EXHIBIT 10.39
-26-
STOCK PUT/CALL OPTION AND SUCCESSOR DESIGNATION AGREEMENT
This Stock Put/Call Option and Successor Designation
Agreement (the "Agreement") is made effective as of this 1st day
of January, 1998 by and among Xxxxxx X. Xxxx, D.D.S., M.S., Ltd.,
a professional corporation (the "New PC") incorporated under the
laws of the State of Nevada (the "State"); Xxxxxx X. Xxxx, D.D.S.
("Xx. Xxxx") who is duly licensed to practice endodontics in the
State; Omega Orthodontics, Inc., a Delaware corporation
("OMEGA"); and Omega Orthodontics of Reno, Inc., a Delaware
corporation (the "MSO"), which is a wholly-owned subsidiary of
OMEGA, with reference to the following facts.
RECITALS
A. OMEGA is an orthodontic and other dental specialty
practice management company and has expertise in managing
orthodontic and other dental specialty practices including
practice management systems, office space, equipment, furnishings
and active administrative personnel necessary for the operation
of such practices and providing high quality healthcare
management services to such practices, directly or indirectly
through management service organizations such as the MSO.
B. OMEGA acquired certain assets of Xx. Xxxx pursuant to
that certain Affiliation Agreement and Asset Purchase Agreement
(the "Affiliation Agreement") dated as of January 1, 1998 by and
between OMEGA and Xx. Xxxx.
C. The New PC owns and operates an endodontic practice
with offices located in the facility identified in Exhibit A (the
"Endodontic Offices") and furnishes endodontic care to the
general public through the services of Xx. Xxxx affiliated with
the New PC.
D. The New PC and the MSO and OMEGA have entered into that
certain Management Services Agreement (the "Management Services
Agreement") dated as of even date herewith for the management by
the MSO of the non-endodontic business affairs of the New PC.
E. Xx. Xxxx owns all of the capital stock (the "Capital
Stock") of the New PC and desires to provide for successor
ownership upon the occurrence of certain events. When used in
this Agreement, the term "Capital Stock" shall mean all of Xx.
Xxxx'x right, title, interest and estate in and to all of the
issued and outstanding stock in the New PC, including any stock
hereafter issued and any rights to any additional stock and any
preemptive rights, warrants and instruments of like effect, as
set forth on Exhibit B.
F. As a condition of entering into the Management Services
Agreement, Xx. Xxxx has agreed to grant to the MSO, and the MSO
desires to acquire from Xx. Xxxx certain rights, including but
not limited to, the right to designate the successor purchaser
(the "Designated Successor") of all or any part of the issued and
outstanding Capital Stock upon the occurrence of certain events.
In addition, under the Management Services Agreement, upon
termination thereof, each of the New PC and the MSO were granted
certain rights to be set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual promises contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the New PC, Xx. Xxxx, the MSO and OMEGA
agree as follows:
1. Defined Terms. The capitalized words and expressions
used in this Agreement, but which are not defined herein shall,
unless the context otherwise requires, have the same meaning as
they are given in the Management Services Agreement.
2. Put Option. The MSO shall have the option (the "Put
Option") to require the New PC, upon termination of the
Management Services Agreement by the MSO under Section 10.2
thereof or upon expiration of the Term of the Management Services
Agreement, to:
(a) Purchase from the MSO at book value all of the
leasehold improvements, fixtures, furniture, furnishings and
equipment comprising or located at the Endodontic Offices,
including all replacements and additions thereto made by the
MSO pursuant to the performance of its obligations under the
Management Services Agreement and all other assets,
including inventory and supplies and intangibles, set forth
on the balance sheet as at the end of the month immediately
preceding the date of such termination or expiration
prepared in accordance with GAAP (the "Balance Sheet") to
reflect operations of the MSO in respect of the Endodontic
Offices, including depreciation, amortization and other
adjustments of such assets shown on such Balance Sheet; and
(b) Purchase, by obtaining an assignment from the MSO,
at book value, the right to receive payments for breach of
the restrictive covenants provided for in Section 3.7 of the
Management Services Agreement and in the applicable
Employment Agreement with Xx. Xxxx contemplated thereunder,
and any goodwill and other intangible assets set forth on
the Balance Sheet, reflecting amortization or depreciation
of the restrictive covenants, and any goodwill and other
intangible assets; and
(c) Assume all debt and all contracts, payables and
leases which are obligations of the MSO and which relate
solely to the performance of its obligations under the
Management Services Agreement or the properties subleased in
respect of the Endodontic Offices.
If the MSO desires to exercise its Put Option, the MSO shall give
written notice of such election to the New PC and Xx. Xxxx at
least twenty (20) calendar days prior to the date specified in
such notice as the date for the closing of the Put Option. Any
exercise of the Put Option by the MSO shall be made by an
aggregate payment of the amounts computed under Clauses (a) and
(b) of this Section 2 (collectively, the "Put Price").
3. Call Option. The New PC shall have the option (the
"Call Option") to require the MSO, upon termination of the
Management Services Agreement by the New PC under Section 10.1
thereof, to:
(a) Sell to the New PC all of the leasehold
improvements, fixtures, furniture, furnishings and equipment
comprising or located at the Endodontic Offices, including
all replacements and additions thereto made by the MSO
pursuant to the performance of its obligations under the
Management Services Agreement and all other assets,
including inventory and supplies, set forth on the Balance
Sheet to reflect operations of the MSO in respect of the
Endodontic Offices, including depreciation, amortization and
other adjustments of such assets shown on such Balance
Sheet; and
(b) Assign to, or grant a waiver in favor of, the New
PC, the restrictive covenants provided for in Section 3.7 of
the Management Services Agreement and in the applicable
Employment Agreement with Xx. Xxxx contemplated thereunder,
and any goodwill and other intangible assets set forth on
the Balance Sheet, reflecting amortization or depreciation
of the restrictive covenants, and any goodwill and other
intangible assets; and
(c) Assign to the New PC (which it shall assume) all
debt and all contracts, payables and leases which are
obligations of the MSO and which relate solely to the
performance of its obligations under the Management Services
Agreement or the properties subleased in respect of the
Endodontic Offices.
