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EXHIBIT 10.1
ORTHODONTIC CENTERS OF AMERICA, INC.
STOCK POOL PROGRAM
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ORTHODONTIC CENTERS OF AMERICA, INC.
STOCK POOL PROGRAM
PREAMBLE
WHEREAS, Orthodontic Centers of America, Inc., a Delaware corporation
("OCA"), OCA Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of OCA ("OCA Merger Sub"), and OrthAlliance, Inc., a Delaware
corporation ("OrthAlliance"), are parties to that certain Agreement and Plan of
Merger, dated as of May 16, 2001 (the "Merger Agreement"), among such parties,
pursuant to which OCA Merger Sub is to merge with and into OrthAlliance, with
OrthAlliance thereby becoming a wholly-owned subsidiary of OCA (the "Merger"),
subject to various conditions; and
WHEREAS, OCA desires to establish a program through which OCA may grant
shares of its common stock, $.01 par value per share ("OCA Common Stock"), to
certain eligible individuals (each such eligible individual, a "Participant")
who are OrthAlliance Affiliated Practitioners and who timely execute and deliver
an Amendment to OrthAlliance Service/Consulting Agreement and Amendment to
Employment Agreement and/or OCA Business Services Agreement (each as defined
below), subject to the terms described herein and completion of the Merger;
NOW, THEREFORE, OCA hereby establishes the Orthodontic Centers of
America, Inc. Stock Pool Program (the "Program").
ARTICLE I. ELIGIBILITY
In order for any person to be eligible to be a Participant in the
Program, or to be granted shares of OCA Common Stock under the Program or any
Participation Agreement (as defined below), he or she must meet or comply with
each of the following:
1.1 Must Be An OrthAlliance Affiliated Practitioner. In order to be a
Participant in the Program and to be issued any shares of OCA Common Stock under
or pursuant to the Program or any Participation Agreement (as defined below), a
person must be a licensed orthodontist or pediatric dentist who both (i) owns,
beneficially and of record, shares of capital stock of, or partnership,
membership or other equity interests in, a professional corporation or other
professional entity (each, an "OrthAlliance Affiliated PC") that is a party to a
written long-term service, management service, consulting or similar long-term
agreement with OrthAlliance and/or a subsidiary thereof pursuant to which
OrthAlliance and/or its subsidiary is providing business management or
consulting services for such Participant's orthodontic or pediatric dental
practice in exchange for a consulting or service fee (each an "OrthAlliance
Service/Consulting Agreement"), and (ii) is a full-time employee as an
orthodontist or pediatric dentist, as applicable, of such OrthAlliance
Affiliated PC (each such person, an "OrthAlliance Affiliated Practitioner").
Each Participant must also be a party to a written employment agreement (each,
an "Employment Agreement") with his or her respective OrthAlliance Affiliated
PC, pursuant to which such Participant provides orthodontic or pediatric dental
services as a full-time employee of such OrthAlliance Affiliated PC.
1.2 Must Amend Employment and Service/Consulting Agreement or Enter Into New OCA
Business Services Agreement. In order to be a Participant in the Program and to
be issued any shares of OCA Common Stock under or pursuant to the Program or any
Participation Agreement, an OrthAlliance Affiliated Practitioner must also,
along with his or her respective OrthAlliance Affiliated PC, execute and deliver
their respective (i) Amendments (as defined below) and/or (ii) OCA Business
Services Agreement (as defined below) no later than the earlier to occur of
September 30, 2001 or the effective time of the Merger. In addition, if such
OrthAlliance Affiliated PC is partially
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owned by one or more other OrthAlliance Affiliated Practitioners, then each of
such other OrthAlliance Affiliated Practitioners must also execute and deliver
their respective Amendments and/or OCA Business Services Agreement) no later
than the earlier to occur of September 30, 2001 or the effective time of the
Merger.
For purposes of the Program:
"Amendments" means an Amendment to Employment Agreement (as defined
below) and an Amendment to OrthAlliance Service/Consulting Agreement (as defined
below).
"Amendment to Employment Agreement" shall mean a written amendment to
the OrthAlliance Affiliated Practitioner's respective Employment Agreement, in
form and substance satisfactory to OCA and its counsel, which amendment shall be
in full force and effect upon and following the effective time of the Merger,
include OrthAlliance as a third party beneficiary and provide for an agreement
by such OrthAlliance Affiliated Practitioner and the applicable OrthAlliance
Affiliated PC to continue the employment of such OrthAlliance Affiliated
Practitioner by such OrthAlliance Affiliated PC as an orthodontist or pediatric
dentist, as applicable, for a period of at least three years following the
closing date of the Merger.
