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EXHIBIT 10.19
STOCK PURCHASE AGREEMENT
BY AND AMONG
FNEDC OF NEW JERSEY, INC.,
AND
XXXX XXXXXX, D.D.S.
AND
XXXXXX XXXXXXX, D.D.S.,
THE OWNERS OF THE ISSUED AND OUTSTANDING
CAPITAL STOCK OF
GROUP DENTAL HEALTH ADMINISTRATORS, INC.
Dated as of August 29, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I
PURCHASE AND SALE.............................................................................................. 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES................................................................................. 7
2.1. Representations and Warranties of FNEDC........................................................... 7
(a) Organization, Power and Standing.......................................................... 7
(b) Power and Authority Relative to Transaction............................................... 7
(c) Valid and Binding Obligation.............................................................. 7
(d) Required Consents......................................................................... 8
(e) No Brokers................................................................................ 8
(f) Litigation................................................................................ 8
(i) Disclosure................................................................................ 8
2.2. Representations and Warranties Concerning the Company............................................. 9
(a) Organization, Power and Standing.......................................................... 9
(b) Qualification to do Business.............................................................. 9
(c) Subsidiaries and Interest in Other Entities............................................... 9
(d) Capitalization............................................................................ 9
(e) Certain Outstanding Liabilities........................................................... 10
(g) Title to Properties, Etc.................................................................. 10
(h) Conduct of Business; Absence of Material Adverse Changes.................................. 11
(i) Tax Returns and Payments.................................................................. 14
(j) Compliance with Laws...................................................................... 14
(k) Insurance................................................................................. 15
(l) Employees and Compensation................................................................ 16
(m) Employee Benefits......................................................................... 16
(n) Material Contracts........................................................................ 18
(o) Books and Records......................................................................... 20
(p) Banking Relationships..................................................................... 20
(q) Required Consents, Etc.................................................................... 20
(r) Accounts Receivable....................................................................... 20
(s) Litigation................................................................................ 20
(t) No Medicare Payment Program Providers..................................................... 21
(u) No Brokers................................................................................ 21
(v) Disclosure................................................................................ 21
(w) No Offer.................................................................................. 21
2.3. Representations and Warranties Concerning the Shareholders........................................ 22
(a) Title..................................................................................... 22
(b) Due Issuance.............................................................................. 22
(c) Power and Authority Relative to Transaction............................................... 22
(d) Valid and Binding Obligation.............................................................. 22
(e) Required Consents......................................................................... 22
(f) Litigation................................................................................ 22
(g) No Brokers................................................................................ 23
(h) No Offer...................................................................................23
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ARTICLE III
ADDITIONAL COVENANTS AND AGREEMENTS..................................................................................... 23
3.1. FNEDC's Access to Information..................................................................... 23
3.2. Notices and Consents; Governmental Approvals...................................................... 24
3.3. Assignment of Intellectual Property and Other Documents........................................... 24
3.4. Operation of Business............................................................................. 25
3.5. Preservation of Business.......................................................................... 25
3.6. Notice of Developments............................................................................ 25
3.7. Insurance......................................................................................... 25
3.8. Further Assurances................................................................................ 26
3.9. Survival of Covenants............................................................................. 26
3.11. Assumption of Certain Automobile Leases by Xxxx Xxxxxx............................................ 27
ARTICLE IV
CONDITIONS TO CLOSING................................................................................................... 27
4.1. Conditions Precedent to FNEDC's Obligations....................................................... 27
(a) Representations and Warranties True; Obligations Performed................................ 27
(b) Delivery of Certificates.................................................................. 27
(c) Escrow Agreement.......................................................................... 27
(d) Legal Opinion from Counsel for the Shareholders........................................... 27
(e) Delivery of Other Instruments............................................................. 28
(f) Termination of Plans...................................................................... 28
(g) Required Consents......................................................................... 28
(h) Stock Purchase Agreement.................................................................. 28
(a) Representations and Warranties True; Obligations Performed................................ 28
(b) Deposit................................................................................... 28
(c) Required Consents......................................................................... 28
(d) Escrow Agreement.......................................................................... 28
(e) Legal Opinion from Counsel to FNEDC....................................................... 29
(f) Stock Purchase Agreement.................................................................. 29
ARTICLE V
CLOSING AND DELIVERIES.................................................................................................. 29
5.1. Date and Place of Closing......................................................................... 29
5.2. Deliveries at Closing by the Shareholders......................................................... 29
5.3. Deliveries by FNEDC............................................................................... 30
ARTICLE VI
POST-CLOSING MATTERS.................................................................................................... 30
6.1. Further Assurances................................................................................ 30
6.2. Employment and Benefits-Related Matters........................................................... 31
6.3. Access to Records................................................................................. 31
ARTICLE VII
NON-COMPETITION AGREEMENT AND NON-SOLICITATION AGREEMENT................................................................ 32
7.1. Non-Solicitation.................................................................................. 32
7.2. Non-Compete....................................................................................... 32
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ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION............................................................................ 33
8.1. Survival.......................................................................................... 33
8.2. Indemnification of FNEDC.......................................................................... 33
8.3. Indemnification of the Shareholders............................................................... 34
8.4. Procedure for Indemnification..................................................................... 34
8.7. Indemnity Payments by the Shareholders to be Treated as Purchase Price Adjustments................ 35
ARTICLE IX
TERMINATION OF AGREEMENT................................................................................................ 36
ARTICLE X
CONFIDENTIAL INFORMATION................................................................................................ 37
ARTICLE XI
MISCELLANEOUS........................................................................................................... 37
11.1. Notices........................................................................................... 37
11.2. No Waiver......................................................................................... 38
11.3. Amendments and Waivers............................................................................ 38
11.4. Governing Law; Headings........................................................................... 38
11.5. No Assignment..................................................................................... 38
11.6. Binding Effect and Benefits; Assigns.............................................................. 39
11.7. Entire Agreement.................................................................................. 39
11.8. Counterparts...................................................................................... 39
11.9. Transfer Taxes.................................................................................... 39
11.10. Submission to Jurisdiction........................................................................ 39
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of August __,
1997, by and among FNEDC OF NEW JERSEY, INC., a New Jersey corporation
("FNEDC"), and XXXX XXXXXX, D.D.S. ("Xxxx Xxxxxx"), and XXXXXX XXXXXXX, D.D.S.
("Xxxxxxx"), the undersigned shareholders (singularly, a "Shareholder" or
collectively, the "Shareholders") of all of the issued and outstanding shares of
capital stock of Group Dental Health Administrators, Inc., a New Jersey
corporation licensed to operate a dental plan organization in the State of New
Jersey (the "Company"). FNEDC and the Shareholders are sometimes hereinafter
referred to each as a "Party" and collectively as the "Parties". For purposes of
Article VIII hereof only, on the Closing Date (defined in Section 5.1), each of
First New England Dental Centers, Inc., a Delaware corporation ("First Dental")
and a to-be-formed New Jersey professional association potentially named First
Dental Associates, P.A. (the "P.C."), shall join as parties to this Agreement.
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of administering
certain dental plans and contracting with dentists to service such plans (the
"Business");
WHEREAS, FNEDC intends to acquire all of the issued and outstanding
capital stock of the Company at the Closing (defined in Section 5.1); and
WHEREAS, simultaneously with and subject to the execution of this
Agreement, First Dental, Xxxx Xxxxxx and Xxxxxxx, as stockholders of Xx. Xxxxxx
South Street Corp., P.A., Ferry Street Dental Associates, P.A., Xx. X. Xxxxxx
Group Dental Associates, P.A., Group Dental Associates of Toms River, P.A.,
Group Dental Associates of East Brunswick, P.A., Ridge Dental Center, P.A., 57th
Street Dental Center, P.A., Xx. Xxxxxx and Associates, P.A., and Doctor's
Denture Service, P.A. (collectively, the "Professional Associations"), and Xxxx
Xxxxxx, D.D.S., are entering into a Stock Purchase Agreement dated of even date
herewith (the "Stock Purchase Agreement").
NOW THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
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ARTICLE I
PURCHASE AND SALE
I.1. Purchase Price. Subject to the conditions precedent set forth in
Sections 4.1 and 4.2 below, based upon the representations and warranties made
herein, and in full consideration of Shareholders' performance of this Agreement
and the sale, assignment, transfer, conveyance and delivery to FNEDC of each
share of issued and outstanding capital stock of the Company (collectively, the
"Stock"), FNEDC shall perform its obligations hereunder and shall deliver and
pay to Shareholders One Million Five Hundred Thousand Dollars ($1,500,000) (the
"Purchase Price"). The Parties agree that the Purchase Price shall be allocated
in the manner set forth in the attached Schedule 1.1 and that each Party shall
report this transaction on all applicable federal and state income tax returns
in accordance with such allocation. The Purchase Price shall be due and payable
at Closing (except as otherwise described in Section 1.1(a) below) by wire
transfer of immediately available funds as follows:
(a) A "non-refundable" deposit (which deposit shall be subject
to return in the limited circumstances described hereinafter) of One Hundred
Seventy-Five Thousand Dollars ($175,000) to be delivered to one or more accounts
designated by the Shareholders upon the execution and delivery of this Agreement
and the Stock Purchase Agreement (the "Deposit");
In the event (i) FNEDC terminates this Agreement in accordance with
Article IX hereof or First Dental terminates the Stock Purchase Agreement in
accordance with Article IX thereof and the Shareholders are unable to terminate
either this Agreement in accordance with Article IX hereof or the Stock Purchase
Agreement in accordance with Article IX thereof, or (ii) the Shareholders fail
to make good faith commercially reasonable efforts to fulfill the closing
conditions set forth in Section 4.1 hereof by the Closing Date (defined below in
Section 5.1) and FNEDC delivers a written notice to the Shareholders certifying
that they are otherwise ready and able to close and stating its election to
terminate this Agreement, then the Shareholders shall return the Deposit to
FNEDC in accordance with Article IX hereof;
In the event (i) the Shareholders terminate this Agreement in
accordance with Article IX hereof or terminate the DPO Stock Purchase Agreement
in accordance with Article IX thereof, or (ii) FNEDC is unable to, or elects not
to, fulfill the closing conditions set forth in Section 4.2 hereof by the
Closing Date and the Shareholders deliver a written notice to FNEDC stating
their election to terminate this Agreement, then the Shareholders shall be
entitled to retain the Deposit;
(b) Five Hundred Thousand Dollars ($500,000), together with
the Five Hundred Thousand Dollars ($500,000) to be delivered by First Dental
pursuant to Section 1.1(b) of the Stock Purchase
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Agreement (collectively, the "Escrowed Funds," which funds shall not be
divisible but rather handled as one source of funds under the terms of the
Escrow Agreement (defined in this Section below)) to Fleet Bank, N.A., the
Escrow Agent, in accordance with the escrow agreement dated the date hereof,
attached hereto as Exhibit A, by and among FNEDC, First Dental, the Shareholders
and the Escrow Agent (the "Escrow Agreement"), and
(c) Eight Hundred Twenty-Five Thousand Dollars ($825,000) to
one or more accounts designated by the Shareholders.
