Code................................................. 3.06-2
Contracts............................................ 1.01-6
DDS.................................................. 6.09
Damages.............................................. 9.02-1
Dental Practice...................................... Introduction
Earnout Consideration................................ 1.04-3
Earnout Period....................................... 1.04-3
EBITDA............................................... 1.04-3
ERISA................................................ 3.06-2
ERISA Plans.......................................... 3.06-2
Environmental Law.................................... 3.24-2(a)
Excess Cap-ex Charge................................. 1.04-3
GD Sub............................................... Introduction
GD Sub's Indemnified Persons......................... 9.02-1
GDSC................................................. Introduction
Hazardous Substance.................................. 3.24-2(b)
Leases............................................... 1.01-5
Material Adverse Change.............................. Article III Introduction
Material Adverse Effect.............................. Article III Introduction
Net Current Assets................................... 1.05-3
Orange............................................... Introduction
Orange Assignable Option Agreement................... Introduction
Orange Management Agreements......................... Introduction
Orange's Indemnified Persons......................... 9.03-1
Partners............................................. Introduction
PDS.................................................. Introduction
Permits.............................................. 3.22
Policies............................................. 3.19
Prevailing Party..................................... 11.09
Professional Corporation............................. Introduction
Purchase Price....................................... 1.04
Purchase Price Adjustment............................ 1.05-1
Real Property........................................ 3.15
iv
Related Documents.................................... 9.01
Returns.............................................. 3.20-1
Xxxxxxxx............................................. Introduction
Tangible Personal Property........................... 1.01-2
Taxes................................................ 3.20-3
Third Party Claims................................... 9.04-1(a)
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LIST OF EXHIBITS
Exhibit Item First Reference
------- ---- ---------------
A Assumption Agreement 1.04-2
B Assignment and Xxxx of Sale 1.05
C Management Agreement 6.06
D Shares Acquisition Agreement 6.07
E Dentist Employment Agreement 6.08
LIST OF SCHEDULES
Schedule Content
-------- -------
1.02-2 Excluded Assets
1.09 Purchase Price Allocation
3.04 Litigation
3.06-2 Employee Benefits
3.06-3 Employment Manuals and Policies
3.06-4 Compensation
3.12 Indebtedness
3.13 Other Liabilities
3.15 Leases
3.16 Contracts
3.19 Insurance
3.22 Permits and Licenses
3.25 Consents and Approvals
vi
ASSET PURCHASE AGREEMENT
DATED: June 30, 1998
BETWEEN: GENTLE DENTAL SERVICE CORPORATION,
a Washington corporation
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000 "GDSC"
GENTLE DENTAL MANAGEMENT, INC.
a Delaware corporation
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000 "GD Sub"
AND: ORANGE DENTAL SERVICES
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Telecopy No.: (000) 000-0000 "Orange"
AND: Pacific Dental Services, Inc.
a California corporation ("PDS"),
and Xxxxx X. Xxxxxxxx, D.D.S. ("Xxxxxxxx") "Partners"
Partners are the owners of all of the partnership interests of Orange.
Orange provides management services to Orange Dental Office, the dental practice
located at 000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000 (the "Dental
Practice"). The Dental Practice is conducted by Xxxxx X. Xxxxxxxx, D.D.S., Inc.,
a California professional corporation (the "Professional Corporation"). Orange
is party to a management agreement with the Professional Corporation (the
"Orange Management Agreement"), and to an assignable option agreement with the
Professional Corporation and Xxxxxxxx, its sole shareholder (the "Orange
Assignable Option Agreement"). Orange desires to sell, and GD Sub desires to
purchase, substantially all of the assets associated with the Dental Practice on
the terms and conditions set forth in this Agreement.
In consideration of the mutual promises and covenants contained in this
Agreement, the parties agree as follows:
ARTICLE I
Purchase and Sale of Assets
1.01 Purchase and Sale. Subject to all the terms and conditions of this
Agreement and for the consideration herein stated, on the "Closing Date," as
that term is defined in Section 1.07, Orange agrees to sell, convey, assign,
transfer and deliver to GD Sub, and GD Sub agrees to purchase and accept from
Orange, all of the assets, properties and rights of Orange (other than the
assets specified in Section 1.02), tangible and intangible, wherever located,
that are used or useful to maintain and operate the Dental Practice, which
assets (the "Assets") shall include without limitation:
1.01-1 All patient lists, operating data and records relating to the
Dental Practice, including without limitation financial, accounting and credit
records, correspondence, budgets, engineering and facility records and other
similar documents and records;
1.01-2 All other items of tangible personal property of Orange used in
connection with or associated with the Dental Practice (the "Tangible Personal
Property"), including furniture, fixtures, equipment, supplies, inventory and
spare and replacement items therefor;
1.01-3 All accounts receivable and other receivables of Orange
associated with the Dental Practice;
1.01-4 All prepaid and deferred items of Orange relating to the Dental
Practice, including prepaid rent, insurance, taxes and unbilled charges and
deposits,
1.01-5 All leases of real or personal property to which Orange is a
party as lessee and which relate to the Dental Practice, including without
limitation all leases listed on Schedule 3.15 and all leases entered into after
the date hereof and on or before the Closing Date and expressly assumed by GD
Sub in writing on the Closing Date as provided in Section 1.04-2(d), other than
to the extent such leases have terminated, expired or been disposed of by Orange
prior to the Closing Date without breach of this Agreement (collectively, the
"Leases");
1.01-6 All rights, benefits and interests of Orange under the
contracts, agreements, commitments, understandings, purchase orders, documents
and instruments listed on Schedule 3.16 hereto, specifically including the
Orange Management Agreement and the Orange Assignable Option Agreement, and
under any contracts, agreements, commitments, understandings, purchase orders,
documents or instruments entered into between the date hereof and the Closing
Date and expressly assumed by GD Sub in writing on the Closing Date as provided
in Section 1.04-2(d), other than to the extent such items have terminated,
expired or been disposed of by Orange prior to the Closing Date without breach
of this Agreement (collectively, the "Contracts");
1.01-7 All assignable rights to all telephone lines and numbers used
in the conduct of the Dental Practice; and
2
1.01-8 All right, title and interest in and to trade names of Orange
associated with the Dental Practice.
1.02 Excluded Assets. The Assets shall not include the following:
1.02-1 Any lease not listed on Schedule 3.15 and any contract,
agreement, commitment, understanding, purchase order, document or instrument not
listed on Schedule 3.16, unless pursuant to Section 1.04-2(d) GD Sub expressly
agrees in writing on the Closing Date to assume the obligations under such
lease, contract, agreement, commitment, understanding, purchase order, document
or instrument, in which case Orange shall assign its rights and benefits
thereunder to GD Sub and the same shall be treated as a "Lease" or "Contract"
for purposes of this Agreement; and
1.02-2 The assets identified on Schedule 1.02-2.
1.03 Assumption of Liabilities. Except for the liabilities and obligations
to be assumed by GD Sub pursuant to Section 1.04-2, GD Sub will not assume and
will not be liable for any liabilities of Orange, known or unknown, contingent
or absolute, accrued or other, and the Assets shall be free of all liabilities,
obligations, liens and encumbrances. Without limiting the generality of the
foregoing and except as otherwise provided above, GD Sub will not be responsible
for any of the following:
1.03-1 Liabilities, obligations or debts of Orange, whether fixed,
contingent or mixed and whether based on events occurring before or after the
Closing Date, including without limitation those based on tort, contract,
statutory or other claims or involving fines or penalties payable to any
governmental authority;
1.03-2 Liabilities, obligations or debts of Orange for any federal,
state or local tax, including without limitation federal income taxes, state
income and excise taxes, state and local real and personal property taxes and
federal, state and local withholding and payroll taxes;
1.03-3 Liabilities or obligations of Orange to employees for salaries,
bonuses or health and welfare benefits or with respect to any profit sharing,
stock bonus, pension, retirement, stock purchase, option, bonus or deferred
compensation plan or for any other benefits or compensation (including without
limitation accrued vacation or sick leave); and
1.03-4 Liabilities or obligations of Orange for employee severance
payments or arrangements resulting from termination of Orange's employees.