"Amendment to OrthAlliance Service/Consulting Agreement" means a
written amendment to the respective OrthAlliance Service/Consulting Agreement
relating to the OrthAlliance Affiliated Practitioner's OrthAlliance Affiliated
Practice and the applicable OrthAlliance Affiliated PC employing the
OrthAlliance Affiliated Practitioner, in form and substance satisfactory to OCA
and its counsel, which amendments shall be in full force and effect upon and
following the effective time of the Merger, and provide for (A) an agreement by
such OrthAlliance Affiliated Practitioner and OrthAlliance Affiliated PC to
continue the employment of such OrthAlliance Affiliated Practitioner by such
OrthAlliance Affiliated PC as an orthodontist or pediatric dentist, as
applicable, for a period of at least three years following the closing date of
the Merger, (B) an agreement by such OrthAlliance Affiliated Practitioner to
guarantee, during the term of his or her employment by such OrthAlliance
Affiliated PC, the payment of service, consulting and other fees and amounts,
reimbursement of center expenses and other performance by such OrthAlliance
Affiliated PC under such OrthAlliance Service/Consulting Agreement, and (C) an
agreement by such OrthAlliance Affiliated Practitioner and OrthAlliance
Affiliated PC to utilize only OCA's and its subsidiaries' proprietary computer
software and operating systems in connection with patient accounting and
scheduling, payroll, supplies ordering and other business functions of such
OrthAlliance Affiliated Practice, and to maintain the current status of such
OrthAlliance Affiliated Practice's advertising or non-advertising, as the case
may be, to the general public, unless otherwise mutually agreed in writing
between OCA or its subsidiary and such OrthAlliance Affiliated PC.
"OCA Business Services Agreement" means a written long-term business
services agreement among the OrthAlliance Affiliated Practitioner, his or her
respective OrthAlliance Affiliated PC and OrthAlliance (or a subsidiary of OCA),
in form and substance satisfactory to OCA and its counsel and based on OCA's
form of such agreement (including, without limitation, the service fee,
restrictive covenant and termination provisions thereof), which agreement shall
be in full force and effect upon and following the effective time of the Merger,
and pursuant to which OCA and/or its subsidiary will provide business management
or consulting services for such OrthAlliance Affiliated Practitioner's
orthodontic or pediatric dental practice in exchange for a consulting or service
fee.
"OrthAlliance Affiliated Practice" means an orthodontic or pediatric
dental practice that is owned by the OrthAlliance Affiliated Practitioner or his
or her respective OrthAlliance Affiliated PC, and is the subject of an
OrthAlliance Service/Consulting Agreement.
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1.3 No Litigation, Notice of Termination or Non-Compliance. An OrthAlliance
Affiliated Practitioner may not be a Participant in the Program, and will not be
issued any shares of OCA Common Stock under or pursuant to the Program or any
Participation Agreement, if:
(a) Such OrthAlliance Affiliated Practitioner and/or his or her
OrthAlliance Affiliated PC is a party to any pending or threatened litigation or
other legal proceedings against or involving OrthAlliance, OCA or their
subsidiaries. If any such litigation or legal proceedings has been commenced or
threatened, such OrthAlliance Affiliated Practitioner may become a Participant
only if the same has been dismissed with prejudice or fully withdrawn in a
manner acceptable to OCA;
(b) Such OrthAlliance Affiliated Practitioner and/or his or her
OrthAlliance Affiliated PC has threatened or given notice of termination or
intention to terminate their respective OrthAlliance Service/Consulting
Agreement. If any such notice has been threatened or given, such OrthAlliance
Affiliated Practitioner may become a Participant only if the same has been fully
withdrawn in a manner acceptable to OCA; and/or
(c) Such OrthAlliance Affiliated Practitioner and/or his or her
OrthAlliance Affiliated PC is in default or breach of, or is not in compliance
with, their obligation to pay service or consulting fees under the applicable
OrthAlliance Service/Consulting Agreement.
1.4 Must Execute Participation Agreement. In order to be a Participant in the
Program and to be issued shares of OCA Common Stock under or pursuant to the
Program or any Participation Agreement, an OrthAlliance Affiliated Practitioner
must execute and deliver to OCA, and OCA must have executed and delivered to
such OrthAlliance Affiliated Practitioner, a written participation agreement
with OCA (each, a "Participation Agreement"), which participation agreement
shall be in form and substance satisfactory to OCA and its counsel and in full
force and effect upon and following the effective time of the Merger, and shall
provide for such OrthAlliance Affiliated Practitioner's participation in the
Program subject to each of the terms and conditions set forth herein and in such
Participation Agreement.