The Escrowed Funds will be released to the Shareholders in accordance with the
terms and conditions of the Escrow Agreement.
I.2. Purchase Price Adjustment Option. The Purchase Price set
forth in Section 1.1 shall be subject to adjustment as follows:
(a) No earlier than thirty (30) days nor later than twenty
(20) days prior to the Closing Date, FNEDC's independent accountants shall
prepare and deliver to the Shareholders a statement of revenues of the Company
and the Professional Associations for the period commencing January 1, 1997 and
ending on the date thirty (30) days prior to the Closing Date (the "Draft
Statement of Revenues"). It is agreed that FNEDC's independent accountants shall
prepare the Draft Statement of Revenues in accordance with generally accepted
accounting principles; provided however, that FNEDC's independent accountants
will not consolidate the revenues of the Company and the Professional
Associations in the Draft Statement of Revenues. It is further agreed that the
comparable statement of revenues for the Company and the Professional
Associations, as prepared in accordance with generally accepted accounting
principles, for calendar year 1996 was Five Million Seven Hundred Thousand
Dollars ($5,700,000).
(b) The Shareholders shall deliver to FNEDC within ten (10)
days after receiving the Draft Statement of Revenues a detailed statement
describing their objections (setting forth in detail the revenue amount proposed
as an adjustment thereto and the basis for such objection), if any, thereto.
Failure of the Shareholders so to object to the Draft Statement of Revenues
shall constitute acceptance thereof, whereupon the Draft Statement of Revenues
shall be deemed to be the "Closing Statement of Revenues". FNEDC and the
Shareholders shall use reasonable efforts to resolve any such objections, but if
they do not reach a final resolution within ten (10) days after the Shareholders
have delivered their statement of objections, FNEDC and the Shareholders shall
settle the disagreement by submitting the dispute within fourteen (14) days
after the expiration of the ten (10) day period established above to resolve any
objections, to a panel of three (3) arbitrators in New York, New York that are
experienced in professional financial audits of this nature, such arbitration to
be conducted in accordance with the
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Commercial Arbitration Rules of the American Arbitration Association then in
effect on the date of the Shareholders' statement of objections. The arbitrators
shall, within thirty (30) days after the dispute is submitted for arbitration,
determine and report to the Parties a statement of revenues included in the
Draft Statement of Revenues, the revenue amount proposed as an adjustment and
the revenue amount determined by the arbitrators. The Draft Statement of
Revenues then shall be adjusted with respect to the items identified in the
Shareholders' statement of objections or by the arbitrators (and any
corresponding items requiring adjustment as a result) to the extent not
presented consistently with generally accepted accounting principles as
determined by the arbitrators and, as so adjusted, shall be the Closing
Statement of Revenues. Any decision by arbitrators appointed and acting pursuant
to this Section 1.2(b) shall be final and binding upon the Parties, absent fraud
or manifest error, and judgment may be entered thereon, upon the application of
any Party, by any court having competent jurisdiction.
(c) During the period of any dispute referred to above, the
Shareholders shall, and shall cause the Company and the Professional
Associations to, give FNEDC, its accountants and the arbitrators full access to
books, records, facilities and employees of the Company and the Professional
Associations; provided, however, that any such access shall be allowed only in
such manner as not to interfere unreasonably with the operation of the business
of the Company and the Professional Associations.
(d) Each Party shall bear the cost of preparing and presenting
its case, with the cost of arbitration to be shared equally by the Parties.
(e) If the aggregate revenues of the Company and the
Professional Associations presented in the Closing Statement of Revenues,
projected on an annualized basis assuming a 365-day calendar year (which
calculation will be made by multiplying the revenues presented in the Closing
Statement of Revenues by the quotient of 365 divided by the number of calendar
days elapsed during the period commencing January 1, 1997 and ending on the date
thirty (30) days prior to the Closing Date (the "1997 Annualized Revenues")),
are less than Five Million Dollars ($5,000,000)("Initial Sales Trigger"), the
Parties may elect to consummate the transactions contemplated in this Agreement
at an adjusted Purchase Price equal to the excess of (i) the Purchase Price over
(ii) the amount (the "Proportionate Deficit Amount") resulting from the product
of (A) the sum of the Deficiency (as defined in the Escrow Agreement) and the
excess of Five Million Seven Hundred Thousand Dollars ($5,700,000) over the 1997
Annualized Revenues, and (B) a fraction whose numerator is the Purchase Price
and whose denominator is Five Million Seven Hundred Thousand Dollars
($5,700,000), (the "Adjusted Purchase Price") as follows:
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ADJUSTED PURCHASE PRICE =
PURCHASE PRICE - PROPORTIONATE DEFICIT AMOUNT ("PDA")
WHERE PDA = [DEFICIENCY +_ ($5.7M - 1997 XXX. REV.)]
X (PURCHASE PRICE/$5.7)
No later than ten (10) days following the determination of the Closing
Statement of Revenues, FNEDC may deliver written notice to the Shareholders
stating its desire to consummate the transactions contemplated in this
Agreement, all in accordance with the terms and conditions set forth herein with
the exception of the reduction of the Purchase Price to the Adjusted Purchase
Price and the extension of the Closing Date as described below ("FNEDC's
Offer"). The Shareholders shall have five (5) days following the day in which
they received FNEDC's Offer ("Response Period") to accept FNEDC's Offer.
In the event the Shareholders accept FNEDC's Offer, FNEDC will have the
right to close the transactions contemplated by this Agreement no later than
thirty (30) days following the date on which FNEDC receives written notice of
the Shareholders' acceptance of FNEDC's Offer (the "Option Period"). In the
event the Shareholders accept FNEDC's Offer, but FNEDC shall be unable to, or
elects not to, fulfill the closing conditions set forth in Section 4.2 hereof
within the Option Period, then the Shareholders shall be entitled to retain the
One Hundred Seventy-Five Thousand Dollars ($175,000) Deposit; provided, however,
that if (i) FNEDC terminates this Agreement in accordance with Article IX hereof
or FNEDC of NJ terminates the Stock Purchase Agreement in accordance with
Article IX thereof, or (ii) the Shareholders shall be unable to, or elect not
to, fulfill their closing conditions set forth in Section 4.1 hereof within the
Option Period, then the Shareholders shall return promptly the One Hundred
Seventy-Five Thousand Dollars ($175,000) Deposit to FNEDC by wire transfer of
immediately available funds; provided, that an appropriate officer of FNEDC will
certify to the Shareholders that FNEDC was timely ready and able to close.
In the event the Shareholders (i) deliver written notice to FNEDC
within the Response Period stating their election not to accept FNEDC's Offer,
or (ii) fail to deliver written notice to FNEDC in response to FNEDC's Offer
within the Response Period, then the Shareholders shall be entitled to retain
Thirty-Seven Thousand Five Hundred Dollars ($37,500) of the Deposit but shall
promptly return One Hundred Thirty-Seven Thousand Five Hundred Dollars
($137,500) of the Deposit to FNEDC by wire transfer of immediately available
funds; provided, that an appropriate officer of FNEDC will certify to the
Shareholders that FNEDC was timely ready and able to close.
In the event FNEDC (i) fails to deliver written notice to the
Shareholders within ten (10) days following the date on which
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FNEDC receives the Closing Statement of Revenues or (ii) delivers written notice
to the Shareholders within such period stating its decision not to consummate
the transactions contemplated herein, and the Shareholders deliver written
notice to FNEDC within the Response Period stating their desire to consummate
the transactions contemplated herein at the Adjusted Purchase Price no later
than thirty (30) days following the date on which FNEDC receives such written
notice (the "Shareholders' Offer"), then the Shareholders shall be entitled to
retain Eighty-Seven Thousand Five Hundred Dollars ($87,500) of the Deposit but
shall promptly return Eighty-Seven Thousand Five Hundred Dollars ($87,500) of
the Deposit to FNEDC by wire transfer of immediately available funds; provided,
that an appropriate officer of FNEDC will certify to the Shareholders that FNEDC
was timely ready and able to close.
In the event FNEDC (i) fails to deliver written notice to the
Shareholders within ten (10) days following the date on which FNEDC receives the
Closing Statement of Revenues, or (ii) delivers written notice to the
Shareholders within such period stating its decision not to consummate the
transactions contemplated herein, and the Shareholders (i) deliver written
notice to FNEDC within the Response Period stating their election not to accept
FNEDC's Offer, or (ii) fail to deliver written notice to FNEDC in response to
FNEDC's Offer within the Response Period, then the Shareholders shall be
entitled to retain Thirty-Seven Thousand Five Hundred Dollars ($37,500) of the
Deposit but shall promptly return One Hundred Thirty-Seven Thousand Five Hundred
Dollars ($137,500) of the Deposit to FNEDC by wire transfer of immediately
available funds; provided, that an appropriate officer of FNEDC will certify to
the Shareholders that FNEDC was timely ready and able to close.