1.04 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be the following:
1.04-1 The Adjusted Cash Consideration Amount payable by check on the
Closing Date with $12,898 of such amount payable by check to Union Bank of
California for the payoff amount of Orange's loan from such Bank and the balance
payable by check to Orange. The "Cash Consideration Amount" equals $719,932. The
"Adjusted Cash Consideration Amount" shall
3
equal the Cash Consideration Amount reduced by the principal amount of any debt
or capital lease obligations of Orange assumed by GD Sub.
1.04-2 The assumption by GD Sub on the Closing Date, pursuant to the
terms of an Assumption Agreement in substantially the form attached hereto as
Exhibit A, of the following liabilities of Orange (the "Assumed Liabilities"):
1.04-2(a) the accounts payable and accrued payroll and benefits
liabilities of Orange associated with the Dental Practice as of March 31, 1998
(to the extent such liabilities are not paid or discharged prior to the Closing
Date);
1.04-2(b) all liabilities of Orange associated with the Dental
Practice of a type identified in Section 1.04-2(a) and incurred in the ordinary
course of business after March 31, 1998 and on or before the Closing Date (to
the extent such liabilities are not paid or discharged prior to the Closing
Date), but specifically excluding any liabilities for brokers' and attorneys'
fees and other expenses of this transaction and accrued liabilities for taxes
based on the income or revenues of Orange;
1.04-2(c) all obligations of Orange under any of the Leases or
Contracts listed on Schedule 3.15 or Schedule 3.16 hereto or under any of the
items listed under the heading "debt to be assumed" on Schedule 3.12; and
1.04-2(d) all obligations of Orange under any lease, contract,
agreement, commitment, understanding, purchase order, document or instrument
entered into by Orange between the date of this Agreement and the Closing Date
that GD Sub, in its sole discretion, elects on the Closing Date to assume.
1.04-3 Additional payments (the "Earnout Consideration") to be paid
based on the EBITDA (as defined below) for the 36-month period (the "Earnout
Period") beginning on the first day of the first calendar month following the
Closing Date. The first payment of Earnout Consideration shall equal 4.20
multiplied by the EBITDA for the first 12 months of the Earnout Period, reduced
by the Cash Consideration Amount. The second payment of Earnout Consideration
shall equal .90 multiplied by the EBITDA for the second 12 months of the Earnout
Period. The third payment of Earnout Consideration shall equal .90 multiplied by
the EBITDA for the third 12 months of the Earnout Period. The "EBITDA" shall
mean the combined net income of (a) the Professional Corporation and (b) GD Sub
from the provision of services to the Professional Corporation, before any
reduction for interest, income taxes, depreciation or amortization, and
excluding any allocation of GD Sub corporate overhead expense, but after the
Excess Cap-ex Charge (as defined below) and the Admin Charge (as defined below),
as reflected on a combined income statement for the practice location prepared
in conformity with generally accepted accounting principles applied in a manner
consistent with the application of such principles to the preparation of GD
Sub's audited financial statements. The "Excess Cap-ex Charge" shall be an
annual charge equal to 25% of the total accumulated capital expenditures by GD
Sub at the Dental Practice after the Closing Date which in any 12-month period
exceeds 2% of the net revenue of the Dental Practice for such period. The "Admin
Charge" shall equal a pro rata portion of the sum of (a) rent reimbursed by GD
Sub to PDS for the administrative office
4
acquired by GD Sub from PDS (the "Administrative Office"), and (b) all
unreimbursed costs incurred by GD Sub at the Administrative Office, including
but not limited to employee compensation and benefits, based on the ratio of the
net revenue of the Dental Practice to the combined net revenue of all dental
practices managed by GD Sub from the Administrative Office for the relevant
period. All payments of Earnout Consideration shall be paid by check. The
calculation and payment of each payment of Earnout Consideration shall be
completed within 90 days of the completion of the applicable 12-month portion of
the Earnout Period.
1.05 Instruments of Conveyance and Transfer. The sale of the Assets, and
the conveyance, assignment, transfer and delivery of all of the Assets shall be
effected by Orange's execution and delivery to GD Sub, on the Closing Date, of a
xxxx of sale in substantially the form of the Assignment and Xxxx of Sale
attached hereto as Exhibit B.
1.06 Further Assurances. Orange and Partners agree that, at any time and
from time to time on and after the Closing Date, they will, upon the request of
GD Sub and without further consideration, take all steps reasonably necessary to
place GD Sub in possession and operating control of the Assets and will do,
execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all further acts, deeds, assignments, conveyances,
transfers, powers of attorney or assurances as reasonably required to sell,
assign, convey, transfer, grant, assure and confirm to GD Sub, or to aid and
assist in the collection of or reducing to possession by GD Sub of, all of the
Assets, or to vest in GD Sub good, valid and marketable title to the Assets.
1.07 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Stoel Rives LLP,
000 XX Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxx, at 10:00 a.m., Pacific time,
on June 30, 1998 or at another date, time and place agreed upon in writing by
the parties (the "Closing Date").
1.08 Sales Tax. Orange shall pay any sales tax owing in respect of the
purchase of the Assets. Orange shall promptly file all necessary sales tax
returns, if any, and pay all sales taxes due, if any, following the Closing
Date.
1.09 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in accordance with Schedule 1.09, and GDSC and Orange shall be
bound by that allocation in reporting the transactions contemplated by this
Agreement to any governmental authority (including without limitation the
Internal Revenue Service).
ARTICLE II
Representations and Warranties of GD Sub and GDSC
GD Sub and GDSC, jointly and severally, represent and warrant to Orange as
follows:
2.01 Authorization. Each of GD Sub and GDSC is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, with all requisite corporate power and authority to own and
operate its properties and to carry on its business as now
5
conducted. Each of GD Sub and GDSC has taken all corporate action necessary to
authorize its execution, delivery and performance of this Agreement. Each of GD
Sub and GDSC has full corporate power and authority to enter into this Agreement
and carry out the terms hereof. This Agreement has been duly executed and
delivered by GD Sub and GDSC and is binding upon and enforceable against each of
them in accordance with its terms, except as enforceability may be limited or
affected by applicable bankruptcy, insolvency, reorganization, or other laws of
general application relating to or affecting creditors' rights generally and
except as enforceability may be limited by rules of law governing specific
performance, injunctive relief or other equitable remedies.
2.02 Compliance. The execution, delivery and performance of this Agreement
by GD Sub and GDSC, the compliance by GD Sub and GDSC with the provisions of
this Agreement and the consummation of the transactions described in this
Agreement will not conflict with or result in the breach of any of the terms or
provisions of or constitute a default under:
2.02-1 the respective articles of incorporation or bylaws of GD Sub
and GDSC;
2.02-2 any note, indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which GD Sub or GDSC is a party or by
which GD Sub or GDSC is bound; or
2.02-3 any statute or any order, rule, regulation or decision of any
court or regulatory authority or governmental body applicable to GD Sub or GDSC.
2.03 Consents. No consent, approval, authorization, order, designation or
declaration of any court or regulatory authority or governmental body, federal
or other, or third person is required to be obtained by GD Sub or GDSC for the
consummation of the transactions described in this Agreement.
2.04 Accuracy of Representations & Warranties. None of the representations
or warranties of GD Sub or GDSC contains or will contain any untrue statement of
any material fact or omits or misstates a material fact necessary to make the
statements contained in this Agreement not misleading. Neither GD Sub nor GDSC
knows of any fact that has resulted or that, in the reasonable judgement of GD
Sub or GDSC will result, in any material adverse change in the business, results
of operation, financial condition or prospects of GD Sub or GDSC that has not
been set forth in this Agreement or in GDSC's filings with the Securities and
Exchange Commission.