1.5 Conditioned on Completion of the Merger. Participation in the Program, and
the issuance of any shares of OCA Common Stock or other awards under or pursuant
to the Program or any Participation Agreement, is expressly conditioned upon
completion of the Merger pursuant to the Merger Agreement. If the Merger
Agreement is voided or terminated (other than upon completion of the Merger),
OCA will thereupon and thereafter have no further obligations under the Program
or any Participation Agreement or otherwise with respect to the Program, any
Participation Agreement and any participation or awards thereunder, and any and
all awards under and participation in the Program shall thereupon automatically
terminate without any obligation or liability on the part of OCA or Affiliate
(as defined below) thereof.
ARTICLE II. STOCK AWARDS
Eligible Participants in the Program will be awarded shares of OCA
Common Stock under the Program, subject to the terms and conditions of the
Program, as follows.
2.1 Service Fee/Tenure Based Awards. Eligible Participants will be granted
(subject to the terms and conditions of the Program) under the Program the
greater of:
(a) 500 shares of OCA Common Stock, or
(b) A number of shares of OCA Common Stock equal to the sum (rounded to
the nearest whole number) of:
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(i) (A) 30, times (B) the result of the 12 Months Service
Fees (as defined below), with respect to such
Participant, divided by $10,000,
PLUS
(ii) (A) 10, times (B) the number of whole calendar months
elapsed during the term of such Participant's (or his
or her respective OrthAlliance Affiliated PC's)
respective OrthAlliance Service/Consulting Agreement
as of the effective date of the Merger, but in no
event later than December 31, 2001.
For purposes of the Program, "12 Months Service Fees" mean service, consulting
or management fees paid to OrthAlliance or its subsidiary by a Participant or
his or her respective OrthAlliance Affiliated PC during and with respect to the
period from April 1, 2000 through March 31, 2001 (with certain adjustments and
annualization for certain specified OrthAlliance Affiliated PC's as described in
Section 2.4 of the Merger Agreement) pursuant to the applicable OrthAlliance
Service/Consulting Agreement, but excluding any amounts reimbursed, paid, earned
or accrued with respect to center expenses, operating and non-operating expenses
incurred in the operation of the applicable OrthAlliance Affiliated Practice or
other expenses.
2.2 Timing Based Awards. In addition, the first 180 eligible Participants who
execute and deliver their respective Amendments and/or OCA Business Services
Agreement, by or within the date or dates set forth below, will be granted
(subject to the terms and conditions of the Program) shares of OCA Common Stock
under the Program as follows:
(a) By June 22, 2001:
(i) 900 shares of OCA Common Stock,
PLUS
(ii) 200 shares of OCA Common Stock for each additional 20
of those Participants who execute and deliver their
respective Amendments and/or OCA Business Services
Agreement from June 23, 2001 through July 27, 2001;
(b) June 23, 2001 through June 29, 2001:
(i) 700 shares of OCA Common Stock,
PLUS
(ii) 200 shares of OCA Common Stock for each additional 20
of those Participants who execute and deliver their
respective Amendments and/or OCA Business Services
Agreement from June 30, 2001 through July 27, 2001;
EXCEPT that, eligible Participants who were issued, or whose
OrthAlliance Affiliated PC's were issued, shares of
OrthAlliance common stock in connection with initially
entering into their respective OrthAlliance Service/Consulting
Agreement or their related sale of assets or capital stock to
OrthAlliance or its subsidiary, would be granted:
(i) 900 shares of OCA Common Stock,
PLUS
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(ii) 200 shares of OCA Common Stock for each additional 20
of those Participants who execute and deliver their
respective Amendments and/or OCA Business Services
Agreement from June 30, 2001 through July 27, 2001;
(c) June 30, 2001 through July 6, 2001:
(i) 600 shares of OCA Common Stock,
PLUS
(ii) 200 shares of OCA Common Stock for each additional 20
of those Participants who execute and deliver their
respective Amendments and/or OCA Business Services
Agreement from July 7, 2001 through July 27, 2001;
(d) July 7, 2001 through July 13, 2001:
(i) 500 shares of OCA Common Stock,
PLUS
(ii) 200 shares of OCA Common Stock for each additional 20
of those Participants who execute and deliver their
respective Amendments and/or OCA Business Services
Agreement from July 14, 2001 through July 27, 2001;
(e) July 14, 2001 through July 20, 2001:
(i) 400 shares of OCA Common Stock,
PLUS
(ii) 200 shares of OCA Common Stock for each additional of
those Participants who execute and deliver their
respective Amendments and/or OCA Business Services
Agreement from July 21, 2001 through July 27, 2001;
and
(f) July 21, 2001 through July 27, 2001:
(i) 300 shares of OCA Common Stock.