Any adjustment to the Purchase Price in this Section 1.2 shall
not be deemed to be a loss for purposes of Article VIII hereof. For purposes of
calculating the Proportionate Deficit Amount as of the Closing Date, the
Deficiency shall be deemed to be zero.
(f) When and if a Deficiency is determined pursuant to the terms of the
Escrow Agreement, the Proportionate Deficit Amount and the Adjusted Purchase
Price shall be redetermined. In the event that there is not an Initial Sales
Trigger (i.e., 1997 Annualized Revenues are not less than $5 million) and a
Deficiency is determined pursuant to the Escrow Agreement, the purchase price of
the Stock shall be the Adjusted Purchase Price; provided, however, for purposes
of the calculation of the Proportionate Deficit Amount, the 1997 Annualized
Revenues shall be deemed to be equal to Five Million Seven Hundred Thousand
Dollars ($5,700,000). In the event that the determination of a Deficiency causes
the Purchase Price or the Adjusted Purchase Price, as the case may be, to be
reduced from the Purchase Price or the Adjusted Purchase Price calculated at the
Closing Date, the Shareholders shall be deemed to have repaid, such excess
consideration by the distribution of the Deficiency to FNEDC
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pursuant to the Escrow Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
II.1. Representations and Warranties of FNEDC.
FNEDC hereby represents and warrants to the Shareholders that each of
the statements contained in this Section 2.1 is true and correct in all respects
as of the date hereof and will be true and correct at and as of the Closing.
(a) Organization, Power and Standing. FNEDC is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New Jersey with all requisite power to own and operate its properties
and to carry on its business as such business is now conducted. FNEDC is not
qualified to do business as a foreign corporation in any jurisdiction.
(b) Power and Authority Relative to Transaction. FNEDC has
full corporate power and authority and has taken all required action necessary
to permit it to execute and deliver this Agreement and to perform all of the
obligations contained herein, and to execute, deliver and perform all of the
obligations contained in all other instruments or agreements required hereby or
incident or collateral hereto (collectively with this Agreement, the "Operative
Documents"), and none of such actions conflicts with or violates any provision
of law known to FNEDC or of the Certificate of Incorporation or Bylaws of FNEDC,
or violates or constitutes a default under or will result in any breach of any
agreement, indenture, deed of trust, mortgage, instrument, lease, order,
judgment, writ, injunction, decree, license or permit of any court or
governmental or regulatory body applicable to FNEDC or by which FNEDC or its
assets may be bound.
(c) Valid and Binding Obligation. The Operative Documents
constitute valid and legally binding obligations of FNEDC, enforceable against
it in accordance with their respective terms, subject to applicable bankruptcy,
insolvency and other general laws affecting the rights and remedies of
creditors, except that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(d) Required Consents. Except as set forth on Schedule 2.1(d)
hereto, no consent, order, approval, authorization, declaration or filing
including, without limitation, any consent, approval or authorization of or
declaration or filing with any governmental authority, is required on the part
of FNEDC for or in connection with the
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execution and delivery of the Operative Documents.
(e) No Brokers. FNEDC has not dealt with any broker, finder
or similar agent with respect to the transactions contemplated by this Agreement
and FNEDC is not under any obligation to pay any broker's fee, finder's fee or
commission in connection with the transactions contemplated by this Agreement.
(f) Litigation. Schedule 2.1(f) sets forth each instance in
which FNEDC (i) is subject to any outstanding injunction, judgment, order,
decree, ruling or charge, or (ii) is a party or, to the knowledge of FNEDC and
any directors and officers (and employees with responsibility for litigation
matters) of FNEDC, is threatened to be made a party, to any action, suit,
proceeding, hearing or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator, which in each case would materially
adversely affect FNEDC's ability to perform its obligations under the Operative
Documents.
(g) Solvency. FNEDC is financially solvent and, subject to
receiving the net proceeds from its proposed initial public offering, FNEDC will
have the financial ability to close the transaction contemplated herein in
accordance with the terms and conditions hereof. Upon such Closing, FNEDC will
have the financial ability at all times through the expiration of the escrow
term (as defined in the Escrow Agreement) to continue the operation of the
Business of the Company and the Professional Associations.
(h) Compliance with Laws. Except as set forth on Schedule
2.1(h), to its best knowledge, FNEDC holds all permits, registrations, orders
and authorizations of governmental authorities necessary or appropriate to
consummate the transactions contemplated hereby.
(i) Disclosure. Neither the representations and warranties of
FNEDC contained in this Agreement, nor the other information included in the
Schedules hereto, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein complete and not misleading as of the dates thereof in light of the
circumstances in which they were made.
II.2. Representations and Warranties Concerning the Company.
Each of the Shareholders hereby jointly and severally
represents and warrants to FNEDC that each of the statements contained in this
Section 2.2 (including the Schedules hereto) is true and correct as of the date
of this Agreement and will be true and correct at and as of the Closing.
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(a) Organization, Power and Standing. The Company is a
corporation duly organized, validly existing and in good corporate and tax
standing under the laws of the State of New Jersey. The Company has the power
and authority to own its properties and engage in the business in which it is
currently engaged. The copy of the Company's Certificate of Incorporation and
Bylaws, each as amended through the date hereof, that has been delivered to
FNEDC by the Company is complete and correct as of the date of this Agreement
and will continue in effect without further amendment through the Closing.
(b) Qualification to do Business. The Company is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction where the failure to so qualify would have a
material adverse effect on the Company.
(c) Subsidiaries and Interest in Other Entities. The Company
has no subsidiaries nor does it, directly or indirectly, own or have the right
to acquire any equity interest in any other corporation, partnership, joint
venture or other business organization, except as provided herein. The Company
has not made any investment in or advance of cash or other extension of credit
to any company, entity or individual. Other than the Shareholders, there is no
entity and/or individual controlling, controlled by or under control with the
Company, nor is there any entity or person which on or prior to the Closing Date
is or was a member of the same controlled group or affiliated service group or
was under common control with the Company within the respective meanings of
Sections 414(b), (m) and (c) of the Internal Revenue Code of 1986, as amended
(the "Code").
(d) Capitalization. The number of authorized shares of
capital stock, the number of shares of capital stock presently issued and
outstanding, the par value per share of capital stock and the beneficial owners
of such issued and outstanding shares of capital stock of the Company are set
forth in Schedule 2.2(d). All of the outstanding shares of capital stock of the
Company have been issued in full compliance with all applicable securities laws.
The Company has no outstanding option warrants, conversion rights, exchange
privileges or other commitments to issue or to acquire any shares of its capital
stock or any securities or obligations convertible or exchangeable into shares
of its capital stock except as set forth in Schedule 2.2(d).
(e) Certain Outstanding Liabilities. Except as set forth on
Schedule 2.2(e), no Shareholder has any debts, liabilities or obligations of any
nature whatsoever which are related to the Business or the assets of the
Company. To each Shareholder's best knowledge, the Company has no debts,
liabilities or obligations which have arisen after December 31, 1996 outside of
such Company's ordinary course of business (and to the Shareholders' best
knowledge, there is no present basis for any present or future action, suit,
proceeding, hearing,
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investigation, charge, complaint, claim or demand against any Company giving
rise to any liability), except as set forth on Schedule 2.2(e).
(f) Unfunded Liabilities. Without in any way limiting the
representation and warranty set forth in Section 2.2(e) above, the Company has
no unfunded liabilities in connection with any workers' compensation, employers'
liability, or group health plan except as described in Schedule 2.2(f). The
matters described in Schedule 2.2(f) will not, individually or in the aggregate,
have any material adverse effect upon the business or operations of the Company
or FNEDC.
(g) Title to Properties, Etc.. Except as listed on Schedule
2.2(g), the Company is the sole owner of, and has good, valid and marketable
title to, all of its properties and assets, real and personal, and all
trademarks, copyrights, and service marks used in connection with the Business.
None of such properties is subject to any mortgage, pledge, lien, conditional
sale agreement, security interest, encumbrance or other charge except:
(i) liens, encumbrances and leases incurred or made in the
ordinary course of business which do not materially impair the usefulness of
such properties and assets in the conduct of the business of the Company (but
excluding liens securing payment of indebtedness);
(ii) liens from nondelinquent taxes, assessments or
governmental charges or levies; and
(iii) as specifically set forth on Schedule 2.2(g).
The Company enjoys peaceful and undisturbed possession under the leases set
forth on Schedule 2.2(g). All such leases are valid, subsisting and in full
force and effect, and there are no uncured defaults of the Company under such
leases. The assets and properties of the Company, including those obtained
pursuant to said leases, are adequate to conduct the operations currently
conducted and presently proposed to be conducted by the Company. Except as
otherwise specifically provided, the Shareholders make no representation or
warranty concerning or relating to the condition, repair or maintenance of the
machinery and equipment of the Company. Except as set forth in Schedule 2.2(g),
however, the Company and none of the Shareholders have received any written
notice from any federal, state or local governmental agency that any machinery,
equipment or other assets of the Company fails to conform in all material
respects to all applicable ordinances, regulations and zoning or other laws.