If the New PC desires to exercise its Call Option, the New PC
shall give written notice of such election to the MSO at least
twenty (20) calendar days prior to the date specified in such
notice as the date for the closing of the Call Option (the "Call
Option Notice"). Any exercise of the Call Option by the New PC
shall be made by an aggregate payment to the MSO of an amount
equal to the fair market value of the assets, tangible and
intangible, described in Clauses (a) and (b) of this Section 3
(collectively, the "Call Price"). For purposes of this Section
3, the "fair market value" of such assets shall be determined by
an independent appraiser acceptable to, and appointed by, the MSO
and the New PC. In the event that the MSO and the New PC cannot
agree on an independent appraiser, the fair market value of such
assets shall be determined by three independent appraisers, one
of whom shall be appointed by the MSO, one of whom shall be
appointed by the New PC and the third of whom shall be appointed
by mutual agreement of the two appointed appraisers. Within
sixty (60) days after the appointment of the third appraiser, the
three appraisers shall each submit in writing their determination
of fair market value of such assets to each of the MSO and the
New PC, and the fair market value of such assets shall be
conclusively determined by taking the numerical average of the
two fair market value determinations which are closest in amount.
The cost of obtaining these appraisals shall be paid one-half by
the MSO and one-half by the New PC.
Notwithstanding the foregoing, in the event that the New PC
terminates the Management Services Agreement pursuant to Section
10.1(a)(1) of the Management Services Agreement, the Call Option
may be exercised by the payment by the New PC to the MSO of (w)
if the Call Option Notice is received by the MSO during the first
year following the date of this Agreement, $400,000 in cash, the
cancellation of the Purchase Note and the return of the shares of
Omega Common Stock received by Xx. Xxxx under Section 1.1(a)(iii)
(the "Omega Shares"), (x) if the Call Option Notice is received
by the MSO during the second year following the date of this
Agreement, $300,000 in cash, the cancellation of the Purchase
Note and the return of any Omega Shares then owned of record or
beneficially by Xx. Xxxx, (y) if the Call Option Notice is
received by the MSO during the third year following the date of
this Agreement, $200,000 in cash, the cancellation of the
Purchase Note and the return of any Omega Shares then owned of
record or beneficially by Xx. Xxxx and (z) thereafter, the lesser
of (A) the depreciated book value of the assets described in
Clause (a) of this Section 3 or (B) $100,000.
4. Closing and Delivery. The closing ("Closing") of the
exercise by the MSO of the Put Option under Section 2 or of the
exercise by the New PC of the Call Option under Section 3, as the
case may be, shall be, in the case of the Put Option, at the
offices of Xxxxxxxx & Xxxx LLP, Xxx Xxxxxx Xxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 and, in the case of the Call Option, at the
offices of Xxxxxx X. Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxxx, Xxxxxx
00000, on the date specified for such Closing in the written
notice of election to exercise such Put Option or Call Option, as
the case may be, or on such other date as the parties may
mutually determine. At the Closing, the New PC shall pay cash,
or, at the option of the New PC and with the consent of Xx. Xxxx,
a combination of cash, forgiveness of amounts due to Xx. Xxxx
under the Purchase Note and/or return of the shares of Omega
Common Stock received by Xx. Xxxx under Section 1.1(a)(iii) of
the Affiliation Agreement (the value of such shares to be
determined by multiplying such number of shares by the average of
the last sales (or closing) price for Omega's Common Stock on
Nasdaq (or a national securities exchange) for each of the sixty
(60) trading days immediately preceding the date of the Put
Option Notice or the Call Option Notice, as the case may be) for
the repurchased assets, whether the Put Price pursuant to
exercise by the MSO of the Put Option or the Call Price pursuant
to exercise by the New PC of the Call Option, as the case may be.
The New PC and Xx. Xxxx shall execute such documents as may be
required by the MSO to assume the liabilities set forth in
Section 2(c) or 3(c), as the case may be, and shall use their
respective best efforts to remove the MSO from any liability with
respect to such repurchased assets and with respect to any
property leased or subleased by the MSO. From and after any such
Closing, each party shall provide to the other party reasonable
access to books and records then owned by it to permit such
requesting party to satisfy reporting and contractual obligations
which may be required of it. In addition, following any such
Closing, the MSO or its designee shall have reasonable access
during normal business hours to the New PCs records, including
patient records regarding records of collections, expenses and
disbursements as kept by the MSO in performing its obligations
under the Management Services Agreement, and the MSO may copy any
or all such records.