2.3 Award to Clinical Advisory Committee Members. An eligible Participant shall
be awarded (subject to the terms of the Program) an additional grant of 2,500
shares of OCA Common Stock if he or she (1) enters into the Amendments or an OCA
Business Services Agreement as required under Section 1.2 by June 22, 2001, and
(2) is selected by OCA and OrthAlliance to serve on OCA's Clinical Advisory
Committee upon completion of the Merger, and such Participant accepts and serves
in such position.
2.4 Pro Rata Basis for Practices with Multiple Owners. If a Participant's
OrthAlliance Affiliated PC is partially owned by one or more other OrthAlliance
Affiliated Practitioners, then the number of shares of OCA Common Stock granted
pursuant to Section 2.1(b) above for such Participant shall be calculated by
multiplying the number of shares of OCA Common Stock that would otherwise be
granted to such person pursuant to such Section 2.1(b) by his or her percentage
of equity ownership of such OrthAlliance Affiliated PC.
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2.5 Timing and Conditions of Grants. Shares of OCA Common Stock awarded under
the Program shall be issuable to Participants in three annual installments, as
follows:
(a) For each Participant, one-third of the total number of shares of
OCA Common Stock (rounded to the nearest whole number) to be issued to such
Participant under the Program will be issued to such Participant following each
of the first, second and third anniversaries of the effective date of the Merger
if the amount of service or consulting fees (excluding any amounts reimbursed,
paid, earned or accrued with respect to center expenses, operating and
non-operating expenses incurred in the operation of the applicable OrthAlliance
Affiliated Practice or other expenses) paid to OCA or its subsidiary by the
Participant and/or his or her OrthAlliance Affiliated PC during and with respect
to the 12 calendar months immediately preceding that particular anniversary
pursuant to the applicable OCA Business Services Agreement or OrthAlliance
Service/Consulting Agreement ("Service Fees") is at least 90% (the "90% Minimum
Target") of the amount of Service Fees such Participant and/or OrthAlliance
Affiliated PC paid to OrthAlliance or its subsidiary during and with respect to
the 12 calendar months immediately preceding the Merger.
(b) However, if the 90% Minimum Target is not achieved in the 12
calendar month period immediately preceding the first or second anniversary of
the effective date of the Merger (each, an "Earlier Period), but is achieved
during the 12 calendar month period immediately preceding the second or third,
as applicable, anniversary of the effective date of the Merger (each, a "Later
Period"), then the installment of shares of OCA Common Stock issuable with
respect to such Earlier Period will be issued following such Later Period.
2.6 Only Whole Shares. Only whole shares of OCA Common Stock will be issued or
awarded under the Program; no fractional shares shall be issued.
ARTICLE III. ADJUSTMENT UPON CERTAIN CORPORATE CHANGES
3.1 Adjustments to Shares. The number of shares of OCA Common Stock subject to
an outstanding award of shares of OCA Common Stock granted to a Participant
under and pursuant to the Program shall be adjusted as the Committee (as defined
below) determines (in its sole discretion) to be appropriate, in the event that:
(a) OCA or an Affiliate (as defined below) effects one or more stock
dividends, stock splits, reverse stock splits, subdivisions, consolidations or
other similar events;
(b) OCA or an Affiliate engages in a transaction to which section 424
of the Code (as defined below) applies; or
(c) there occurs any other event which in the judgment of the Committee
necessitates such action.
For purposes of the Program:
(i) "Affiliate" means a "parent corporation," as defined in
section 424(e) of the Code, or "subsidiary corporation," as defined in
section 424(f) of the Code, of OCA.
(ii) "Code" means the U.S. Internal Revenue Code of 1986, as
amended.
3.2 No Adjustment upon Certain Transactions. The issuance by OCA of shares of
stock of any class, or securities convertible into shares of stock of any class,
for cash or property, or for labor or services rendered, either upon direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of OCA convertible into such shares or other
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securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to, outstanding awards.