There is no pending or, to the best of the Shareholders' knowledge, threatened
condemnation of any such property. Except as set forth in Schedule 2.2(g), the
leasehold or other interest of the Company in such real property is not subject
or subordinate to any recorded security interest, lien or mortgage, except with
respect to liens described in Subsections 2.2(g)(i)
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15
and (ii) above, and the Shareholders are not aware of any security interest,
lien, mortgage or other encumbrance whatsoever on the Company's leasehold or
other interests. Except as set forth in Schedule 2.2(g), the lease for the
Company's premises has not been amended and neither the landlord, to each
Shareholder's best knowledge, nor the Company is in default thereunder. Neither
the Company nor any of the Shareholders has received any written notice from any
federal, state or local government agency, and that the use of the Company's
premises by the Company and the occupancy and operation thereof by the Company
fails to comply in all material respects with all applicable federal, state and
local laws, ordinances and regulations, including without limitation federal and
state safety, health, environmental protection and hazardous waste laws,
regulations, standards and ordinances.
(h) Conduct of Business; Absence of Material Adverse Changes.
Since December 31, 1996, except as otherwise required pursuant to this
Agreement, the Business has been conducted only in the usual and ordinary
course, and there has been (i) no sale, transfer or other disposition of any of
the material assets or capital stock of the Company; (ii) no encumbrance placed
upon the Company's assets or stock; (iii) no other event or condition known to
the Shareholders which materially and adversely affects, or which is reasonably
likely to materially and adversely affect, the Business or the condition
(financial or other), prospects, assets or liabilities of the Company; and (iv)
no free service, premium or gift offered as an inducement to existing or
prospective patients (other than charitable care provided in accordance with the
Company's policy regarding uncompensated care) that materially and adversely
affects, or which is reasonably likely to materially and adversely affect, the
Business or the condition (financial or other), prospects, assets or liabilities
of the Company.
In particular, and without limiting the generality of the foregoing,
since December 31, 1996, the Shareholders have not permitted the Company to do
any of the following, except as otherwise contemplated herein:
(i) change its method of management or operations;
(ii) amend its Certificate of Incorporation or Bylaws;
(iii) terminate the services of any employee, consultant or
agent of the Company;
(iv) increase the compensation payable or to become payable to
any officer, director, employee or agent of the Company or make or
enter into any bonus payment arrangement with any officer, director,
employee, or agent, or hire or engage any additional management
personnel or consultants for the business of the Company, except as
disclosed in Schedule 2.2(h) or in connection with the transactions
contemplated hereunder;
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(v) make any loan to, or enter into any other transaction
with, any of its directors, officers and employees outside of the
Company's ordinary course of business;
(vi) adopt, amend, modify or terminate any bonus,
profit-sharing, incentive, severance or other plan, contract or
commitment for the benefit of any of its directors, officers and
employees (or take any such action with respect to any of its employee
benefit plans);
(vii) directly or indirectly redeem, purchase or otherwise
acquire or dispose of any properties or assets except in the ordinary
course of business;
(viii) subject any of its properties or assets to any
mortgage, pledge, security interest or lien;
(ix) directly or indirectly redeem, purchase or otherwise
acquire any of its outstanding capital stock;
(x) incur any indebtedness for borrowed money, make any loans
or advances to any individual, firm or corporation or assume, guarantee
or endorse, or otherwise become responsible for, the obligation of any
other individual, firm or corporation, except in the ordinary course of
business;
(xi) modify, amend, cancel or terminate any existing agreement
material to its business, including the making of any substantial
prepayment on any existing obligation, except in the ordinary course of
business;
(xii) make any material change in the accounting methods or
practices employed by the Company as at the date hereof in respect of
the business of the Company;
(xiii) delay or postpone the payment of its accounts payable
and other liabilities outside its ordinary course of business;
(xiv) enter into any contract or commitment involving in any
instance aggregate payment by the Company of more than $10,000 or
extending beyond the Closing Date, except in connection with the
transactions contemplated hereby or in the usual and ordinary course of
business consistent with past practice;
(xv) declare or pay any dividend or distribution in respect of
its capital stock, either in cash, in kind or in shares of stock (other
than dividends or distributions that are consistent in nature and
amount with the Company's past dividends or distributions during the
Company's last five (5) fiscal years; provided, however, that subject
to the
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final sentence of this Section 2.2(h), the Shareholders may cause the
Company to distribute to the Shareholders all cash in the Company'
respective bank accounts on or before the Closing Date), or issue or
authorize any securities of the Company or grant stock options,
warrants or other rights to acquire shares of its stock or securities
convertible into or exchangeable for shares of its stock;
(xvi) take any other action which would materially adversely
affect or detract from the value of the Company or the capital stock of
the Company, including without limitation cancelling any debts or
claims;
(xvii) waive any rights of material value or modify, amend,
alter or terminate any Material Contract (defined in 2.2(n) below);
(xviii) grant any license or sublicense of any of its rights
under or with respect to any of its intellectual property; and/or
(xix) directly or indirectly offer, solicit or entertain
offers for or take any other action with a view to the sale of all or
any substantial part of the assets, capital stock or business of the
Company.
Furthermore, the Shareholders have permitted the Company and the
Professional Associations to continue to pay any liabilities which are
outstanding and due, consistent with past practice and within forty-five (45)
days of receipt of evidence that each such outstanding liability is due and
payable.
(i) Tax Returns and Payments. The Company has prepared in good
faith and filed when due, or timely obtained extensions of time for filing, all
tax returns required by law to be filed, and has paid when due all taxes,
assessments and other governmental charges (whether or not shown on any tax
return), including without limitation all estimated tax payments imposed upon
any of its properties, assets or income. To the best of the Shareholders'
knowledge, the Company has no liability for any federal, state or local taxes
not yet paid which relate to prior taxable years, except the portion of the 1997
tax year preceding the Closing. To the best of the Shareholders' knowledge, all
such tax returns are correct and complete in all material respects and no income
tax return nor any corporation excise tax return of the Company has ever been
audited except as otherwise set forth on Schedule 2.2(i), which schedule sets
forth in reasonable detail the nature and scope of each disclosed audit. The
Company has never filed a consent under Section 341(f) of the Code. The Company
has not executed any waiver or consent that would have the effect of extending
any applicable statute of limitations in respect of any of its tax liabilities.
To the best of the Shareholders' knowledge, the charges, accruals and reserves
on the books of the Company in respect of taxes for all fiscal periods are
adequate, and there is no unpaid assessment or
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any basis for the assessment of any material amount of additional taxes for any
period or partial period preceding Closing. Except as set forth on Schedule
2.2(i), neither the Internal Revenue Service nor any other taxing authority has
asserted or threatened to assert, or is now asserting or threatening to assert,
against the Company any deficiency or claim for additional taxes or interest
thereon or penalties in connection therewith. The Company has withheld from its
employees or its other payees gross compensation and has paid over to
appropriate governmental authorities all tax and other withholdings required by
applicable law. If the Company has any liability arising from or related to any
taxes for any period prior to the Closing, the Shareholders shall be fully and
solely responsible for the payment of such tax liabilities. Each Shareholder
agrees to indemnify FNEDC in accordance with Section 8.2 hereof for any
liability of the Company relating to or arising from any taxes for any period
prior to the Closing; provided that it is agreed and acknowledged that any
indemnity claim made by FNEDC hereunder shall neither be subject to the basket
nor be included in the cap as set forth in Section 8.5 hereof.
(j) Compliance with Laws. Except as set forth on Schedule
2.2(j) hereto, to each Shareholder's best knowledge, the Company presently holds
all permits, licenses, consents, certificates, approvals, qualifications,
registrations, orders and authorizations of governmental authorities
(collectively, "Permits") necessary or appropriate for the conduct of the
Business and the consummation of the transactions contemplated hereby, and all
such Permits are listed on Schedule 2.2(j). To the best of the Shareholders'
knowledge, the Permits constitute all such permits, licenses, consents,
certificates, approvals, qualifications, registrations, orders and
authorizations of governmental authorities required for the conduct of the
Business, and no suspension or cancellation of any Permit is threatened. To the
best of the Shareholders' knowledge, all of the Permits are in full force and
effect and are valid and enforceable in accordance with their terms. To the best
of the Shareholders' knowledge, there exists no fact or circumstance which
constitutes, or with the passage of time or giving of notice or both would
constitute, a default under any Permit or allow any governmental or other
authority to cancel or terminate any Permit. Neither the Company nor any
Shareholder has received any notice from any federal, state or local
governmental agency, and neither the Company and nor any Shareholder has any
knowledge or reason to believe that the Company's operation of the Business
violates any federal, state or local law, regulation, order or restriction that
materially and adversely affects or which is reasonably likely to materially and
adversely affect, the Business, or the condition (financial or other),
prospects, assets or liabilities of the Company. Except as set forth on Schedule
2.2(j) hereto, to each Shareholder's best knowledge, the Company has operated
the Business in full compliance with all applicable laws, including all laws and
regulations relating to payment and claims for health care services, employment,
occupational safety and health, and environmental matters.
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Except as set forth on Schedule 2.2(j) hereto, to each Shareholder's best
knowledge, the Company is not in material violation of any federal, state or
local statute, ordinance, judgment, decree, order or governmental rule,
regulation, policy or guideline applicable to the Company in a manner which
could materially and adversely affect its condition (financial or otherwise),
the transactions contemplated by this Agreement or the Business.
(k) Insurance. The Company has continuously maintained for the
entire period of time the Business has been in existence, and continues to
maintain, property, general liability, professional liability and workers'
compensation insurance covering the operations of the Business through the
current insurance policies listed in Schedule 2.2(k) hereto or through
comparable insurance policies previously in effect. All such current policies
are in full force and effect, all premiums due thereon have been paid and the
Company has complied in all material respects with the provisions of such
policies. The Company and each dentist-employee of the Company currently
maintains in full force and effect an individual professional liability
insurance policy with liability limits of at least $1 million per occurrence and
$3 million aggregate except as provided on Schedule 2.2(k). Except as otherwise
indicated on Schedule 2.2(k), all liability insurance policies are on an
"occurrence" basis. The insurance listed in Schedule 2.2(k) is in amounts
adequate to cover losses on physical assets.