5. Successor Designation Option.
(a) Upon termination of the Management Services Agreement
by the MSO under Section 10.2 thereof or upon expiration of the
Term of the Management Services Agreement or upon the happening
of any of the following events (each of such termination,
expiration or event being hereinafter referred to as a "Transfer
Event"), the MSO shall have the option (the "Designated Successor
Option") to designate a Designated Successor to purchase all of
the Capital Stock then held by Xx. Xxxx:
(i) the death of Xx. Xxxx;
(ii) if Xx. Xxxx is determined to be permanently
disabled so as to be unable to render any professional
services on behalf of the New PC, as determined in
accordance with paragraph (b) of this Section 5 below;
(iii) if Xx. Xxxx voluntarily terminates his
employment without first proposing and obtaining the MSO's
approval of a proposed qualified successor endodontist
reasonably acceptable to the MSO on behalf of the New PC;
(iv) if Xx. Xxxx acts in a criminally or grossly
negligent manner with respect to the performance of
professional endodontic services rendered or to be rendered
on behalf of the New PC;
(v) if Xx. Xxxx becomes hospitalized for alcohol or
drug abuse;
(vi) if Xx. Xxxx is convicted of a felony;
(vii) if Xx. Xxxx loses his license or is otherwise
determined to be disqualified from rendering services as an
endodontist for the New PC by the applicable dental or other
comparable regulatory board of the State;
(viii) if Xx. Xxxx'x shares of Capital Stock are or
are to be transferred voluntarily or by operation of law to
any person who is a "disqualified person," as defined in the
professional corporation statute of the Laws of the State;
(ix) if Xx. Xxxx voluntarily files a petition under any
bankruptcy or insolvency law or a petition for the
appointment of a receiver, or makes an assignment for the
benefit of creditors;
(x) if Xx. Xxxx is subjected involuntarily to such a
petition or assignment, or any creditor or other persons
obtains an attachment or other legal or equitable interest
in any shares of the Capital Stock of Xx. Xxxx and such
involuntary petition, assignment or attachment is not
discharged within sixty (60) days after creation;
(xi) if Xx. Xxxx is required to transfer any shares of
Capital Stock by reason of a judgment, court order or decree
or by operation of law;
(xii) if Xx. Xxxx retires within the meaning of
Paragraph (c) of this Section 5; or
(xiii) if Xx. Xxxx desires to sell any of his shares
of Capital Stock to another endodontist as contemplated
under Section 8 hereof.
(b) For purposes hereof, "permanent disability" means any
illness, injury, disease or condition, whether mental or
physical, which, for a continuous period of thirty (30) days, (i)
prevents Xx. Xxxx from performing his duties competently and
adequately as determined by the MSO, or (ii) substantially
impairs the New PC's or Xx. Xxxx'x ability to practice
endodontics.
(c) For purposes hereof, "Retirement" of Xx. Xxxx shall
occur on the date when Xx. Xxxx voluntarily withdraws from the
practice of endodontics at whatever age or for whatever reason
and notifies the New PC that he desires to be regarded as
"Retired" and fails to have first proposed and obtained the MSO's
approval of a qualified successor endodontist reasonably
acceptable to the MSO.
6. Successor Designation Option Exercise. Except as
otherwise provided herein, upon exercise of the Successor
Designation Option, the Designated Successor may purchase all,
but not less than all, of the Capital Stock. The Successor
Designation Option shall also be exercisable by the MSO as
provided in Section 8 below.
7. Exercise Notice. Any exercise of the Successor
Designation Option shall be accompanied by a written notice (the
"Successor Designation Exercise Notice") to Xx. Xxxx (or his
successor or representative), specifying the name, address and
information showing the qualifications and suitability of the
Designated Successor to conduct or perform professional services
on behalf of the New PC and number of shares of Capital Stock of
Xx. Xxxx as to which the Successor Designation Option is being
exercised. Upon the MSO's exercise of the Successor Designation
Option in respect of any event described in Section 5(a)(iii) or
(x) as to all of the shares of Capital Stock of Xx. Xxxx, Xx.
Xxxx shall execute a Non-Competition Agreement in the form
attached hereto as Exhibit C. The MSO may, at any time, cancel
any Successor Designation Exercise Notice sent by it hereunder.
8. Right of First Refusal and Sale of Stock. If Xx. Xxxx
desires to sell any of the Capital Stock to another endodontist
(a "Purchaser"), he shall first give notice to the MSO of his
intent to sell such Capital Stock ("Notice of Sale"), giving to
the MSO such information as shall be reasonably requested by it
to ascertain the qualifications and suitability of the Purchaser
to conduct or to perform professional services on behalf of the
New PC and the terms and conditions of such proposed sale to the
Purchaser. Upon receipt of such Notice, the Successor
Designation Option of the MSO shall become exercisable for a
period of three (3) months, provided however, that the exercise
price and terms of purchase of the Capital Stock shall be no less
favorable to Xx. Xxxx than those set forth in the Notice of Sale.
In the event the Successor Designation Option is not exercised
during such three (3) month period, Xx. Xxxx may sell the Capital
Stock to the Purchaser upon the terms and conditions set forth in
the Notice of Sale, provided however, that such sale shall be
conditioned: (i) upon the Purchaser joining in this Agreement and
entering into an employment agreement with the New PC on such
terms and conditions as may be approved by the MSO, and (ii) upon
Xx. Xxxx executing a Non-Competition Agreement in the form
attached hereto as Exhibit C.
9. Assignment of the Successor Designation Option The
Successor Designation Option may be assigned by the MSO or any
assignee of the MSO to OMEGA or to a duly licensed endodontist,
by a written assignment, signed by both the MSO and the assignee.
When the context so requires in this Agreement, the term "MSO"
shall be deemed to refer to an assignee holding an assignment of
the Successor Designation Option with respect to such Capital
Stock, and the terms "party" and "parties" shall be deemed to
include
10. Purchase Price of the Capital Stock.
(a) The purchase price ("Purchase Price") due and
payable by the Designated Successor upon exercise of the
Successor Designation Option shall be an amount equal to the
product of (a) the aggregate net amount received by the New PC
pursuant to Article 6 and Schedule 3 of the Management Services
Agreement for the twelve (12) calendar months immediately
preceding the month in which the Successor Designation Exercise
Notice is delivered to Xx. Xxxx (or his successor or
representative) multiplied by (b) a fraction, the numerator of
which is the number of shares of the Capital Stock to be
purchased and the denominator of which is the total number of
shares of the Capital Stock outstanding at the time of such
purchase.