ARTICLE IV. LEGAL COMPLIANCE CONDITIONS
4.1 General. No OCA Common Stock shall be issued under the Program except in
compliance with all federal or state laws and regulations (including, without
limitation, withholding tax requirements), federal and state securities laws and
regulations and the rules of all securities exchanges or self-regulatory
organizations on which OCA's shares may be listed. OCA shall have the right to
rely on an opinion of its counsel as to such compliance. Any certificate issued
to evidence shares of OCA Common Stock granted under the Program may bear such
legends and statements as the Committee upon advice of counsel may deem
advisable to assure compliance with federal or state laws and regulations. No
OCA Common Stock shall be issued and no certificate for shares shall be
delivered until OCA has obtained such consent or approval as the Committee may
deem advisable from any regulatory bodies having jurisdiction over such matters.
4.2 Representations by Participants. As a condition to the issuance of OCA
Common Stock, OCA may require a Participant to represent and warrant at the time
of grant that the Participant does not have a present intention to sell or
distribute such shares. At the option of OCA, a stop transfer order against any
shares of stock may be placed on the official stock books and records of OCA,
and a legend indicating that the stock may not be pledged, sold or otherwise
transferred unless an opinion of counsel was provided (concurred in by counsel
for OCA) and stating that such transfer is not in violation of any applicable
law or regulation may be stamped on the stock certificate in order to assure
exemption from registration. The Committee may also require such other action or
agreement by the Participants as may from time to time be necessary to comply
with federal or state securities laws. This provision shall not obligate OCA or
any Affiliate to undertake registration of stock hereunder.
ARTICLE V. ADMINISTRATION AND AMENDMENT
5.1 Administrative Committee. The Program shall be administered by a committee
composed of the chief executive officer and chief financial officer of OCA and
any other officer of OCA appointed to such committee by the chief executive
officer of OCA (the "Committee"). The express grant in the Program of any
specific power to the Committee shall not be construed as limiting any power or
authority of the Committee. Any decision made or action taken by the Committee
to administer the Program shall be final and conclusive. No member of the
Committee shall be liable for any act done in good faith with respect to the
Program or any Participation Agreement. In addition to all other authority
vested with the Committee under the Program, the Committee shall have complete
authority to:
(a) Interpret all provisions of the Program;
(b) Prescribe the form of any Participation Agreement;
(c) Make amendments to all Participation Agreements;
(d) Adopt, amend, and rescind rules for Program administration; and
(e) Make all determinations it deems advisable for the administration
of the Program.
5.2 Determination of Financial Performance. The authorities of the Committee
described in Section 5.1 include the full discretionary authority to make all
determinations regarding financial performance and related matters referenced in
the Program. Such matters include, but are not
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limited to, whether or not Participants have achieved the standards of financial
performance required to receive awards of OCA Common Stock. The Committee shall
make such determinations by reference to any data and information that it deems
appropriate and, to the extent that such information that is provided by a
Participant is not otherwise subject to disclosure, shall employ reasonable
measures that are designed to keep such information confidential.
5.3 Amendment. OCA may amend or terminate the Program at any time; provided,
however, an amendment that would have a material adverse effect on the rights of
a Participant under an outstanding award of OCA Common Stock is not valid
without the Participant's consent.
ARTICLE VI. GENERAL PROVISIONS
6.1 Unfunded Program. The Program shall be unfunded, and OCA shall not be
required to segregate any assets that may at any time be represented by grants
under the Program. Any liability of OCA to any person with respect to any grant
under the Program shall be based solely upon contractual obligations that may be
created hereunder. No such obligation of OCA shall be deemed to be secured by
any pledge of, or other encumbrance on, any property of OCA.
6.2 Rules of Construction. Headings are given to the articles and sections of
the Program solely as a convenience to facilitate reference. The masculine
gender when used herein refers to both masculine and feminine. The reference to
any statute, regulation or other provision of law shall be construed to refer to
any amendment to or successor of such provision of law.
6.3 Governing Law. The internal laws of the State of Louisiana (without regard
to the choice of law provisions of Louisiana) shall apply to all matters arising
under the Program, to the extent that federal law does not apply.
6.4 Federal Withholding Tax Requirements. To the extent that withholding is
required by law, at the time that any OCA Common Stock is granted, the
Participant shall, upon notification of the amount due, pay to OCA amounts
necessary to satisfy applicable federal, state and local withholding tax
requirements or shall otherwise make arrangements satisfactory to OCA for such
requirements.
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IN WITNESS WHEREOF, the undersigned officer has executed this document
effective as of August 6, 2001.
ORTHODONTIC CENTERS OF AMERICA, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxxxxx, Xx.
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Xxxxxxxxxxx X. Xxxxxxxxx, Xx.
Chairman of the Board, President
and Chief Executive Officer
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