(l) Employees and Compensation.
(i) To each Shareholder's best knowledge, the Company is not
in violation of any applicable federal, state or local laws or
regulations with respect to employment, employment practices, or the
terms and conditions of employment, wages and hours in a manner which
could materially and adversely affect its condition (financial or
otherwise). None of the Company's employees is represented by any
union, and there is no labor strike, slowdown, stoppage, organizational
effort, dispute or proceeding by or with any employee or former
employee of the Company or any labor union pending or threatened
against the Company.
(ii) To each Shareholder's best knowledge, there are no
employment or consulting contracts or arrangements (other than those
terminable at will) with any employees or consultants of or associated
with the Company, except as described on Schedule 2.2(l) hereto.
Schedule 2.2(l) also sets forth a true and complete list of all
employees of and consultants to the Company, showing date of hire,
hourly rate or salary or other basis of compensation, each bonus,
hourly rate increase and/or salary increase granted since December 31,
1996 (or committed to be granted in connection with the transactions
contemplated hereunder), and job function.
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(m) Employee Benefits. Schedule 2.2(m) contains a complete and
accurate list of each plan, arrangement, understanding, practice or commitment,
formal or informal, firm or contingent, written or oral, currently sponsored,
maintained or contributed to by the Company which covers, or which at any time
prior to the Closing covered, any of the current or former officers, employees
or independent contractors of the Company or its predecessors and providing any
of the following benefits: bonus, stock bonus, profit sharing, pension,
retirement, life insurance, medical, hospitalization, dental, vision,
disability, vacation, workers' compensation, deferred or incentive compensation,
severance benefits and including, without limitation, each "employee pension
benefit plan" (within the meaning of Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended (hereinafter "ERISA")) and "employee
welfare benefit plan" (within the meaning of Section 3(1) of ERISA)
(collectively, the "Plans"). Except as disclosed on Schedule 2.2(m):
(i) Neither the Company nor any Shareholder has engaged in any
transactions which would, directly or indirectly, subject any Plan, its
related trust or any Company to a tax or penalty imposed under Section
4975 of the Code or Section 502(i) of ERISA;
(ii) The Company and each Shareholder have performed all their
respective material obligations under the Plans and have not violated
the provisions of any of the Plans and, to the best knowledge of the
Company and each Shareholder, no other party is in violation thereof;
(iii) The Plan is in compliance in all material respects with
all applicable requirements prescribed by all statutes (including,
without limitation, ERISA and the Code), orders, governmental rules and
regulations;
(iv) All payments required to be made to each Plan as of the
Closing have been timely and completely made;
(v) There is no suit, action, dispute, claim, arbitration or
legal, administrative or other proceeding or governmental investigation
pending, or to the best knowledge of the Company or any Shareholder, is
threatened, alleging any breach of the terms of any Plan or of any
fiduciary duties thereunder or violation of any applicable law with
respect to any Plan;
(vi) Subject to applicable requirements of ERISA, neither any
provision of any Plan nor any agreement with any employee nor any
representation or course of conduct by or on behalf of the Company
would prevent the amendment or termination after the Closing of any
Plan without liability to the Company;
(vii) There are no benefits or severance
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obligations of the Company that will arise as a result of the
transactions contemplated hereunder;
(viii) No Plan which is an "employee welfare benefit plan"
provides for continuing benefits or coverage, including but not limited
to medical, health or life insurance, to any employee or former
employee following termination of employment with the Company other
than that either required by Section 4980B of the Code and Sections 601
through 609 of ERISA (or similar provisions of state law), or provided
in accordance with the conversion feature of the Plan.
(ix) Each Plan which is a "group health plan" (within the
meaning of Section 4980(B)(a)(2) of the Code) is in material compliance
with the applicable requirements under Section 4980B of the Code and
Sections 601 through 609 of ERISA;
(x) No Plan is, or forms part of, a "multiple employer welfare
arrangement" (within the meaning of Section 3(40) of ERISA), a
"multiemployer plan" (within the meaning of Section 4001(a)(3) of
ERISA) or a "voluntary employees' beneficiary association" (within the
meaning of Section 501(c)(9) of the Code);
(xi) With respect to each Plan which is a self-insured
"employee welfare benefit plan," no claims have been made pursuant to
any such Plan that have not yet been paid and, to the best knowledge of
the Company and the Shareholders, no injury, sickness or other medical
condition has been incurred with respect to which claims may be made
pursuant to any such Plan; and
(xii) All reports, forms and other documents with respect to
any Plan required to be filed with any government entity or to be
disclosed to Plan participants and their beneficiaries have been timely
filed or disclosed, as the case may be, and are accurate in all
material respects.
(n) Material Contracts. Schedule 2.2(n) hereto sets forth a
complete and accurate list and compilation of all material:
(i) Contracts with respect to the provision of health care
services, including all contracts between third party payors and the
Company or any Shareholder;
(ii) Licenses, leases, contracts and other arrangements with
respect to any material property of the Company;
(iii) Contracts (written or unwritten) with respect to which
the Company has any liability or obligation, contingent or otherwise,
involving more than $10,000 or
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which may otherwise have any continuing effect after the Closing, or
which place any material limitation on the method of conducting or the
scope of the Business;
(iv) Contracts of the Company with directors, officers,
employees, agents and/or consultants of the Company or the spouses or
relatives of such persons;
(v) Compensation arrangements for all employees and
consultants including rates of pay and other benefits and the amounts
of compensation and other benefits accrued as of a recent date;
(vi) Agreements, contracts or instruments relating to the
borrowing of money, or the guaranty of any obligation for the borrowing
of money;
(vii) Contracts between officers, directors or employees of
the Company and any other person or entity which purport to restrict
the Company's business activities or use of information in the
Business, including without limitation any covenant not to compete;
(viii) All agreements relating to any securities of the
Company or rights in connection therewith; and
(ix) Any contracts, leases or other agreements referred to in
any other Schedule hereunder, and any other material contracts,
instruments, commitments, plans or arrangements of the Company.
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All the foregoing are herein called "Material Contracts." Schedule 2.2(n)
includes with respect to each Material Contract the names of the parties, the
date thereof, its title or other general description. Copies of all written
Material Contracts have been delivered to FNEDC or its counsel or accountants.
Each Material Contract sets forth the entire arrangement and understanding
between the Company and the respective third parties with respect to the subject
matter thereof and, except as indicated in such Schedule, there have been no
amendments or side or supplemental arrangements to or in respect of any Material
Contract. The Company has furnished to FNEDC true and correct copies of all
Material Contracts as currently in effect, and will furnish any further
information that FNEDC may reasonably request in connection therewith. Each
Material Contract is valid and in full force and effect, and the Company has
performed all material obligations required to be performed by it thereunder.
The Company is not in material default under or in material breach or material
violation of (a) its Certificate of Incorporation or Bylaws, or (b) to each
Shareholder's best knowledge, any Material Contract, or (c) any other agreement,
indenture, deed of trust, mortgage, instrument, lease, order, judgment, writ,
injunction, decree, license, permit, statute, rule or regulation of any court or
governmental or regulatory body applicable to it in a manner which would
materially and adversely affect its condition, the transactions contemplated by
this Agreement or the Business, and the execution and delivery of the Operative
Documents and the consummation of the transactions contemplated thereby will not
result in the violation of any law, decree or order known to the Company or in
any default, breach or violation of the Company's Certificate of Incorporation
or Bylaws, or any Material Contract to which the Company is a party or by which
it is bound. Except as set forth on Schedule 2.2(n), to the best of the
Shareholders' knowledge, there is no event which has occurred or existing
condition which constitutes, or with notice or lapse of time or both, would
constitute a default under any Material Contract or would cause the acceleration
of any obligation of any party thereto, or give rise to any right of termination
or cancellation or cause the creation of any lien or encumbrance on any asset of
any Company. To the best of the Shareholders' knowledge, no third party is in
default under any material provision of any Material Contract. None of the
Shareholders has any knowledge that the parties to any Material Contract will
not fulfill their obligations thereunder in all material respects. There is no
term of any Material Contract that materially adversely affects the Business or
the business, operations, affairs, prospects or conditions of the Company.
(o) Books and Records. As of the Closing Date, all past actions and
authorizations of the Company's board of directors and shareholders since the
date of the Company's incorporation have been fully and validly ratified. Except
as detailed in Schedule 2.2(o) hereto, the general ledgers and books of the
Company and all of the Company's other books, accounts and records are
identified on Schedule 2.2(o), constitute all such ledgers, books, accounts and
records of the Company, are complete
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and correct in all material respects.
(p) Banking Relationships. All of the arrangements which the Company
has with any banking institution are completely and accurately described in
Schedule 2.2(p), indicating with respect to each such arrangement the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereto. The
Company has no outstanding powers of attorney of any kind.
(q) Required Consents, Etc. Except as described in Schedule 2.2(q)
hereto, to the best of the Shareholders' knowledge, no consent, approval,
authorization, declaration or filing, including without limitation any consent,
approval or authorization of or declaration or filing with any governmental
authority, is required on the part of the Company in connection with the
execution and delivery of the Operative Documents.
(r) Accounts Receivable. To the best of the Shareholders' knowledge,
the notes and accounts receivable of the Company are reflected properly on its
books and records. Except as set forth on Schedule 2.2(r), the Company has no
accounts or loans receivable from any person, firm or corporation which is
affiliated with the Company or from any director, officer or employee of the
Company. All accounts receivable of the Company arose out of bona fide
transactions in its ordinary course of business.