ARTICLE III
Representations and Warranties of Orange and Partners
As used in this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, results of operations, financial position,
assets or prospects of Orange, the Dental Practice or any of them which shall in
any event include any adverse effect on the assets, revenue or net income of
Orange in excess of $15,000; and "Material Adverse Change" means any change that
has resulted,
6
will result or is likely to result in a Material Adverse Effect. Orange and
Partners represent and warrant to GD Sub as follows:
3.01 Corporate Existence; Authority.
3.01-1 The Partners have full power and authority to enter into this
Agreement and carry out its terms. PDS has taken all corporate action necessary
to authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly and validly executed and delivered by the Partners and
is binding upon and enforceable against each Partner in accordance with its
terms, except as enforceability may be limited or affected by applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the rights of creditors and except as enforceability
may be limited by rules of law governing specific performance, injunctive relief
or other equitable remedies. The Professional Corporation is a professional
corporation duly organized, validly existing and in good standing under the laws
of the State of California, and the Professional Corporation has all necessary
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now conducted and as proposed to be
conducted.
3.01-2 Orange is a partnership duly organized and validly existing
under the laws of California and has the power to own and lease its properties
and carry on its business as now being conducted. The Partners hold all of the
partnership interests of Orange and no person has any right to become a partner
of Orange or to acquire any interest in Orange. Orange has full power and
authority to enter into this Agreement and to carry out its terms. This
Agreement has been duly and validly executed and delivered by Orange and is
binding upon and enforceable against Orange in accordance with its terms, except
as enforceability may be limited or affected by applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the rights of creditors and except as enforceability may be limited by
rules of law governing specific performance, injunctive relief or other
equitable remedies.
3.02 No Adverse Consequences. Neither the execution and delivery of this
Agreement by Orange or Partners nor the consummation of the transactions
contemplated by this Agreement will
3.02-1 result in the creation or imposition of any lien, charge or
encumbrance on any of Orange's or the Professional Corporation's assets or
properties,
3.02-2 violate or conflict with any provision of Orange's
organizational documents,
3.02-3 violate any law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority applicable to Orange,
Partners, the Professional Corporation or any of them, assuming that the
agreements to be entered into between GD Sub and the Professional Corporation do
not violate applicable laws, or
3.02-4 either alone or with the giving of notice or the passage of
time or both, conflict with, constitute grounds for termination or acceleration
of, result in the breach of the terms, conditions or provisions of, result in
the loss of any benefit to Orange or the Professional Corporation under or
7
constitute a default under any agreement, instrument, license or permit to which
Orange, any Partner or any Professional Corporation is a party or by which any
of them is bound, assuming that the agreements to be entered into between GD Sub
and the Professional Corporation do not violate applicable laws.
3.03 Brokers and Finders. Neither Orange nor any Partner has employed any
broker, finder or agent or dealt with anyone purporting to act in such capacity
or agreed to pay any brokerage fee, finder's fee or commission with respect to
the transaction contemplated by this Agreement.
3.04 Litigation. Except as set forth on Schedule 3.04, there is no claim,
litigation, proceeding or investigation of any kind pending or threatened by or
against Orange, or the Professional Corporation and, to the best knowledge of
Orange, there is no basis for any such claim, litigation, proceeding or
investigation.
3.05 Compliance with Laws. Except as set forth on Schedule 3.22, Orange and
the Professional Corporation have at all relevant times conducted their
businesses in compliance with their respective organizational documents and all
applicable laws and regulations. Except as set forth on Schedule 3.22, Orange
and the Professional Corporation are not in violation of any applicable laws or
regulations, other than violations which singly or in the aggregate do not, and,
with the passage of time will not, have a Material Adverse Effect. Neither
Orange nor the Professional Corporation is subject to any outstanding order,
writ, injunction or decree, and neither Orange nor the Professional Corporation
has been charged with, or threatened with a charge of, a violation of any
provision of federal, state or local law or regulation.
3.06 Employment Matters.
3.06-1 Labor Matters.
(a) Neither Orange nor the Professional Corporation is a party or
otherwise subject to any collective bargaining or other agreement governing the
wages, hours or terms of employment of its employees. Orange and the
Professional Corporation are and have been in compliance with all applicable
laws regarding employment and employment practices, terms and conditions of
employment, wages and hours and are not and have not been engaged in any unfair
labor practice.
(b) There is no (1) unfair labor practice complaint against
Orange or the Professional Corporation pending before the National Labor
Relations Board or any other governmental authority, (2) labor strike, slowdown
or work stoppage actually occurring or, to the best of the knowledge of Orange
threatened against either of them, (3) representation petition respecting any of
their employees pending before the National Labor Relations Board, or (4)
grievance or any arbitration proceeding pending arising out of or under
collective bargaining agreements applicable to any of them.
(c) Neither Orange nor the Professional Corporation has
experienced any primary work stoppage or other organized work stoppage involving
its employees in the past two years.
8
3.06-2 Employee Benefits. Schedule 3.06-2 lists all pension,
retirement, profit sharing, deferred compensation, bonus, commission, incentive,
life insurance, health and disability insurance, hospitalization and all other
employee benefit plans or arrangements (including, without limitation, any
contracts or agreements with trustees, insurance companies or others relating to
any such employee benefit plans or arrangements) established or maintained by
Orange and complete and accurate copies of all those plans or arrangements have
been provided to GD Sub. The employee pension benefit plans (within the meaning
of Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) established and maintained by Orange that are subject to
ERISA are listed separately as ERISA Plans on Schedule 3.06-2 (the "ERISA
Plans"). The ERISA Plans comply with the applicable requirements of ERISA.
Orange has received from the Internal Revenue Service a favorable determination
for each of the ERISA Plans and their related trusts that each of the ERISA
Plans is qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code") and the related trust is tax-exempt under Section 501(a) of
the Code. There has been no event subsequent to that determination that has
adversely affected the tax qualified status of the ERISA Plans or the exemption
of the related trusts other than changes in the Code that are not effective as
of the Closing Date. No "accumulated funding deficiency" as defined in Section
302(a)(2) of ERISA or Section 412(a) of the Code exists, or has existed, with
respect to any of the ERISA Plans. The present value of all accrued benefits
under each of the ERISA Plans does not exceed the value of such plan's assets,
less all liabilities other than those attributable to accrued benefits. Orange
has no "potential withdrawal liability," as defined in Section 4201 of ERISA.
None of the ERISA Plans, its related trusts or any trustee, investment manager
or administrator thereof has engaged in a nonexempt "prohibited transaction," as
such term is defined in Section 406 of ERISA and Section 4975 of the Code. There
are not and have not been any excess deferrals or excess contributions under any
ERISA Plan. Each ERISA Plan is and has been operated and administered in
conformance with the requirements of all applicable laws and regulations,
whether or not the ERISA Plan documents have been amended to reflect such
requirements. Orange has no obligation of any kind (whether under the terms of
the ERISA Plans or under any understanding with employees) to make payments
under, or to pay contributions to or in respect of, any plan or arrangement
listed on Schedule 3.06-2, or any other plan, agreement or other arrangement for
deferred compensation of employees, whether or not tax qualified, including,
without limitation, a single employer tax qualified plan, a tax qualified plan
of a controlled group of corporations, a multi-employer pension plan, a
nonqualified deferred compensation plan, an individual employment or
compensation agreement or a commitment to provide medical benefits to retirees.
3.06-3 Employment Agreements. Each of the employees of Orange and the
Professional Corporation is an "at-will" employee and, except as listed on
Schedule 3.06-3, there are no written employment, commission or compensation
agreements of any kind between Orange or the Professional Corporation and any of
their respective employees. Schedule 3.06-3 lists and includes all of Orange's
employment or supervisory manuals, employment or supervisory policies, and
written information generally provided to employees (such as applications or
notices), and true and complete copies of those manuals, policies and written
information have been provided to GD Sub. Orange does not have any agreements or
understandings with Orange's employees except as reflected in the items listed
in Schedules 3.06-2 and 3.06-3.
9
3.06-4 Compensation. Schedule 3.06-4 contains a complete and accurate
list of all employees of Orange, as of June 29, 1998, specifying their names,
hire dates, the total amount paid or payable as compensation to each such
person, and the basis of such compensation.
3.07 [Reserved]
3.08 [Reserved]
3.09 [Reserved]
3.10 [Reserved]
3.11 [Reserved]
3.12 Indebtedness. Schedule 3.12 lists all indebtedness of Orange and the
Professional Corporation as of June 30, 1998 incurred in connection with the
business, operations or assets of the Dental Practice or the repayment of which
is secured by the assets of the Dental Practice. For each item of indebtedness,
Schedule 3.12 shows the name of lender and the principal balance.