(b) Payment of Purchase Price. The Purchase Price
upon exercise of the Successor Designation Option shall be paid
by the Designated Successor executing a nonrecourse, negotiable
promissory note, secured by the Capital Stock of Xx. Xxxx. The
note shall be for a term of five years, with interest payable
quarterly in arrears at the mid-term Applicable Federal Rate with
monthly compounding published by the Internal Revenue Service
from time to time in accordance with Section 1274(d) of the
Internal Revenue Code of 1986, as amended (the "Code") or any
successor provision of the Code, provided however, that the
Designated Successor shall be permitted to prepay such note at
any time. Principal shall be payable in five equal annual
installments commencing six months after the closing date.
(c) Purchase From Xx. Xxxx'x Estate.
(i) Upon the death of Xx. Xxxx and receipt of
notice of a Successor Designation Exercise Notice, Xx. Xxxx'x
personal representative shall apply for and obtain any necessary
court approval or confirmation of the sale of Xx. Xxxx'x shares
of Capital Stock pursuant to this Agreement. The representative
of the estate of Xx. Xxxx and the Designated Successor shall
complete such sale as soon after the date of death as
practicable, but no later than 180 days after such event.
(ii) The death of Xx. Xxxx'x spouse, if any, shall
not be considered the death of Xx. Xxxx for purposes of this
Agreement.
(iii) The estate of Xx. Xxxx shall bear, and hold
the New PC harmless from, all costs and expenses incurred as a
result of securing any court orders, court decrees, court
approvals or inheritance tax clearances required to enable the
estate of Xx. Xxxx to transfer to the Designated Successor full
legal and equitable tax-free title to the Capital Stock of Xx.
Xxxx.
(d) Other Purchases. Except for purchases of Capital
Stock upon exercise of the Successor Designation Option pursuant
to Section 5(a)(i) hereof, all other purchases of Capital Stock
pursuant to such Option shall close thirty (30) days after the
date of any Successor Designation Exercise Notice, unless
extended by the parties.
11. Insurance.
(a) In order to insure the MSO's interest in the
Management Services Agreement and under this Agreement, Xx. Xxxx
hereby consents to the acquisition and maintenance in force of a
disability insurance policy and a life insurance policy on Xx.
Xxxx ("Insurance Policies"). The life insurance policy may be in
an aggregate face amount of up to three times Xx. Xxxx'x income,
as shown on the W-2 Form prepared by the New PC for the most
recent calendar year. Xx. Xxxx agrees, at the election of the
MSO, to take whatever actions are necessary to facilitate the
acquisition of any such Insurance Policy by the MSO.
(b) The Insurance Policies shall name the New PC as
sole owner and beneficiary of such policies.
(c) As long as the Insurance Policies provided for
herein are in full force and effect, the MSO shall pay all
premiums falling due on all such policies issued to it subject to
this Agreement.
(d) No insurance company that has issued or shall
issue an Insurance Policy or Policies to the MSO as permitted
under this Agreement shall be under any obligation with respect
to the performance of the terms and conditions of this Agreement.
Any such company shall be bound only by the terms of the
Insurance Policy or Policies which it has issued or shall
hereafter issue and shall have no liability except as set forth
in its policies.
12. Representations. The New PC and Xx. Xxxx each
represent and warrant to the MSO and OMEGA that as of the day and
year first above written and during the term of this Agreement,
Exhibit A is a true and complete listing of the Capital Stock, as
revised from time to time pursuant to this Agreement.
13. Restriction on Transfer.
(a) Except to the extent and in the manner provided in
this Agreement or with the express prior written consent of the
MSO which may be granted or withheld in its absolute discretion,
Xx. Xxxx shall not sell, assign, transfer, pledge or otherwise
dispose (including by gift or otherwise) of any of his shares of
the Capital Stock.
(b) Issuance of Stock; Change in Ownership; Mergers
and Consolidation. Without the prior written consent of the MSO,
Xx. Xxxx shall not permit the New PC to, and the New PC shall
not, during the term of this Agreement, issue any stock, other
equity, or debt of the New PC; permit any change in the
composition or respective percentage ownership of the New PC;
merge, consolidate or otherwise reorganize with or into any other
corporation, partnership, trade, business, or the like; amend or
otherwise modify its articles of incorporation or bylaws;
dissolve; or enter into any agreement with any person to do any
of the foregoing without the prior written consent of the MSO.
14. Delivery of Stock Power. Upon execution of this
Agreement, Xx. Xxxx shall execute and deliver to Xxxxxx X.
Xxxxxxxx, as escrow agent (the "Escrow Agent"), a sufficient
number of assignments separate from certificates, endorsed in
blank to cover all of the Stock (the "Stock Power") held of
record or beneficially owned by Xx. Xxxx. Upon execution of this
Agreement, Xx. Xxxx shall deliver to the Escrow Agent all
certificates heretofore issued representing all of the shares of
Capital Stock held of record or beneficially owned by Xx. Xxxx.
Each such certificate shall have affixed to the back of the
certificate a legend substantially as follows:
"The rights of any holder of any share evidenced by this
certificate, including the right to dispose of the
securities represented by this certificate or any interest
therein, are subject to and restricted by a certain Stock
Put/Call Option and Successor Designation Agreement, dated
as of January 1, 1998, among the New PC, the holder hereof
and the MSO and OMEGA (as defined therein). The New PC will
mail without charge to any holder of these shares a copy of
such agreement within five (5) days of receipt by the New PC
of a written request therefor."