(s) Litigation. Except as set forth on Schedule 2.2(s), there is no
litigation, proceeding or investigation pending or, to the best of the
Shareholders' knowledge, threatened (nor, to the best of the Shareholders'
knowledge, is there any basis therefor) against the Company or affecting any of
its properties, rights or assets or against any officer or employee which
relates to the affairs of the Company or the right of any officer or employee to
participate in the business of the Company and which is reasonably likely to
result in any material adverse change in the Business or in the business or
condition (financial or otherwise), prospects, assets or liabilities of the
Company or which relates to the Stock or the transactions contemplated by this
Agreement, in any court or before any authority or governmental entity
including, without limitation, actions, proceedings or investigations with
respect to any alleged violation by the Company of any law, statute, ordinance,
regulation, order, policy or guideline of any governmental entity.
(t) No Medicare Payment Program Providers. None of the dentists
rendering services to patients of the Company at the Company's location are
participating providers in the Medicare payment program.
(u) No Brokers. The Company has not dealt with any broker, finder or
similar agent with respect to the transactions
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contemplated by the Agreement and the Company is under no obligation to pay any
broker's fee, finder's fee or commission in connection with the transactions
contemplated by this Agreement.
(v) Disclosure. Neither the representations and warranties of the
Company and each Shareholder contained in this Agreement nor the financial or
other information included in the Schedules hereto contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein and therein complete and not misleading as of
the dates thereof in light of the circumstances in which they were made. There
is no fact presently known to the Shareholders which will (so far as the
Shareholders or the Company can now reasonably foresee) materially adversely
affect the Business or the operations and/or affairs of the Company.
(w) No Offer. During the period (i) commencing on January 15, 1997 and
continuing through July 15, 1997, and (ii) commencing on the execution date of
this Agreement and continuing through the earlier of December 15, 1997 or the
Closing Date, the Company has not, directly or indirectly, through any officer,
director, agent or otherwise, (i) solicited, initiated or encouraged submission
of proposals or offers from any person other than FNEDC relating to any
acquisition or purchase of any of the stock and/or the assets of the Company, or
any equity interest in the Company or any equity investment, merger,
consolidation or business combination with the Company, or (ii) participated in
any discussions or negotiations regarding, or furnished to any other person, any
non-public information with respect to, or otherwise cooperated in any way with,
or assisted or participated, facilitated or encouraged, any effort or attempt by
any other person to do or seek any of the foregoing.
II.3. Representations and Warranties Concerning the Shareholders.
Each Shareholder hereby jointly and severally represents and warrants
to FNEDC that each of the statements contained in this Section 2.3 is true and
correct as to himself as of the date of this Agreement and will be true and
correct at and as of the Closing:
(a) Title. Such Shareholder has good, marketable and unencumbered title
to, and full right, power and authority to sell, transfer, assign and deliver
the Stock; and FNEDC will on the Closing Date, acquire good and marketable title
to such Stock, free and clear of any liens, encumbrances, restrictions on
transfer, charges or claims.
(b) Due Issuance. The shares of Stock owned by such Shareholder are
validly issued, fully paid and nonassessable.
(c) Power and Authority Relative to Transaction. Such Shareholder has
full power and authority and has taken all required action necessary to permit
him to execute and deliver
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the Operative Documents, and none of such actions conflicts with or violates any
provision of law known to him or violates or constitutes a default under or will
result in any breach of any agreement, indenture, deed of trust, mortgage,
instrument, lease, order, judgment, writ, injunction, decree, license or permit
of any court or governmental or regulatory body applicable to him.
(d) Valid and Binding Obligations. The Operative Documents constitute
the valid and legally binding obligations of such Shareholder, enforceable
against him in accordance with their respective terms, subject to applicable
bankruptcy, insolvency and other general laws affecting the rights and remedies
of creditors, except that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(e) Required Consents. No consent, order, approval, authorization,
declaration or filing including, without limitation, any consent, approval or
authorization of or declaration or filing with any governmental authority, is
required on the part of such Shareholder for or in connection with the execution
and delivery of the Operative Documents.
(f) Litigation. Schedule 2.3(f) sets forth each instance in which such
Shareholder (i) is subject to any outstanding injunction, judgment, order,
decree, ruling or charge or (ii) is a party or, to the knowledge of such
Shareholder, is threatened to be made a party to any action, suit, proceeding,
hearing or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction or
before any arbitrator, which in each case would materially adversely affect the
Shareholder's ability to perform his obligations under the Operative Documents.
(g) No Brokers. Such Shareholder has not dealt with any broker, finder
or similar agent with respect to the transactions contemplated by the Agreement
and such Shareholder is not under any obligation to pay any broker's fee,
finder's fee or commission in connection with the transactions contemplated by
this Agreement.
(h) No Offer. During the periods (i) commencing on January 15, 1997 and
continuing through July 15, 1997, and (ii) commencing on the execution date of
this Agreement and continuing through the earlier of December 15, 1997 or the
Closing Date, no Shareholder has, directly or indirectly, offered, solicited
offers for or sold, assigned, pledged or otherwise transferred any of the Stock
prior to the Closing. No Shareholder has, directly or indirectly, through any
agent or otherwise, (i) solicited, initiated or encouraged submission of
proposals or offers from any person other than FNEDC relating to any acquisition
or purchase of any of the stock and/or the assets of the Company, or any equity
interest in the Company or any equity investment, merger, consolidation or
business combination with
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the Company, or (ii) participated in any discussions or negotiations regarding,
or furnished to any other person, any non-public information with respect to, or
otherwise cooperated in any way with, or assisted or participated, facilitated
or encouraged, any effort or attempt by any other person to do or seek any of
the foregoing.
(i) Disclosure. Neither the representations and warranties of
such Shareholder contained in this Agreement, nor the other information
included in the Schedules hereto contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained herein and therein complete and not misleading as of the
dates thereof in light of the circumstances in which they were made.
ARTICLE III
ADDITIONAL COVENANTS AND AGREEMENTS
III.1. FNEDC's Access to Information. The Shareholders shall cause the
Company to permit FNEDC and its counsel, accountants and other representatives
full and free access, upon reasonable notice and during normal business hours
without interference to business operations, throughout the period prior to the
Closing, to all of the properties, books, contracts, commitments, records
(including financial and tax records for fiscal years 1993 through and including
1996 and any 1997 interim period prior to Closing), officers and personnel of
the Company and shall furnish to FNEDC during such period all such information
concerning the business activities of the Company as FNEDC or its counsel,
accountants or other representatives may reasonably request. FNEDC agrees to pay
the reasonable out-of-pocket expenses incurred in providing this information.
FNEDC further agrees that it will not communicate with Company employees or with
any employer which is a party to any dental plan contract with the Company as of
the closing, without the prior approval of Xxxx Xxxxxx. If the transactions
contemplated by this Agreement are not consummated, all confidential or
proprietary information furnished by the Shareholders or the Company shall be
kept in strict confidence in accordance with Article X hereof and shall not be
used or disclosed by any recipient, and FNEDC shall cause each such recipient to
return to the Company all copies of documents or records furnished hereunder. No
investigation or findings of FNEDC shall diminish or affect the representations
and warranties of the Shareholders in this Agreement or relieve the Shareholders
of any of their obligations hereunder; provided, however, that FNEDC shall
promptly disclose to the Shareholders the results of any investigation by FNEDC
which reveals information that is likely to materially adversely affect the
Shareholders.
III.2. Notices and Consents; Governmental Approvals. The Shareholders
shall use their good faith commercially reasonable efforts to obtain, and shall
cooperate with FNEDC to obtain, all
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governmental and regulatory approvals and actions necessary to consummate the
transactions contemplated hereby which are required to be obtained by applicable
law or regulations. The Shareholders will cause the Company to give any notices
to third parties, and will use their good faith commercially reasonable efforts
to obtain any third party consents, that FNEDC reasonably may request in
connection with the matters referred to in Section 2.1(d) above and/or to effect
transfers of the contracts and agreements described in Schedule 2.2(n); provided
however, that during the Escrow Period (as defined in the Escrow Agreement) the
Shareholders shall not be required to give any notice or obtain any consent to
transfer from any employer which is a party to any dental plan contract with the
Company as of the closing. Each of the Parties will give any required notices,
make any filings with, and use its or his, as the case may be, good faith
commercially reasonable efforts to obtain any governmental approvals in
connection with the matters referred to in Sections 2.1(d), 2.2(j) and 2.3(e)
above.
III.3. Assignment of Intellectual Property and Other Documents. In the
event that any Shareholder has ownership rights, title or interest in any
intellectual property, or is a party in his individual capacity to any
contracts, agreements, or other documents ("Other Documents") intended to be
transferred to FNEDC or the P.C., pursuant to the Closing, such Shareholder
hereby conveys, transfers and assigns any and all of such right, title and
interest in and to said intellectual property and Other Documents and will take
whatever action necessary for FNEDC or the P.C. to effect transfer or assignment
of the same as of the Closing or as soon as possible thereafter.
III.4. Operation of Business. Neither Shareholder will permit the
Company to engage in any practice, take any action, or enter into any
transaction outside of its ordinary course of business. Without limiting the
generality of the foregoing, the Shareholders will ensure that the Company will
not, at any time prior to Closing, (i) declare, set aside or pay any dividend or
make any distribution with respect to its capital stock (other than dividends
and distributions that are consistent in nature and amount with the Company's
last five (5) fiscal years; provided, however, that subject to the final
sentence of Section 2.2(h), the Shareholders may cause the Company to distribute
to the Shareholders all cash in the Company's respective bank accounts on or
before the Closing Date), or redeem, purchase or otherwise acquire any of its
capital stock, or (ii) otherwise engage in any practice, take any action, or
enter into any transaction of the sort described in Section 2.2(h) above.
III.5. Preservation of Business. Prior to Closing, the Shareholders
will use their good faith commercially reasonable efforts to ensure that the
Company will keep the Business and properties substantially intact, including
its present operations, physical facilities, working conditions and
relationships with lessors, licensors, suppliers, customers and
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employees.