3.13 Other Liabilities. Except as listed on Schedule 3.13, neither Orange
nor the Professional Corporation has any liability or obligation (whether
absolute, accrued, contingent or other, and whether due or to become due), which
is not accrued, reserved against or disclosed in the Current Balance Sheet,
other than liabilities incurred in the ordinary course of business consistent
with past practice, which individually or in the aggregate would not have a
Material Adverse Effect.
3.14 Absence of Certain Changes or Events. Since March 31, 1998, there has
not been with respect to Orange or the Dental Practice:
3.14-1 Any Material Adverse Change or any event, occurrence,
development or state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Change;
3.14-2 Any damage, destruction or casualty loss, whether insured
against or not, to any assets or properties associated with the Dental Practice;
3.14-3 Any increase in the rate or terms of compensation payable or to
become payable by Orange to its key employees; any increase in the rate or terms
of any bonus, insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any such key employees; any special bonus or
remuneration paid; or any written employment contract executed or amended;
10
3.14-4 Any entry into any agreement, commitment or transaction
(including, without limitation, any borrowing, capital expenditure or capital
financing or any amendment, modification or termination of any existing
agreement, commitment or transaction) by Orange or the Professional Corporation,
except agreements, commitments or transactions in the ordinary course of
business and consistent with past practices or as expressly contemplated in this
Agreement;
3.14-5 Any conduct of business which is outside the ordinary course of
business or not substantially in the manner that Orange previously provided
management services to the Dental Practice;
3.14-6 Any purchase or other acquisition of property, any sale, lease
or other disposition of property, or any expenditure, except in the ordinary
course of business;
3.14-7 Any incurrence of any noncontract liability which, either
singly or in the aggregate is material to the business, results of operations,
financial condition or prospects of the Dental Practice;
3.14-8 Any encumbrance or consent to encumbrance of any property or
assets of Orange except in the ordinary course of business; or
3.14-9 Any change in the assets, liabilities, licenses, permits or
franchises of Orange, or in any agreement to which Orange is a party or is
bound, which has had or reasonably could be expected to have a Material Adverse
Effect.
3.15 Leases. Schedule 3.15 contains a complete and accurate list of all
Leases of real property used or useful in the business of Orange, including the
lease at the Dental Practice location, a description of the real property
covered thereby (the "Real Property"), the term of each Lease and the monthly
payments under the Lease. Complete and accurate copies of all Leases have been
delivered to GD Sub.
3.16 Certain Contracts and Arrangements. Schedule 3.16, which is organized
by type of agreement, contains a complete and accurate list of all Contracts of
the following types to which Orange or the Professional Corporation is a party
or by which Orange or the Professional Corporation is bound which relate to or
are associated with the Dental Practice:
3.16-1 any mortgage, note or other instrument or agreement relating to
the borrowing of money or the incurrence of indebtedness by Orange or the
Professional Corporation or Orange's guaranty of any obligation for the
borrowing of money;
3.16-2 contracts, agreements, purchase orders or acknowledgment forms
for the purchase, sale, lease or other disposition of capital assets or more
than $20,000 of other equipment or materials;
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3.16-3 contracts or agreements for the performance of services,
including but not limited to the Orange Management Agreement;
3.16-4 contracts or agreements for the joint performance of work or
services and all other partnership or joint venture agreements;
3.16-5 contracts or agreements with agents, brokers, consignees, sales
representatives or distributors relating to the sale of the services of Orange;
and
3.16-6 any other contract, instrument, agreement or obligation not
described on any other Schedule to which Orange or the Professional Corporation
is a party or by which either of them is bound and which contains material
unfulfilled obligations of Orange, including but not limited to the Orange
Assignable Option Agreement.
Complete and accurate copies of all Contracts have been delivered to GD Sub.
3.17 Status of Contracts and Leases.
3.17-1 Each of the Contracts and Leases listed on Schedules 3.15 and
3.16 is valid, binding and enforceable by Orange in accordance with its terms
and is in full force and effect. There is no existing default or violation by
Orange under any Contract or Lease and no event has occurred which (whether with
or without notice, lapse of time or both) would constitute a default of Orange
under any Contract or Lease. There is no pending or threatened proceeding which
would interfere with the quiet enjoyment of any Real Property of which Orange is
lessee or sublessee which is used by the Dental Practice.
3.17-2 All other parties to the Contracts and Leases have consented or
prior to the Closing will have consented (where such consent is necessary) to
the consummation of the transaction contemplated by this Agreement without
requiring modification of Orange's rights or obligations under any Contract or
Lease.
3.17-3 Orange is not aware of any default by any other party to any
Contract or Lease or of any event which (whether with or without notice, lapse
of time or both) would constitute a default by any other party with respect to
obligations of that party under any Contract or Lease, and, to the knowledge of
Orange, there are no facts that exist indicating that any of the Contracts or
Leases may be totally or partially terminated or suspended by the other parties.
3.17-4 Neither Orange nor the Professional Corporation is a party to,
nor is it bound by, any contract or agreement that Orange can reasonably foresee
will result in any material loss to Orange or the Dental Practice upon the
performance thereof (including any material liability for penalties or damages,
whether liquidated, direct, indirect, incidental or consequential), unless such
contract or agreement is terminable by Orange or the Professional Corporation on
60 or fewer days notice at any time without penalty.
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3.18 Title and Condition of Tangible Assets.
3.18-1 Orange owns all of the Tangible Personal Property except the
leased property free and clear of all mortgages, pledges, security interests,
claims, charges or other encumbrances or restrictions of any kind, except
(a) liens disclosed on the Current Balance Sheet,
(b) security interests or liens securing payment of Assumed
Liabilities or
(c) liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Current Balance Sheet).
3.18-2 Orange has good and absolute title to the Tangible Personal
Property except the leased property. No Partner, Professional Corporation or
shareholder thereof, nor any other person or entity has any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
Dental Practice, other than indirectly as a partner of Orange. The immediately
preceding sentence shall not apply to patient charts, files and patient records
and contracts for the provision of dentistry services that may be owned or held
by the Professional Corporation.
3.18-3 All Tangible Personal Property has been maintained and operated
in accordance with manufacturer's specifications and prudent industry practices,
is in a good state of maintenance and repair, ordinary wear and tear excepted,
and is adequate for the conduct of Orange's business.
3.18-4 There are no developments affecting any of the Real Property or
Tangible Personal Property pending or, to the knowledge of Orange, threatened
which might materially detract from the value of such property or assets,
materially interfere with any present or intended use of any such property or
assets or materially adversely affect the marketability of such properties or
assets.
3.18-5 At the Closing, GD Sub will acquire good title to all the
Assets, free and clear of all mortgages, pledges, security interests, claims,
charges or other encumbrances or restrictions of any kind, except for security
interests or liens securing payment of Assumed Liabilities.
3.19 Insurance. Schedule 3.19 contains a complete and accurate list of all
policies (other than the malpractice insurance policy in effect for the
Professional Corporation) of liability, fire, worker's compensation and other
forms of insurance insuring Orange, the Professional Corporation, their
respective employees, and assets or operations of the Dental Practice, setting
forth the applicable deductible amounts (all of the foregoing policies including
the malpractice insurance policy of the Professional Corporation are hereinafter
collectively defined as the
13
"Policies"). All the Policies are valid, enforceable and in full force and
effect, all premiums with respect to the Policies covering all periods up to and
including the date as of which this representation is being made have been paid
and no notice of cancellation or termination has been received with respect to
any Policy. The Policies are sufficient for compliance with all requirements of
law and of agreements to which Orange and the Professional Corporation are
parties and provide insurance for the risks and in the amounts and types of
coverage usually obtained by persons using or holding similar properties in
similar businesses. There are no unresolved claims for insurance payment under
any of the Policies. True and complete copies of the Policies and all
endorsements thereto have been delivered to GD Sub.