Upon any exercise of the Successor Designation Option by the
MSO, the Escrow Agent shall deliver the Stock Powers and the
certificates representing all of the shares of Capital Stock held
of record or beneficially owned by Xx. Xxxx to the MSO and the
MSO (and/or the Designated Successor) shall be authorized to
complete the Stock Powers, attach them to the certificates and
tender the same to the transfer agent for the New PC for
reissuance in the name of the Designated Successor. Upon any
termination of this Agreement without exercise of the Successor
Designation Option, the Escrow Agent shall return all such Stock
Powers and certificates to Xx. Xxxx.
15. Confidentiality. The parties shall use all good faith
efforts to keep the contents of this Agreement and all other
aspects of the negotiations preceding execution of this Agreement
confidential. Unless required by law, the New PC, Xx. Xxxx, and
the MSO and OMEGA shall not disclose the contents of this
Agreement or the negotiations leading to this Agreement to third
parties without the prior written consent of the other parties.
The MSO shall ensure that all of the assignees likewise comply
with the obligations of confidentiality imposed by this Section,
except that the MSO and the assignees may disclose the contents
of such to the extent required by law or otherwise to their
respective agents, representatives, contractors, and employees to
the extent necessary to exercise their respective rights or
perform their respective obligations hereunder.
16. Term. The term of this Agreement shall commence as of
the day and year first above written and shall terminate upon the
termination of the Management Services Agreement or the exercise
(and consummation of the transaction provided for upon such
exercise) of the Put Option, the Call Option or the Successor
Designation Option as to all of the Capital Stock, as the case
may be (the "Term").
17. General
(a) Compliance with Law. The New PC and Xx. Xxxx
shall comply with all applicable requirements of applicable state
law and regulations, and other licensing and accreditation
authorities.
(b) Relationship of Parties. In the exercise of their
respective rights and the performance of their respective
obligations under this Agreement, the New PC and Xx. Xxxx on the
one hand and OMEGA and the MSO (or any assignee of the MSO) on
the other hand are acting in the capacity of the grantor and
grantee of an option to purchase or to designate the purchase of
shares of Capital Stock and nothing in this Agreement is intended
nor shall be construed to create an employer/employee,
partnership, joint venture or a landlord/tenant relationship
between or among the parties.
(c) Assignment. The rights and duties of the parties
under this Agreement may not be assigned or transferred without
the prior written consent of the non-assigning party, which
consent shall not be unreasonably withheld; provided, however,
that the MSO and OMEGA shall be permitted to assign its and their
respective rights and duties hereunder without the consent of Xx.
Xxxx or the New PC to any person, firm or corporation controlled
by the MSO or OMEGA, controlling the MSO or OMEGA or under common
control with the MSO or OMEGA.
(d) Counterparts. This Agreement, and any amendments
thereto, may be executed in counterparts, each of which shall
constitute an original document, but which together shall
constitute one and the same instrument.
(e) Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
(f) Notices. Any notice or other communication in
connection with this Agreement shall be deemed to be delivered if
in writing (or in the form of a telegram or facsimile
transmission) addressed as provided below and if either
(a) actually delivered at said address, or (b) in the case of a
letter, three business days shall have elapsed after the same
shall have been deposited in the United States mail, postage
prepaid and registered or certified, return receipt requested, or
sent by reputable overnight courier:
If to Xx. Xxxx, to:
Xxxxxx X. Xxxx, D.D.S.
0000 Xxxxxxxx Xxxxxx - Xxxxx 0
Xxxx, Xxxxxx 00000
If to the OMEGA, to:
Omega Orthodontics, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx
and in any case at such other address as the addressee shall have
specified by written notice. All periods of notice shall be
measured from the date of delivery thereof.
(g) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State.
(h) Amendment. This Agreement may be amended at any
time by agreement of the parties, provided that any amendment
shall be in writing and executed by the parties.
(i) Severability. If any provision of this Agreement
is held by a court of competent jurisdiction to be invalid or
unenforceable, (i) the parties shall amend this Agreement in
order to carry out the intent and essential business purposes of
this Agreement as closely possible within the requirements of
applicable provisions of Law as determined by such a court, and
(ii) the remaining provisions will nevertheless continue in full
force and effect.
(j) Fees and Expenses. The New PC, Xx. Xxxx and the
MSO and OMEGA each shall bear their own expenses, including,
without limitation, attorneys' and accountants' fees, incurred in
connection with the preparation of this Agreement and the
transactions contemplated hereby.
(k) Exhibits and Schedules. All attachments and
schedules attached to this Agreement are incorporated herein by
this reference and all references herein to "Agreement" shall
mean this Agreement together with all such exhibits and
schedules.
(l) Time of Essence. Time is expressly made of the
essence of this Agreement in each and every provision hereof of
which time of performance is a factor.
(m) Attorneys' Fees. Should any of the parties hereto
institute any action or proceeding to enforce this Agreement or
any provision hereof (including without limitation, arbitration),
or for damages by reason of any alleged breach of this Agreement
or of any provision hereof, or for a declaration of rights
hereunder (including, without limitation, by means of
arbitration), the prevailing party in any such action or
proceeding shall be entitled to receive from the other party all
costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred by the prevailing party in connection
with such action or proceeding.
(n) Further Assurances. The parties shall take such
actions and execute and deliver such further documentation as may
reasonably be required in order to give effect to the
transactions contemplated by this Agreement and the intentions of
the parties hereto.
(o) Rights Cumulative. The various rights and
remedies herein granted to the respective parties hereto shall be
cumulative and in addition to any other rights any such party may
be entitled to under law. The exercise of one or more rights or
remedies by a party shall not impair the right of such party to
exercise any other right or remedy, at law or equity.