III.6. Notice of Developments. The Shareholders on one hand, and FNEDC,
on the other, will give prompt written notice to the other Party of any material
adverse development prior to Closing which causes or is likely to cause a breach
of any of their, his or its own, as the case may be, representations and
warranties in Sections 2.1, 2.2 and 2.3 above. No disclosure by any Party
pursuant to this Section 3.6, however, shall be deemed to amend or supplement
the Schedules or to prevent or cure any misrepresentation, breach of warranty or
breach of covenant.
III.7. Insurance. Each Shareholder will use his good faith commercially
reasonable efforts to ensure that at all time prior to the Closing Date the
Company and each dentist-employee of the Company will continue to maintain in
full force and effect an individual professional liability insurance policy with
liability limits of at least $1 million per occurrence and $3 million aggregate.
If any of the foregoing insurance is on a "claims-made" basis, each Shareholder
will use his good faith commercially reasonable efforts to ensure that the
Company will prior to Closing obtain, at its expense, malpractice tail
insurance, in form and substance acceptable to FNEDC, to insure against general,
professional and directors and officers liability claims made on or after
Closing resulting from or arising out of events occurring in the Business prior
to Closing. Such tail policies shall name FNEDC as a named insured thereunder.
III.8. Further Assurances. The Shareholders on one hand, and FNEDC, on
the other, both before and after the Closing, upon the request from time to time
of the other, and without further consideration, will do each and every act and
thing as may be necessary or reasonably requested to consummate the transactions
contemplated hereby (including, without limitation, the orderly transfer to
FNEDC of the Stock), including without limitation by executing, acknowledging
and delivering assurances, assignments and other documents and instruments,
furnishing information and copies of documents, books and records (including
without limitation tax records); filing reports, returns, applications, filings
and other documents and instruments with governmental authorities; and
cooperating with the other in exercising any right or pursuing any claim,
whether by litigation or otherwise, other than rights and claims running against
the party from whom or which such cooperation is requested.
III.9. Survival of Covenants. The covenants contained in Sections 3.8
and 3.9 shall survive the Closing.
III.10. Break-Up Fee. Each Shareholder hereby agrees that, during the
Break-Up Fee Period as defined below, in the event of a sale, merger,
consolidation or other disposition of all or a majority of the assets or stock
of the Company or Professional Associations, to, with, or into a third party
other than an affiliate of FNEDC, another Professional Association, the
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Company or a Shareholder, or in the event the Company Professional Associations
otherwise combines or forms a partnership with a third party other than an
affiliate of FNEDC, another Professional Association, the Company or a
Shareholder, then FNEDC would be irreparably harmed. Accordingly, in the event
of any such sale, merger, consolidation or other combination (a "Transaction"),
within the Break-Up Fee Period as set forth below, each Shareholder hereby
agrees that he shall be jointly and severally liable to FNEDC for liquidated
damages in the aggregate amount of One Million Dollars ($1,000,000) under this
Agreement and the Stock Purchase Agreement, which liquidated damages shall be
due and payable to FNEDC immediately upon the consummation of any such sale,
merger, consolidation or other combination.
In the event that (i) FNEDC terminates this Agreement in accordance
with Article IX hereof or First Dental terminates the Stock Purchase Agreement
in accordance with Article IX thereof and the Shareholders are unable to
terminate either this Agreement in accordance with Article IX hereof or the
Stock Purchase Agreement in accordance with Article IX thereof, or (ii) the
Shareholders fail to make good faith commercially reasonable efforts to fulfill
the closing conditions set forth in Section 4.1 hereof by the Closing Date and
FNEDC delivers a written notice to the Shareholders stating its election to
terminate this Agreement, then the Break-Up Fee Period shall commence as of the
Closing Date and expire no earlier than six (6) months from such date.
In the event that (i) the Shareholders terminate this Agreement in
accordance with Article IX hereof, or (ii) FNEDC is unable to, or elects not to,
fulfill the closing conditions set forth as Section 4.1 hereof by the Closing
Date and the Shareholders deliver a written notice to FNEDC stating their
election to terminate this Agreement, then the Break-Up Fee Period shall
terminate as of the date of such notice.
III.11. Assumption of Certain Automobile Leases by Xxxx Xxxxxx. Prior
to the Closing, the Shareholders shall cause the Company, to convey, transfer
and assign to Xxxx Xxxxxx any and all of their respective right, title and
interest in and to the Automobile Leases described on the attached Schedule 3.11
(the "Automobile Leases"). The Shareholders will take whatever action is
necessary to effect the transfer or assignment of the Automobile Leases to Xxxx
Xxxxxx prior to the Closing.
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ARTICLE IV
CONDITIONS TO CLOSING
IV.1. Conditions Precedent to FNEDC's Obligations. The obligation of
FNEDC to consummate the transactions contemplated by this Agreement is expressly
subject to the fulfillment or express written waiver of the following conditions
on or prior to the Closing Date:
(a) Representations and Warranties True; Obligations Performed. Each
of the representations and warranties contained in Sections 2.2, 2.3 and 2.4 of
this Agreement shall be true and correct in all material respects at and as of
the Closing Date, except as otherwise specifically provided for herein. The
Shareholders shall have performed, on or before the Closing Date, all
obligations under this Agreement which by the terms hereof are to be performed
respectively by each Shareholder on or before the Closing Date.
(b) Delivery of Certificates. The Shareholders shall have delivered
to FNEDC certificates representing the Stock, duly endorsed for transfer or with
duly executed stock powers attached.
(c) Escrow Agreement. The Shareholders shall have executed and
delivered the Escrow Agreement.
(d) Legal Opinion from Counsel for the Shareholders. FNEDC shall have
received the written opinion of Cole, Schotz, Meisel, Xxxxxx and Xxxxxxx, P.C.,
counsel for the Shareholders and the Company, dated the Closing Date and
substantially in the form attached hereto as Exhibit B.
(e) Delivery of Other Instruments. The Shareholders shall have
delivered instruments of conveyance for the Other Documents and such other
certificates, consents, instruments or agreements as may be reasonably requested
by FNEDC or its counsel.
(f) Termination of Plans. The Shareholders shall have caused the
Company to terminate the Plans listed in Schedule 2.2(m) effective on or before
the Closing Date.
(g) Required Consents. All consents and waivers in form and substance
satisfactory to FNEDC and its counsel, necessary or appropriate to (1)
consummate the Closing and the other transactions contemplated hereby, and (2)
for the continued operation of the Business of the Company on substantially the
same basis as operating currently and without the imposition of materially
adverse conditions on such Business shall have been obtained by the
Shareholders.
(h) Stock Purchase Agreement. The Stock Purchase Agreement shall have
been executed and delivered by the
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Shareholders.
IV.2. Conditions Precedent to the Obligations of the Shareholders. The
obligation of each Shareholder to consummate the transactions contemplated by
this Agreement is expressly subject to the fulfillment or written waiver of the
following conditions on or prior to the Closing Date:
(a) Representations and Warranties True; Obligations Performed. Each
of the representations and warranties of FNEDC contained in Section 2.1 shall be
true and correct in all material respects at and as of the Closing, except as
otherwise specifically provided for herein. FNEDC shall have performed, on or
before the Closing Date, all obligations under this Agreement which by the terms
hereof are to be performed by FNEDC on or before the Closing Date.
(b) Deposit. FNEDC shall have delivered the Deposit in accordance
with Section 1.1(a) hereof.
(c) Required Consents. All consents and waivers, in form and
substance satisfactory to the Shareholders and their counsel, necessary to
consummate the Closing and the other transactions contemplated hereby, shall
have been obtained by FNEDC.
(d) Escrow Agreement. First Dental shall have executed and delivered
the Escrow Agreement.
(e) Legal Opinion from Counsel to FNEDC. The Shareholders shall have
received the written opinion of XxXxxxxxx, Will and Xxxxx, counsel to FNEDC,
dated the Closing Date and in a form reasonably satisfactory to Shareholders'
counsel.
(f) Stock Purchase Agreement. The Stock Purchase Agreement shall have
been closed by First Dental. FNEDC shall cause each of First Dental and the P.C.
on the date of closing to have signed counterpart signature pages to this
Agreement and the Stock Purchase Agreement.
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ARTICLE V
CLOSING AND DELIVERIES
V.1. Date and Place of Closing. Subject to Section 1.2, to the extent
applicable, if at all, the consummation of the transactions contemplated hereby
(the "Closing") shall be held at the offices of XxXxxxxxx, Will & Xxxxx, 00
Xxxxxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx Xxxx, Xxx Xxxx at 10:00 a.m. on the
earlier of (i) the tenth (10th) day after the closing date of FNEDC's proposed
initial public offering, or (ii) December 15, 1997, or at such other time and
place as the parties may mutually agree in writing (the "Closing Date").
V.2. Deliveries at Closing by the Shareholders. At the Closing,
provided FNEDC has duly performed its obligations hereunder, the Shareholders
shall deliver or cause to be delivered to FNEDC the following:
(a) Certificates representing the Stock, duly endorsed for
transfer or with duly executed stock powers attached, and free of any liens,
encumbrances, restrictions on transfer, charges or claims;
(b) Certified copies of resolutions duly adopted by: the Company's
(i) Board of Directors and (ii) shareholders approving and authorizing the
transactions provided for in the Operative Documents, the execution thereof and
the performance of all acts required to be performed by the Company thereunder,
accompanied by an appropriate certificate of incumbency.
(c) Certified copies of resolutions duly adopted by the Company's
(i) Board of Directors and (ii) shareholders, ratifying all actions and
authorizations of the Company's board of directors and shareholders since the
date of the Company's incorporation, accompanied by an appropriate certificate
of incumbency;
(d) A copy of the Company's (i) Certificate of Incorporation, and
(ii) Bylaws, each as amended as of the Closing Date and certified by the
Secretary of the Company, a Certificate of Good Standing of the Company issued
as of a recent date by the Secretary of State of the State of New Jersey and a
Tax Clearance Certificate of the Company issued as of a recent date by the New
Jersey Department of Taxation.