3.20 Taxes.
3.20-1 Returns. Orange has filed all federal, state and other returns,
reports and information returns required to be filed by it with respect to Taxes
(as defined below) (collectively, the "Returns") and has timely paid all Taxes
shown to be due on the Returns. All Returns filed are complete and accurate in
all material respects, and no additional Taxes are owed by Orange with respect
to the periods covered by the Returns. Orange has provided GD Sub with complete
and accurate copies of Orange's Returns for 1995 and 1996.
3.20-2 Taxes Paid or Reserved. All deficiencies in Taxes asserted or
assessments made by any taxing authority have been fully paid or finally
settled, excluding property taxes that are not yet due. All Taxes which Orange
or the Professional Corporation has been required to collect or withhold have
been withheld or collected and, to the extent required, have been paid to the
proper taxing authority.
3.20-3 Definition. "Taxes" means all taxes, charges, fees, levies or
other assessments including, without limitation, income, excise, property,
sales, use and franchise taxes, imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof, and
including any interest, penalties or additions.
3.21 No Restrictions. No contract or agreement to which Orange is a party
or is bound or to which any of its properties or assets is subject limits the
freedom of Orange to compete in any line of business or with any person.
3.22 Permits and Licenses. Except as set forth on Schedule 3.22, Orange,
the Professional Corporation and Xxxxxxxx hold and at all times have held, all
licenses, permits, franchises, easements and authorizations (collectively,
"Permits") necessary for the lawful conduct of the Dental Practice pursuant to
all applicable statutes, laws, ordinances, rules and regulations of all
governmental bodies, agencies and other authorities having jurisdiction over it
or any part of its operations, except where the failure to hold any Permit,
singly or in the aggregate, either alone or with the giving of notice or the
passage of time or both, would not have a Material Adverse Effect. Orange, the
Professional Corporation and Xxxxxxxx are in compliance with all the terms of
each Permit, and there are no claims of violation by any such party of any
Permit.
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3.23 Certain Payments. Neither Orange nor the Professional Corporation or
any Partner, directly or indirectly, on behalf of or with respect to the Dental
Practice or its operations made or received any payment that was not legal to
make or receive under federal, state or local laws of the United States or any
other country or territory.
3.24 Environmental Conditions.
3.24-1 Compliance. Orange has operated the Dental Practice and
maintained the Assets, including without limitation the Real Property, in
compliance with all Environmental Laws. All wastes generated in connection with
the Dental Practice are and have been transported and disposed of off site in
compliance with all Environmental Laws. Except as otherwise required for the
normal operation of the Dental Practice, no Hazardous Substance is or has been
generated, manufactured, treated, stored, transported, used or otherwise handled
on the Real Property or in connection with the Dental Practice.
3.24-2 Definitions. As used in this Agreement,
(a) "Environmental Law" means any federal, state or local
statute, ordinance or regulation pertaining to the protection of human health or
the environment and any applicable orders, judgments, decrees, permits, licenses
or other authorizations or mandates under such statutes, ordinances or
regulations, and
(b) "Hazardous Substance" means any hazardous, toxic, radioactive
or infectious substance, material or waste as defined, listed or regulated under
any Environmental Law, and includes without limitation petroleum oil and its
fractions.
3.25 Consents and Approvals. Except as set forth on Schedule 3.25, no
consent, approval or authorization of any court, regulatory authority,
governmental body, or any other entity or person not a party to this Agreement
is required for the consummation of the transactions described in this Agreement
by Orange or Partners. Orange and Partners have obtained, or shall have obtained
prior to the Closing, all consents, authorizations or approvals of any third
parties required in connection with the execution, delivery or performance of
this Agreement by Orange or Partners or the consummation of the transaction
contemplated by this Agreement. Orange has made all registrations or filings
with any governmental authority required for the execution or delivery of this
Agreement or the consummation of the transaction contemplated hereby.
3.26 Records. The books of account of Orange and the Professional
Corporation are complete and accurate in all material respects, and there have
been no transactions involving the business of Orange and the Professional
Corporation which properly should have been set forth therein and which have not
been accurately so set forth. Complete and accurate copies of such books have
been made available to GD Sub.
15
3.27 Reliance. Orange and Partners recognize and agree that,
notwithstanding any investigation by GD Sub, GD Sub is relying upon the
representations and warranties made by Orange and Partners in this Agreement.
3.28 Accuracy of Representations and Warranties. None of the
representations or warranties of Orange and Partners contains or will contain
any untrue statement of any material fact or omits or misstates a material fact
necessary to make the statements contained in this Agreement not misleading.
Orange and Partners do not know of any fact that has resulted or that, in the
reasonable judgment of Orange or Partners will result, in any material adverse
change in Orange's business, results of operation, financial condition or
prospects that has not been set forth in this Agreement.
ARTICLE IV
Covenants of Orange and Partners
4.01 Access to Properties, Books and Records. Prior to the Closing Date,
Orange shall, at GD Sub's request, afford or cause to be afforded to the agents,
attorneys, accountants and other authorized representatives of GD Sub reasonable
access during normal business hours to all employees, properties, books and
records of Orange and the Professional Corporation and shall permit such
persons, at GD Sub's expense, to make copies of such books and records. Orange
shall deliver to GD Sub monthly financial statements of Orange promptly after
they become available. GDSC and GD Sub shall treat, and shall cause all of their
agents, attorneys, accountants and other authorized representatives to treat,
all information obtained pursuant to this Section 4.01 as confidential in
accordance with Section 10.01 hereof. No investigation by GDSC or GD Sub or any
of their authorized representatives pursuant to this Section 4.01 shall affect
any representation, warranty or closing condition of any party hereto or GD
Sub's rights to indemnification pursuant to Section 9.02 hereof.
4.02 Negative Covenants. Except as otherwise permitted by this Agreement or
with the prior written consent of GD Sub, prior to the Closing Date, Orange
shall not, in connection with the Dental Practice:
4.02-1 Incur additional debt for borrowed money (including without
limitation obligations under leases for real or personal property whether or not
required to be capitalized under generally accepted accounting principles),
incur or increase any obligation or liability (fixed, contingent or other,
including without limitation liabilities as a guarantor or otherwise with
respect to obligations of others) except in the ordinary and usual course of
business and consistent with past practices, forgive or release any debt or
claim, give any waiver of any right of material value or voluntarily suffer any
extraordinary loss;
4.02-2 Make any payment to discharge or satisfy any lien or
encumbrance or pay any obligation or liability (fixed or contingent) other than
(a) current liabilities (including the
16
current portion of any long-term liabilities) included in the Financial
Statements and (b) current liabilities incurred or maturing since the date of
the Current Balance Sheet in the ordinary course of business;
4.02-3 Admit any new or additional partner or declare, pay or make any
distribution of money or property to the Partners other than ordinary
distributions consistent with past practices;
4.02-4 Mortgage, pledge, otherwise encumber or subject to lien any of
its assets or properties, tangible or intangible, or commit itself to do any of
the foregoing;
4.02-5 Except in the ordinary and usual course of its business and in
each case for fair consideration, dispose of, or agree to dispose of, any of its
assets or lease or license to others, or agree so to lease or license, any of
its assets;
4.02-6 Acquire any assets which would be material to the Dental
Practice other than assets acquired in the ordinary and usual course of business
and consistent with past practices;
4.02-7 Enter into any transaction or contract or make any commitment
to do the same, except in the ordinary and usual course of business and not
requiring the payment in any case of an amount in excess of $15,000 annually;
4.02-8 Increase the wages, salaries, compensation, pension or other
benefits payable, or to become payable by it, to any of its employees or agents,
including without limitation any bonus payments or severance or termination pay,
other than increases in wages and salaries required by employment arrangements
existing on the date hereof or otherwise in the ordinary and usual course of its
business;
4.02-9 Implement or agree to any implementation of or amendment or
supplement to any employee profit sharing, pension, bonus, commission,
incentive, retirement, medical reimbursement, life insurance, deferred
compensation or any other employee benefit plan or arrangement;
4.02-10 Change its accounting methods, policies or practices; or
4.02-11 Agree or commit to do any of the foregoing.