18. Alternative Dispute Resolution.
18.1 General.
(a) If a dispute arises under this Agreement which cannot
be resolved informally by the parties, any party may invoke the
procedures set forth in Exhibit D hereto and the parties agree to
use these procedures, except paragraph (b) of this Section 18,
prior to any party pursuing other available remedies. The
parties will meet and attempt in good faith to resolve any
controversy or claim arising out of or relating to this
Agreement.
(b) Notwithstanding anything in this Section 18 to the
contrary, nothing in this Section 18 shall preclude any party
from seeking a preliminary injunction or other provisional
relief, either prior to or during the proceeding provided for in
this section, if in its judgment such action is necessary to
avoid irreparable damage or to preserve the status quo.
18.2 Waiver of Jury. With respect to any dispute
arising under or in connection with this Agreement or any related
agreement, as to which legal action nevertheless occurs, each
party hereby irrevocably waives all rights it may have to demand
a jury trial. This waiver is knowingly, intentionally and
voluntarily made by the parties and each party acknowledges that
no person acting on behalf of the other party has made any
representation of fact to induce this waiver of trial by jury or
in any way modified or nullified its effect. The parties each
further acknowledge that it has been represented (or has had the
opportunity to be represented) in the signing of this Agreement
and in the making of this waiver by independent legal counsel,
selected of its own free will, and that it has had the
opportunity to discuss this waiver with counsel. Each party
further acknowledges that it has read and understands the meaning
and ramifications of this waiver provision.
INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the New PC, Xx. Xxxx, MSO and OMEGA have
executed this Agreement as of the date first above written by
their duly authorized representatives as set forth below.
"NEW PC"
XXXXXX X. XXXX, D.D.S., M.S., LTD.,
a Nevada corporation
By: /s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx, President
XX. XXXX
/s/ Xxxxxx X. Xxxx, D.D.S.
Xxxxxx X. Xxxx, D.D.S.
"MSO"
OMEGA ORTHODONTICS OF RENO, INC.
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx, President
"OMEGA"
OMEGA ORTHODONTICS, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx, President and
Chief Executive Officer
SPOUSAL JOINDER AND CONSENT
I am the spouse of Xxxxxx X. Xxxx, D.D.S., the sole
Stockholder of Xxxxxx X. Xxxx, D.D.S., M.S., Ltd. To the extent
that I have any interest in any of the Capital Stock (as that
term is defined in the Stock Put/Call Option and Successor
Designation Agreement), I hereby join in such Agreement and agree
to be bound by its terms and conditions to the same extent as my
spouse. I have read the Stock Put/Call Option and Successor
Designation Agreement, understand its terms and conditions, and
to the extent that I have felt it necessary, I have retained
independent legal counsel to advise me concerning the legal
effect of this Stock Put/Call Option Agreement and this Spousal
Joinder and Consent.
I understand and acknowledge that each of the MSO and OMEGA is
significantly relying on the validity and accuracy of this
Spousal Joinder and Consent in entering into this Stock Put/Call
Option and Successor Designation Option Agreement.
Executed this day of January, 1998.
Signature:
Printed or Typed Name:
EXHIBIT A
ENDODONTIC OFFICES
The offices and related leasehold improvements constituting the
Endodontic Offices are located at 0000 Xxxxxxxx Xxxxxx, Xxxxx 0,
Xxxx, Xxxxxx 00000.
EXHIBIT B
STOCK
The authorized capital stock of the New PC is 2,500 shares
of common stock, no par value. ___________shares of the common
stock of the New PC are issued and are outstanding, all of which
shares are evidenced by Certificate No. 1 issued in the name of
Xxxxxx X. Xxxx.
EXHIBIT C
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT ("Agreement") is made as of this
day of
_______________, ____ by and between ____________________, D.D.S.
("Dr. _____________"), who is duly licensed to practice
endodontics in the state of _____________, and
___________________, a professional corporation (the "New PC")
incorporated under the laws of the State.
All capitalized terms used herein and not otherwise
expressly defined shall have the same meanings set forth in that
certain Stock Put/Call Option and Successor Designation Agreement
("Stock Agreement") dated ____________, 199_ by and among Dr.
__________________, the New PC, Omega Orthodontics, Inc., a
Delaware corporation ("Omega") and Omega Orthodontics of
____________________, Inc., a Delaware corporation (the "MSO")
which is a wholly owned subsidiary of Omega.
RECITALS
A. Dr. _________________ is the sole owner of the Capital
Stock of the New PC and desires to transfer all of his right,
title and interest in and to such Capital Stock pursuant to
Section 8 of the Stock Agreement to the Purchaser.
B. The Purchaser has agreed to join the Stock Agreement
and to enter into an employment agreement with the New PC on
terms and conditions acceptable to and approved by the MSO.
C. As a condition to the transfer by Dr. ______________ of
his Capital Stock to the Purchaser pursuant to Section 8 of the
Stock Agreement, Dr. ______________ has agreed to enter into an
agreement in the form of this Agreement to be delivered to the
New PC upon the closing of the transfer of his Capital Stock
pursuant to Section 8 of the Stock Agreement.
NOW, THEREFORE, in consideration of the foregoing promises
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows.
1. Dr. _______________'s Covenants . During the term of
this Agreement in the Service Area described in Section 4 below,
Dr. __________________ shall not (directly or indirectly through
any business, enterprise, venture, partnership, corporation or
any other entity controlled directly or indirectly by Dr.
_______________, whether alone or as a partner, stockholder,
creditor or otherwise):
(a) Provide endodontic or other dental services, or
engage, participate, aid, assist, or hold any interest in any
business or the provision of any managed care plan service which
is, or as of Dr. ______________'s engagement or participation,
would become, competitive with the New PC's endodontic practice
business;
(b) Engage or contract (other than with the MSO or any
of the MSO's affiliates) for the provision of any management
services for Dr. _____________ or any person employed or under
contract to Dr. ________________ (as applicable) which are the
same as or substantially similar to any of the services that the
MSO or any of the MSO's affiliates furnishes;
(c) Solicit or assist any other person to solicit any
business relating to a competing line of business (other than for
the New PC or any of its affiliates) from any present or
potential patient, customer (including all third party payors) of
Dr. _________________, the New PC or any of their respective
affiliates;
(d) Commit any other act or assist others to commit
any other act which might injure the business of the New PC, the
MSO or any of their respective affiliates;
(e) Directly or indirectly employ, contract, solicit
or encourage any employee or other person under contract with
the New PC, the MSO or any of their respective affiliates to
leave the employ of any such entity; and
(f) Directly or indirectly solicit, request, advise,
or encourage any present or future supplier, patient, customer or
employee of the New PC, the MSO or their respective affiliates to
withdraw, curtail or cancel its business dealings with the New
PC, the MSO or their respective affiliates, or take any actions
that might impair the relations of the New PC, the MSO or any of
their respective affiliates and their respective suppliers,
patients, customers, employees or others.
2. Dr. _______________'s Representations. Dr.
______________ specifically acknowledges, represents, and
warrants that: (i) his covenants set forth in this Agreement are
being given in connection with the sale of the Capital Stock to
the Purchaser pursuant to Section 8 of the Stock Agreement; (ii)
such covenants are reasonable and necessary to protect the
legitimate interests of the New PC, the MSO and Omega; and (iii)
the New PC, the MSO and Omega would not have consented to such
sale in the absence of such restrictions. Dr. _______________
acknowledges that this Agreement is subject to all
representations, warranties and covenants of Dr. _______________
in the Stock Agreement.
3. Service Area. The Service Area to which Dr.
________________'s covenants in Section 1 apply is defined as the
area within a fifteen (15) mile radius (or the maximum radius
permitted by law, if less) of each endodontic office or other
endodontic facility owned, operated or managed by Dr.
________________ or the New PC now existing or hereafter
established.
4. Term . The term of this Agreement commences as of the
day and year first above written and continues for twenty-four
(24) months.
5. Payment. As consideration for Dr. ________________'s
agreement not to compete and other covenants herein, the New PC
shall pay Dr. ________________ upon the execution of this
Agreement by the New PC the amount of One Thousand Dollars
($1,000).
6. Remedies. In the event of a breach by Dr.
_______________ of this Agreement, the New PC shall be entitled
to receive, on behalf of the MSO, from Dr. _______________, in
addition to other remedies and not by way of an election of
remedies, liquidated damages equal in amount to the greater of
(a) Dr. _________________'s income, as shown on the W-2 form
prepared by the New PC for the most recent calendar year or (b)
$300,000. Any amounts received by the New PC pursuant to the
prior sentence shall be paid to the MSO by the New PC immediately
following receipt by the New PC. Should a court fail to enforce
the liquidated damages provision set forth in the first sentence
of this
Section 6, the parties acknowledge and agree that, absent such
liquidated damages, a breach by Dr. ________________ of this
Agreement will cause irreparable damage to the New PC, the exact
amount of which will be difficult to ascertain, and that remedies
at law for any such breach will be inadequate. Accordingly, Dr.
________________ agrees that in such case, the New PC shall be
entitled to injunctive relief and Dr. _______________ agrees not
to assert in any proceeding that the New PC has an adequate
remedy at law. Each party shall pay its own fees and expenses,
including attorneys fees, in any action to enforce this
Agreement.
7. Third Party Beneficiaries. The parties expressly
understand and agree that the MSO and Omega are third party
beneficiaries of this Agreement and shall be entitled to all of
the rights and remedies provided herein to the New PC and shall
be entitled to enforce the terms of this Agreement.
8. Miscellaneous .
(a) Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties and
their respective heirs (as applicable), legal representatives,
and permitted successors and assigns. No party may assign this
Agreement or the rights, interests or obligations hereunder;
provided, however, that the New PC may assign its rights,
interests and obligations to the MSO, Omega and their affiliates
without the consent of Dr. _____________. Any assignment or
delegation in contravention of this Section shall be null and
void.
(b) Counterparts. This Agreement, and any amendments
thereto, may be executed in counterparts, each of which shall
constitute an original document, but which together shall
constitute one and the same instrument.
(c) Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
(d) Amendment. This Agreement may not be amended
except in a writing executed by all parties.
(e) Time of Essence. Time is expressly made of the
essence of this Agreement and each and every provision hereof of
which time of performance is a factor.
(f) Notices. Any notices required or permitted to be
given hereunder by any party to the other shall be in writing and
shall be deemed delivered upon personal delivery; twenty-four
(24) hours following deposit with a courier for overnight
delivery; or seventy-two (72) hours following deposit in the U.S.
Mail, registered or certified mail, postage prepaid, return-
receipt requested, addressed to the parties at the following
addresses or to such other addresses as the parties may specify
in writing:
If to Dr. ________________: Dr. ______________________
______________________
______________________
If to the New PC: ________________________
________________________
________________________
(g) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Nevada.
(h) Severability. If any provision or portion of this
Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, the remainder of this Agreement will
nevertheless continue in full force and effect and shall not be
invalidated or rendered unenforceable or otherwise adversely
affected, unless such invalidity or unenforceability would defeat
an essential business purpose of this Agreement. Without
limiting the generality of the foregoing, if the provisions of
this Agreement shall be deemed to create a restriction, which is
unreasonable as to either duration or geographical area or both,
the parties agree that the provisions of this Agreement shall be
enforced for such duration and in such geographic area as any
court of competent jurisdiction on may determine to be
reasonable.