4.03 Affirmative Covenants. Except as otherwise permitted by this Agreement
or with the prior written consent of GD Sub, prior to the Closing Date, Orange
shall:
4.03-1 Operate the Dental Practice, including collecting receivables
and paying payables, as presently operated and only in the ordinary course and
consistent with past practices;
17
4.03-2 Advise GD Sub in writing of any litigation or administrative
proceeding that challenges or otherwise materially affects the transactions
contemplated hereby and of any Material Adverse Change or any event, occurrence
or circumstance which is likely to cause a Material Adverse Change;
4.03-3 When the consent of any third party to the transactions
contemplated by this Agreement is required under the terms of any contract or
agreement material to the Dental Practice to which Orange is a party or by which
Orange is bound, use its best efforts to obtain such consent on terms and
conditions not materially less favorable than those in effect on the date
hereof;
4.03-4 Use its best efforts to maintain all of the Tangible Personal
Property in good operating condition, reasonable wear and tear excepted,
consistent with past practices, and take all steps reasonably necessary to
maintain its intangible assets;
4.03-5 Not cancel or change any policy of insurance (including
self-insurance) or fidelity bond or any policy or bond providing substantially
the same coverage;
4.03-6 Maintain, consistent with past practices, all inventories,
spare parts, office supplies and other expendable items;
4.03-7 Use its best efforts to retain all employees;
4.03-8 Maintain its books and records in accordance with past
practices;
4.03-9 Pay and discharge all taxes, assessments, governmental charges
and levies imposed upon it, its income or profits or upon any property belonging
to it, in all cases prior to the date on which penalties attach thereto; and
4.03-10 Comply with all laws, rules and regulations applicable to it
and to the Dental Practice.
4.04 No Negotiations With Others. Except as otherwise permitted by this
Agreement or with the prior written consent of GD Sub, Orange and Partners shall
refrain, and shall cause Orange's employees and any investment banker, attorney,
accountant or other agent retained by either of them to refrain, from initiating
or soliciting any inquiries or making any proposals with respect to, or engaging
in negotiations concerning, or providing any confidential information or data to
or having any discussions with any person relating to, any acquisition, business
combination or purchase of all or any significant portion of the assets of, or
any equity interest in, Orange. Orange and Partners will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing.
18
4.05 Employees. Effective as of the close of business on the Closing Date,
Orange shall terminate all of its employees at the Dental Practice. Except as
expressly assumed by GD Sub under this Agreement, Orange shall be responsible
for and shall pay and discharge all obligations to such employees arising out of
or in connection with their employment prior to Closing.
4.06 Offset of Notes. Xxxxxxxx is currently indebted to PDS under an
Original NonNegotiable Secured Promissory Note dated July 1, 1996, as amended
September 1, 1997, and PDS is currently indebted to Xxxxxxxx under a
Non-Negotiable Secured Promissory Note dated September 1, 1997. Xxxxxxxx and PDS
agree that effective as of the Closing, these two notes will be offset and the
net amount due from Xxxxxxxx to PDS shall be immediately due and payable.
ARTICLE V
Joint Covenants
GD Sub, Orange and Partners covenant and agree that they will act in
accordance with the following:
5.01 Governmental Consents. Promptly following the execution of this
Agreement, the parties will proceed to prepare and file with the appropriate
governmental authorities any requests for approval or waiver, if any, that are
required from governmental authorities in connection with the transactions
contemplated hereby, and the parties shall diligently and expeditiously
prosecute and cooperate fully in the prosecution of such requests for approval
or waiver and all proceedings necessary to secure such approvals and waivers.
5.02 Best Efforts; No Inconsistent Action. Each party will use its best
efforts to effect the transactions contemplated by this Agreement and to fulfill
the conditions to the obligations of the other parties set forth in Article 6 or
7 of this Agreement. No party will take any action inconsistent with its
obligations under this Agreement or that could hinder or delay the consummation
of the transactions contemplated by this Agreement, except that nothing in this
Section 5.02 shall limit the rights of the parties under Articles 6, 7 and 8.
ARTICLE VI
Conditions to Obligations of GD Sub
The obligations of GD Sub under Article 1 are, at its option, subject to
satisfaction, at or prior to the Closing, of each of the following conditions:
6.01 Governmental Approvals. All authorizations, consents and approvals of
all governmental agencies and authorities required to be obtained in order to
permit consummation
19
of the transactions contemplated by this Agreement shall have been obtained and
be satisfactory in form and content to GD Sub.
6.02 Consents. Orange shall have obtained the third-party consents required
under the terms of the Contracts and Leases, except for those Contracts and
Leases for which the necessity of obtaining consent to assignment is waived by
GD Sub as indicated in Schedule 3.25, and such consents shall not have required
any change to the terms and conditions of the Contracts and Leases other than
changes consented to in writing by GD Sub.
6.03 Representations, Warranties and Covenants.
6.03-1 All representations and warranties of Orange and Partners made
in this Agreement, or in any certificate delivered pursuant hereto, shall in all
material respects be true and complete on and as of the Closing Date with the
same force and effect as if made on and as of that date.
6.03-2 All of the terms, covenants and conditions to be complied with
and performed by Orange and Partners at or prior to the Closing shall in all
material respects have been complied with or performed thereby.
6.03-3 GD Sub shall have received a certificate of Partners, dated as
of the Closing Date, to the effect that the representations and warranties of
Orange and Partners contained in this Agreement are in all material respects
true and complete on and as of the Closing Date as though made on and as of the
Closing Date and that Orange and Partners have in all material respects complied
with or performed all terms, covenants and conditions to be complied with or
performed by him at or prior to the Closing.
6.04 Adverse Proceedings. No suit, action, claim or governmental proceeding
shall have been instituted or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered against, GDSC, GD Sub, Orange or either Partner to restrain or
prohibit, or obtain damages in respect of, this Agreement or the transactions
contemplated by this Agreement.
6.05 No Adverse Change. There shall not have been any Material Adverse
Change.
6.06 Management Agreement. The Orange Management Agreement assigned by
Orange to GD Sub pursuant to Section 1.01-6 shall have been amended and restated
as a Management Agreement with GD Sub in the form attached hereto as Exhibit C,
and the Professional Corporation shall have executed and delivered such a
Management Agreement.
6.07 Shares Acquisition Agreement. The Orange Assignable Option Agreement
assigned by Orange to GD Sub pursuant to Section 1.01-6 shall have been amended
and restated as a Shares Acquisition Agreement relating to the stock of the
Professional Corporation in the
20
form attached hereto as Exhibit D, and the Professional Corporation and Xxxxxxxx
shall have executed and delivered such Shares Acquisition Agreement.
6.08 Dentist Employment Agreements. Xxxxxxxx shall have executed and
delivered a Dentist Employment Agreement with the Professional Corporation in
the form attached hereto as Exhibit E.
6.09 Closing and Signing of Related Transactions. The transactions
contemplated by the following agreements shall close simultaneously with the
Closing: Asset Purchase Agreement dated June 30, 1998 by and among GDSC, GD Sub,
PDS and the shareholders of PDS; and Asset Purchase Agreement dated June 30,
1998 by and among GDSC, GD Sub and Xxxxx Xxxxxxxx D.D.S., Inc. All parties shall
have executed and delivered the Asset Purchase Agreement dated June 30, 1998 by
and among GDSC, GD Sub, TG3 Dental Services and the partners of TG3 Dental
Services.
6.10 Actions Satisfactory to GD Sub's Counsel. All actions, proceedings,
instruments and documents required to be carried out by this Agreement, or
incidental hereto, and all other relevant legal matters shall be reasonably
satisfactory to counsel for GD Sub.
ARTICLE VII
Conditions to Obligations of Orange
The obligations of Orange under Article I are, at its option, subject to
satisfaction, at or prior to the Closing, of each of the following conditions:
7.01 Representations, Warranties and Covenants.
7.01-1 All representations and warranties of GDSC and GD Sub made in
this Agreement and in any certificate delivered pursuant hereto shall in all
material respects be true and complete on and as of the Closing Date with the
same force and effect as if made on and as of that date.
7.01-2 All of the terms, covenants and conditions to be complied with
and performed by GDSC and GD Sub on or prior to the Closing shall in all
material respects have been complied with or performed by GDSC and GD Sub.