(i) Attorneys' Fees. Should either the New PC or Dr.
________________ institute any action or procedure to enforce
this Agreement or any provision hereof, or for damages by reason
of any alleged breach of this Agreement or of any provision
hereof, or for a declaration of rights hereunder (including
without limitation arbitration), the prevailing party in any such
action or proceeding shall be entitled to receive from the other
party all costs and expenses, including without limitation
reasonable attorneys' fees, incurred by the prevailing party in
connection with such action or proceeding.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement of the day and year first written above.
"DR. ________________" "NEW PC"
_______________________________
______________________________ By:
___________________________
President
EXHIBIT D
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
A. Method of Invoking ADR Procedures
1. These procedures may be invoked by any party to an
agreement which incorporates these procedures by giving written
notice to the other of the dispute and designating a person with
decision-making authority (the "representative") to act on behalf
of the disputing party regarding the dispute. The other party
shall be required to respond to the disputing party's notice
within five (5) business days by designating in writing its own
representative. A party may choose more than one person to
represent it. If a party appoints only one representative, one
or more of its officers may nonetheless attend such meetings.
2. The parties, each acting through its representative,
shall meet at a mutually acceptable time and place within five
business days after the non-disputing party designates its
representative to the other. At that meeting, the parties shall
attempt in good faith to negotiate a resolution of the dispute,
or failing that, to agree on a method for resolving the claim or
dispute.
3. If, within ten (10) business days after the first
meeting or within such longer period of time as the parties may
mutually agree, the parties have not succeeded in negotiating a
resolution of the claim or dispute or agreeing on a dispute
resolution mechanism, they shall submit the dispute to mediation
in accordance with the procedures set forth herein.
4. The parties will jointly appoint a mutually acceptable
mediator to mediate the dispute. If the parties are unable to
agree on a mutually acceptable mediator within five (5) days
after the conclusion of the negotiations described in paragraph 3
above, then the parties shall select a neutral third party from
the Center for Public Resources, New York, New York ("CPR")
Panels of Neutrals or the American Arbitration Association
("AAA"), with the assistance of CPR or AAA, unless the parties
agree otherwise in finding a mutually acceptable mediator.
5. The New PC and the MSO shall each bear 50% of the fees
and costs of the mediator and any fees and costs of CPR or AAA.
6. The parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of thirty
(30) days from appointment of a mediator by any of the parties or
the CPR or AAA.
B. Mediation procedures
1. The mediator shall be neutral and impartial.
2. The mediator shall control the procedural aspects of
the mediation. The parties will cooperate fully with the
mediator.
(a) The mediator is free to meet and
communicate separately with each party.
(b) The mediator will decide when to hold
joint meetings with the parties and when to hold
separate meetings. There shall be no stenographic
record of any meeting. Formal rules of evidence
will not apply.
(c) The mediator may request that there be
no direct communication between the parties or
between their attorneys without the concurrence of
the mediator.
3. Each party may be represented by more than one person,
e.g., one or more of its officers and an attorney. Each party
will have a representative fully authorized to negotiate a
settlement of the dispute present.
4. The process will be conducted expeditiously.
5. The mediator will not transmit information received
from any party to another party or any third person unless
authorized to do so by the party transmitting the information.
6. The entire process is confidential. The parties and
the mediator will not disclose information regarding the process,
including settlement terms, to third persons, unless the parties
otherwise agree. The process shall be treated as a compromise
negotiation for purposes of the Federal Rules of Evidence and
state rules of evidence.
7. The parties will refrain from pursuing administrative
and/or judicial remedies during the mediation process, except as
otherwise expressly provided in the agreement which incorporates
these procedures.
8. Unless all parties and the mediator otherwise agree in
writing,
(a) The mediator will be disqualified as a
witness, consultant or expert in any pending or
future investigation, action or proceeding
relating to the subject matter of the mediation
(including any investigation, action or proceeding
which involves persons not party to this
mediation); and
(b) The mediator and any documents and
information in the mediator's possession will not
be subpoenaed in any such investigation, action or
proceeding, and all parties will oppose any effort
to have the mediator and documents subpoenaed.
9. If the dispute goes into arbitration, the mediator
shall not serve as an arbitrator, unless the parties and the
mediator otherwise agree in writing.
10. The mediator, if a lawyer, may freely express views to
the parties on the legal issues of the dispute.
11. The mediator shall not be liable for any act or
omission in connection with the mediation.
12. The mediator may withdraw at any time by written notice
to the parties (i) for overriding personal reasons, (ii) if the
mediator believes that a party is not acting in good faith, or
(iii) if the mediator concludes that further mediation efforts
would not be useful.
C. Binding Arbitration
If the parties do not resolve the dispute through mediation
within the period provided in Part A above, the parties shall
submit the matter to binding arbitration in Boston, Massachusetts
before a qualified sole arbitrator in accordance with the then
current CPR Rules for Non-Administered Arbitration of Business
Disputes or comparable AAA rules. The sole arbitrator shall be
agreed upon by the parties within twenty (20) days after either
party elects to submit any issue to arbitration or, failing that,
shall be selected by CPR or AAA A qualified arbitrator is one
who is familiar with the principal subject matter of the issues
to be arbitrated such as by way of example, healthcare services
industry matters, management consulting services generally or
business law/corporate matters generally. Judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction. The arbitrator shall not have the authority to
award multiple, punitive or consequential damages under any
circumstances.