7.01-3 Orange shall have received a Certificate of GDSC and GD Sub,
dated as of the Closing Date, executed by the President or other authorized
officer of GDSC and GD Sub, to the effect that the representations and
warranties of GDSC and GD Sub contained in this Agreement are in all material
respects true and complete on and as of the Closing Date as though made on and
as of the Closing Date and that GDSC and GD Sub have in all material respects
21
complied with or performed all terms, covenants and conditions to be complied
with or performed by them at or prior to the Closing.
7.02 Adverse Proceedings. No suit, action, claim or governmental proceeding
shall have been instituted or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered against, GDSC, GD Sub, Orange or any Partner to restrain or prohibit
this Agreement or the transactions contemplated by this Agreement.
ARTICLE VIII
Termination
8.01 Right of Parties to Terminate. This Agreement may be terminated:
8.01-1 by GD Sub, if any of the authorizations, consents, approvals,
filings or registrations described in Section 6.01 hereof, other than as may
pertain to those Contracts and Leases for which the necessity of obtaining
consent to assignment is waived by GD Sub as indicated on Schedule 3.25, shall
have been denied, not permitted to go into effect or obtained on terms not
reasonably satisfactory to GD Sub and all reasonable final appeals shall have
been exhausted;
8.01-2 by GD Sub, if Orange or Partners shall have breached any of
their obligations hereunder in any material respect;
8.01-3 by Orange, if GD Sub shall have breached any of its obligations
hereunder in any material respect; or
8.01-4 by either Orange or GD Sub, by written notice to the other
party, if the Closing shall not have occurred on or prior to March 31, 1999;
provided, however, that the right to terminate this Agreement under this Section
8.01-4 shall not be available to any party whose failure to fulfill or perform
any obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date.
8.02 Effect of Termination. If either GD Sub or Orange decides to terminate
this Agreement pursuant to Section 8.01, such party shall promptly give written
notice to the other party to this Agreement of such decision. In the event of a
termination pursuant to Section 8.01, the parties hereto shall be released from
all liabilities and obligations arising under this Agreement (other than those
described in Article 10 hereof) with respect to the matters contemplated by this
Agreement, other than for damages arising from a breach of this Agreement.
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ARTICLE IX
Survival; Indemnification
9.01 Survival. All representations, warranties, covenants and agreements
made in this Agreement or in any schedule, certificate or assignment delivered
in accordance with this Agreement (collectively, the "Related Documents") shall
survive any investigation by or on behalf of any party, the execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and any termination or expiration of this Agreement for a period of three
and one-half years following the Closing Date and after such period shall be
terminated and extinguished, except insofar as the damaged party shall have
asserted in writing a claim setting forth with reasonable specificity facts and
circumstances relating thereto prior to the expiration of such period in which
event the party liable shall remain liable with respect to such claim.
9.02 Indemnification by Orange and Partners.
9.02-1 Notwithstanding any investigation by GDSC or GD Sub, from and
after the Closing, Orange and Partners shall indemnify, hold harmless and, to
the extent provided in Section 9.04-1, defend GDSC, GD Sub, and their respective
subsidiaries, shareholders, affiliates, officers, directors, employees, agents,
successors and assigns (collectively, "GD Sub's Indemnified Persons") from and
against, and reimburse each of GD Sub'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 GD Sub's
Indemnified Persons by reason of or arising out of or in connection with:
(a) any material breach or inaccuracy of any representation or
warranty of Orange or Partners made in this Agreement or any Related Document;
(b) any failure by Orange or Partners to perform any covenant
required to be performed by them pursuant to this Agreement or any Related
Document after reasonable opportunity to cure; or
(c) any liability or obligation of Orange or Partners arising out
of or in connection with the ownership, use, condition, maintenance or operation
of the Dental Practice or the Assets by Orange on or prior to the Closing, in
either case not expressly assumed by GD Sub in accordance with the terms of this
Agreement, and specifically including any liability to pay cash to a terminated
employee on account of accrued vacation time.
9.02-2 This indemnification extends to any Damages suffered by any of
GD Sub's Indemnified Persons, whether or not a claim is made against any of GD
Sub's Indemnified Persons by any third party.
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9.03 Indemnification by GD Sub.
9.03-1 Notwithstanding any investigation by Orange or Partners, from
and after the Closing, GDSC and GD Sub shall indemnify, hold harmless and, to
the extent provided in Section 9.04-1, defend Orange, Partners, and their
respective partners, affiliates, officers, employees, agents, successors and
assigns (collectively, "Orange's Indemnified Persons") from and against, and
reimburse each of Orange's Indemnified Persons with respect to, any and all
Damages incurred by any of Orange's Indemnified Persons by reason of or arising
out of or in connection with:
(a) any material breach or inaccuracy of any representation or
warranty of GDSC or GD Sub made in this Agreement or any Related Document;
(b) any failure by GDSC or GD Sub to perform any covenant
required to be performed by them pursuant to this Agreement or any Related
Document after reasonable opportunity to cure; or
(c) any liability or obligation of Orange to any third party
expressly assumed by GD Sub in accordance with the terms of this Agreement.
9.03-2 This indemnification extends to any Damages suffered by any of
Orange's Indemnified Persons whether or not a claim is made against any of
Orange's Indemnified Persons by any third party.
9.04 Indemnification Procedure.
9.04-1 Third Party Claims.
(a) Each indemnified party shall, with reasonable promptness
after obtaining knowledge thereof, provide any indemnifying party against whom a
claim for indemnification is to be made under this Article 9 with written notice
of all third party actions, suits, proceedings, claims, demands or assessments
that may be subject to the indemnification provisions of this Article 9
(collectively, "Third Party Claims"), including, in reasonable detail, the basis
for the claim, the nature of Damages and a good faith estimate of the amount of
Damages.
(b) Each indemnifying party shall have 15 days after its receipt
of the claim notice to notify the indemnified party in writing whether the
indemnifying party agrees that the claim is subject to this Article 9 and, if
so, whether the indemnifying party elects, jointly with any other indemnifying
party notified under Section 9.04-1(a), to undertake, conduct and control,
through counsel of its or their choosing (subject to the consent of the
indemnified party, such consent not to be withheld unreasonably) and at its or
their sole risk and expense, the good faith settlement or defense of the Third
Party Claim.
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(c) If within 15 days after its receipt of the claim notice an
indemnifying party notifies the indemnified party that it elects to undertake
the good faith settlement or defense of the Third Party Claim, the indemnified
party shall cooperate reasonably with the indemnifying party in connection
therewith including, without limitation, by making available to the indemnifying
party all relevant information material to the defense of the Third Party Claim.
The indemnified party shall be entitled to participate in the settlement or
defense of the Third Party Claim through counsel chosen by the indemnified
party, at its expense, and to approve any proposed settlement that would impose
any obligation or duty on the indemnified party, which approval may, in the sole
discretion of the indemnified party, be withheld. So long as an indemnifying
party is contesting the Third Party Claim in good faith and with reasonable
diligence, the indemnified party shall not pay or settle the Third Party Claim.
Notwithstanding the foregoing, the indemnified party shall have the right to pay
or settle any Third Party Claim at any time, provided that in such event it
waives any right to indemnification therefor by the indemnifying party.
(d) If an indemnifying party does not provide notice that it
elects to undertake the good faith settlement or defense of the Third Party
Claim, or if an indemnifying party fails to contest the Third Party Claim or
undertake or approve settlement, in good faith and with reasonable diligence,
the indemnified party shall thereafter have the right to contest, settle or
compromise the Third Party Claim at its exclusive discretion, at the risk and
expense of the indemnifying party, and the indemnifying party will thereby waive
any claim, defense or argument that the indemnified party's settlement or
defense of such Third Party Claim is in any respect inadequate or unreasonable.
(e) A party's failure to give timely notice will not constitute a
defense, in part or in whole, to any claim for indemnification by such party,
except if, and only to the extent that, such failure results in any material
prejudice to the indemnifying party.
9.04-2 Non-Third Party Claims.
(a) Each indemnified party shall, with reasonable promptness,
deliver to any indemnifying party against whom a claim for indemnification is to
be made under this Article 9 written notice of all claims for indemnification
under this Article 9, other than Third Party Claims, including, in reasonable
detail, the basis for the claim, the nature of Damages and a good faith estimate
of the amount of Damages.
(b) Each indemnifying party shall have 30 days after its receipt
of the claim notice to notify the indemnified party in writing whether or not
the indemnifying party accepts liability for all or any part of the Damages
described in the claim notice. If the indemnifying party does not so notify the
indemnified party, the indemnifying party shall be deemed to accept liability
for all the Damages described in the claim notice.
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(c) A party's failure to give timely notice will not constitute a
defense, in part or in whole, to any claim for indemnification by such party,
except if, and only to the extent that, such failure results in any material
prejudice to the indemnifying party.
9.05 Right of Offset. At the election of GD Sub, any liability of Orange or
any Partner under Section 9.02 which has been established by agreement,
litigation or in accordance with the procedure set forth in Section 9.04 may be
satisfied by offsetting such liability against any Earnout Consideration then
due or that subsequently becomes due. For this purpose, a liability shall not be
deemed to have been established in accordance with the procedure set forth in
Section 9.04 if Orange or the Partner has asserted under Section 9.04-1(b) that
the liability is not subject to this Article 9 and the question has not been
resolved by agreement or litigation.
9.06 Rights Not Exclusive. An indemnified party's rights to indemnification
under this Article 9 are in addition to, and not in lieu of, any other rights to
which the indemnified party may be entitled at law or in equity.
ARTICLE X
Confidentiality; Press Releases
10.01 Confidentiality.
10.01-1 No information concerning Orange not previously disclosed to
the public or in the public domain that has been furnished to or obtained by
GDSC or GD Sub under this Agreement or in connection with the transactions
contemplated hereby shall be disclosed to any person other than in confidence to
employees, legal counsel, financial advisers or independent public accountants
of GDSC or GD Sub or used for any purpose other than as contemplated herein. If
the transactions contemplated by this Agreement are not consummated, GDSC and GD
Sub shall hold such information in confidence for a period of four years from
the date of any termination of this Agreement, and all such information that is
in writing or embodied on a diskette, tape or other tangible medium shall be
promptly returned to Orange.
10.01-2 No information concerning GDSC or GD Sub not previously
disclosed to the public or in the public domain that has been furnished to or
obtained by Orange or Partners under this Agreement or in connection with the
transactions contemplated hereby shall be disclosed to any person other than in
confidence to the employees, legal counsel, financial advisers or independent
public accountants of Orange or used for any purpose other than as contemplated
herein. If the transactions contemplated by this Agreement are not consummated,
Orange and Partners shall hold such information in confidence for a period of
four years from the date of any termination of this Agreement, and all such
information that is in writing or embodied on a diskette, tape or other tangible
medium shall be promptly returned to GD Sub.
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10.01-3 Notwithstanding the foregoing, such obligations of GD Sub and
of Orange shall not apply to information
(a) that is, or becomes, publicly available from a source other
than GD Sub or Orange, as the case may be;
(b) that was known and can be shown to have been known by GD Sub
at the time of its receipt from Orange, or by Orange at the time of its receipt
from GD Sub, as the case may be;
(c) that is received by GD Sub from a third party without breach
of this Agreement by GD Sub, or is received by Orange from a third party without
breach of this Agreement by Orange, as the case may be;
(d) that is required by law to be disclosed; or
(e) that is disclosed in accordance with the written consent of
GD Sub or of Orange, as the case may be.
10.02 Press Releases. No press releases or other public announcements
concerning the transactions contemplated by this Agreement shall be made by
Orange without the prior written consent of GD Sub; provided, however, that
nothing herein shall prevent a party from supplying such information or making
statements as required by governmental authority or in order for a party to
satisfy its legal obligations (prompt notice of which shall in any such case be
given to the other party or parties).
ARTICLE XI
Other Provisions
11.01 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. No party hereto may voluntarily or involuntarily assign such
party's interest under this Agreement without the prior written consent of the
other parties.
11.02 Entire Agreement. This Agreement and the Schedules and Exhibits
referred to herein embody the entire agreement and understanding of the parties
and supersede any and all prior agreements, arrangements and understandings
relating to matters provided for herein.
11.03 Fees and Expenses. GDSC and GD Sub shall be solely responsible for
all costs and expenses incurred by them, and Orange shall be solely responsible
for all costs and expenses incurred by Orange, in connection with the
negotiation, preparation and performance of and compliance with the terms of
this Agreement.
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11.04 Amendment, Waiver, etc. The provisions of this Agreement may be
amended or waived only by an instrument in writing signed by the party against
which enforcement of such amendment or waiver is sought. Any waiver of any term
or condition of this Agreement or any breach hereof shall not operate as a
waiver of any other such term, condition or breach, and no failure to enforce
any provision hereof shall operate as a waiver of such provision or of any other
provision hereof.
11.05 Headings. The headings are for convenience only and will not control
or affect the meaning or construction of the provisions of this Agreement.
11.06 Governing Law. The construction and performance of this Agreement
will be governed by the laws of the State of Washington (except for the choice
of law provisions thereof).
11.07 Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing; shall be
delivered personally, including by means of telecopy, or mailed by registered or
certified mail, postage prepaid and return receipt requested; shall be deemed
given on the date of personal delivery or on the date set forth on the return
receipt; and shall be delivered or mailed to the addresses or telecopy numbers
set forth on the first page of this Agreement or to such other address as any
party may from time to time direct, with copies to:
In the case of GDSC or GD Sub:
Stoel Rives LLP
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
In the case of Orange or Partners:
Xxxxxx & Holguin
0000 Xxxxxxx Xxxx Xxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxx Xxxxxxx
11.08 Breach; Equitable Relief. The parties acknowledge that the Dental
Practice and rights of the parties described in this Agreement are unique and
that money damages alone for breach of this Agreement would be inadequate. Any
party aggrieved by a breach of the provisions hereof may bring an action at law
or suit in equity to obtain redress, including specific performance, injunctive
relief or any other available equitable remedy. Time and strict performance are
of the essence in this Agreement.
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11.09 Attorneys' Fees. If suit or action is filed by any party to enforce
the provisions of this Agreement or otherwise with respect to the subject matter
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees as fixed by the trial court and, if any appeal is taken from the
decision of the trial court, reasonable attorneys' fees as fixed by the
appellate court. For purposes of this Agreement, the term "prevailing party"
shall be deemed to include a party that successfully opposes a petition for
review filed with an appellate court.
11.10 Guarantee. GDSC irrevocably and unconditionally guarantees that GD
Sub will perform each and every obligation of GD Sub under this Agreement and
waives and agrees not to assert or take advantage of any of the following to the
extent they might apply: (a) any right to require Orange or Partners to proceed
against GD Sub, it being understood and agreed that Orange and Partners may
proceed against GDSC without first proceeding against GD Sub or any other person
or entity; (b) Orange's or Partners' failure to file or enforce any claim in any
bankruptcy or insolvency proceedings against GD Sub; (c) any presentment,
demand, protest or notice of any kind to GDSC, including without limitation,
notice of the acceptance of this guarantee, or of any action or nonaction on the
part of GD Sub under this Agreement; or (d) any right to prior notice and
approval of any extension of the time for payment of any amounts or performance
of any obligations due under this Agreement or any other modification,
alteration or change of this Agreement.
11.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
GDSC: GENTLE DENTAL SERVICE CORPORATION
By: X. X. XXX XXXXXX
-------------------------------------
Title: Executive Vice President
GD SUB: GENTLE DENTAL MANAGEMENT, INC.
By: X. X. XXX XXXXXX
-------------------------------------
Title: Executive Vice President
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ORANGE: ORANGE DENTAL SERVICES
By: XXXXXXX XXXXXX IV
-------------------------------------
Title: President of the Managing Partner
PARTNERS: PACIFIC DENTAL SERVICES, INC.
By: XXXXXXX XXXXXX IV
-------------------------------------
Title: President
XXXXX X. XXXXXXXX, D.D.S.
-----------------------------------------
Xxxxx X. Xxxxxxxx, D.D.S.
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