(e) Instruments of transfer, in form reasonably satisfactory to
FNEDC and its counsel, to convey all of the Shareholders' right, title and
interest in and to any trademarks and Other Documents; and
(f) All consents of any person or entity, whether or not a party
to this Agreement, which are necessary to effectuate the transfer of the Stock,
the assignment of the Other Documents, and the consummation of the transactions
contemplated by this
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Agreement.
V.3. Deliveries by FNEDC. At the Closing, provided each Shareholder and
the Company has fully performed all of his or its respective obligations
hereunder, FNEDC shall deliver or cause to be delivered to or on behalf of the
Shareholders the following:
(a) The Purchase Price minus the Deposit;
(b) A certified copy of resolutions duly adopted by FNEDC's Board
of Directors approving and authorizing the transactions provided for in the
Operative Documents, the execution thereof and the performance of all acts
required to be performed by FNEDC thereunder, accompanied by an appropriate
certificate of incumbency; and
(c) A copy of FNEDC's (i) Certificate of Incorporation, and (ii)
Bylaws, each as amended as of the Closing Date and certified by the Secretary of
FNEDC, and a Certificate of Good Standing of FNEDC issued as of a recent date by
the Secretary of State of the State of Delaware.
(d) All consents of any person or any entity, whether or not a
party to this Agreement, which are necessary to effectuate the consummation of
the transactions contemplated by this Agreement.
(e) Counterpart signature pages to this Agreement and the Stock
Purchase Agreement by each of First Dental and the P.C.
ARTICLE VI
POST-CLOSING MATTERS
VI.1. Further Assurances. Following the Closing Date, the Shareholders
will execute and deliver to FNEDC such documents and take such other actions, at
the Shareholders' expense, as FNEDC may reasonably request in order to vest in
FNEDC good, valid and marketable title to the Stock.
VI.2. Employment and Benefits-Related Matters.
(a) FNEDC shall retain the right to amend in any respect or to
terminate in whole or in part any Plan in accordance with the provisions of such
Plan and applicable law.
(b) Nothing contained in this Agreement shall obligate or commit
FNEDC to continue any Plan with respect to services after the Closing Date or to
maintain in effect any such Plan or any similar plan or any level or type of
benefit except as may be provided to the contrary in this Section 6.2.
(c) The Shareholders shall cooperate and remain responsible
financially for fulfilling all reporting, disclosure and other
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administrative duties of any Shareholder or the Company for the Plans that
relate to periods prior to the Closing Date. Any failure by the Shareholders to
fulfill these duties shall be subject to the indemnification provisions under
Section 8.2(b) below.
(d) The Shareholders shall provide to FNEDC copies of any
correspondence relating to the Plans and shall inform FNEDC of any
communications with a government agency, including but not limited to the
Internal Revenue Service and the U.S. Department of Labor, regarding the Plans.
(e) Upon the Closing, FNEDC and the P.C. will make offers of employment
to all employees of the Company upon such terms and conditions as FNEDC or the
P.C., as the case may be, may determine. Employees of the Company who are not
dentists shall become employees of FNEDC and employees of the Company who are
dentists and who accept offers of employment shall become employees of the P.C.
Such employees shall receive standard FNEDC or P.C. employee benefits, as the
case may be. FNEDC and the P.C. shall be entitled in the ordinary course of
their respective businesses to prospectively alter the compensation, and benefit
programs they offer to their respective employees. The terms and conditions of
the employment of dentists with separate written employment contracts with the
P.C. shall be governed by the provisions of such contracts.
VI.3. Access to Records. The Shareholders and FNEDC shall each
cooperate with the other after the Closing Date by providing without additional
consideration (except as set forth below) and promptly upon request, copies of
such records and other information regarding the Business and the assets of the
Company as may reasonably be requested from time to time by the other Parties as
necessary for the preparation or audit of federal, state and local income and
other tax returns, third party reimbursement filings, audits (including those by
third party payors), third party disputes, refund claims and other valid
business purposes. All such requests for information shall be made upon
reasonable notice, and such information shall be made available during normal
business hours (unless otherwise agreed to by the Parties) and in such manner as
to avoid unnecessary disruption of the Party providing the information. The
Party requesting such information shall pay the reasonable out-of-pocket
expenses of the Party providing such information.
ARTICLE VII
NON-COMPETITION AGREEMENT AND NON-SOLICITATION AGREEMENT
VII.1. Non-Solicitation. Subject to the provisions set forth in Article
IX hereof, for a period of three (3) years following the Closing Date, neither
Xxxx Xxxxxx nor Xxxxxxx (related to orthodontic work only) shall, without the
express written consent of FNEDC:
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(a) solicit any persons who are at any time patients of the
Business, nor suggest, request or direct that any such patients request that
medical records be copied or otherwise removed or transferred from FNEDC's
office, nor remove or copy any medical records or patient or mailing lists; or
(b) hire, seek to hire or assist in hiring any employee, agent
or independent contractor of the Business or FNEDC or induce or seek to induce,
or take action which results in the termination of employment or other
arrangements between the Business or FNEDC and such employee, agent or
independent contractor or otherwise interferes with such employment or
arrangements; provided that Xxxxxxx may continue to employ his two (2)
assistants as of the execution date hereof.
VII.2. Non-Compete. Subject to the provisions set forth in Article IX
hereof, Xxxx Xxxxxx shall be bound by the following non-competition covenants:
(a) For a period of three (3) years following the Closing Date,
Xxxx Xxxxxx shall not, without the express written consent of the FNEDC (i)
engage in any dental practice or activity within a fifteen (15) mile radius
("Non-Compete Area") of any present locations of any Company ("the Locations")
that competes with FNEDC; or (ii) directly or indirectly own, manage, operate,
control or participate either directly or indirectly in the ownership,
management, operation or control of (A) any dental practice or specialty dental
care facility, however organized, within the Non-Compete Area, (B) any dental
plan organization or similar health maintenance organization within the State of
New Jersey, and (C) any laboratory or other facility within the State of New
Jersey that provides any services or manufacturers any products that compete,
directly or indirectly, with the products and/or services manufactured or
provided by FNEDC or Doctor's Denture Service, P.A.
(b) If any part of this Section 7.2 should be determined by a
court of competent jurisdiction to be unreasonable in nature, duration,
geographic area, or scope, then this Agreement is intended to and shall extend
only for such period of time, in such area and with respect to such activity, as
is determined by said court to be reasonable.
(c) Notwithstanding Section 7.2(a) above, during the three (3)
year period following the Closing, Xxxx Xxxxxx will be free to pursue whatever
activities he desires, provided that such other activities do not (i) materially
interfere with his obligations to provide consulting services to FNEDC as set
forth in Schedule 3.7 of the Stock Purchase Agreement, or violate the provisions
of this Section 7.2.
ARTICLE VIII
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SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
VIII.1. Survival. The Shareholders and FNEDC agree that (i) the
covenants, representations and warranties contained in this Agreement shall
survive for a period of two (2) years from the Closing Date, except that the
representations, warranties and covenants contained in Section 2.2(i) shall
survive until the applicable tax statutes of limitations relating thereto shall
have run, (ii) the representations, warranties and covenants contained in
Section 2.2(m) shall survive indefinitely, (iii) the provisions of Article VII
shall survive the Closing Date for the period specified therein; and (iv) the
provisions of this Article VIII shall survive the Closing Date for an indefinite
period.
VIII.2. Indemnification of FNEDC. (a) Each Shareholder agrees to
jointly and severally indemnify and hold FNEDC and its affiliates and their
respective directors, officers and employees (collectively, "FNEDC Indemnitees")
from and against (a) any and all payments, damages, claims, demands, losses,
expenses, costs, obligations and liabilities, including reasonable attorneys'
fees, which may be asserted against or sustained or incurred by the FNEDC
Indemnitees in connection with, arising out of or related to: (i) any inaccuracy
in, misrepresentation or breach of any of the representations, warranties,
agreements, commitments, obligations, covenants or conditions made by the
Company or any Shareholder under this Agreement, including the Schedules hereto;
(ii) any actions of the Shareholders, the Company or its employees or agents
taken prior to the Closing Date (with the exception of liabilities of the
Company incurred by the Company in the ordinary course of business); (iii) the
establishment or administration of any Plan prior to the Closing Date; (iv) the
Shareholders' failure to fulfill their post-Closing duties under Section 6.2
above; (v) any audit of a Plan performed by any governmental unit, including but
not limited to the Internal Revenue Service and the U.S. Department of Labor,
relating to periods prior to the Closing Date; or (vi) the failure of the
transfer and assignment of the Stock, the trademarks and the Other Documents
from the Shareholders to FNEDC to cause FNEDC to acquire good and marketable
title to the Stock, the trademarks and the Other Documents, free and clear of
any liens, encumbrances, restrictions on transfer, charges or claims unless such
failure is caused by the action of FNEDC or its affiliates and agents; and (b)
any and all costs and expenses (including, but not limited to, reasonable legal
expenses) incurred by the FNEDC Indemnitees in connection with the enforcement
of their respective rights hereunder.
VIII.3. Indemnification of the Shareholders. FNEDC and, from and after
the Closing Date, each of First Dental and the P.C., jointly and severally agree
to indemnify and hold the Shareholders and their employees and agents
(collectively, "Shareholder Indemnitees") from and against (a) any and all
payments, damages, claims, demands, losses, expenses, costs, obligations and
liabilities, including reasonable attorneys' fees, which may be asserted against
or sustained or incurred by
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the Shareholder Indemnitees: (i) in connection with, arising out of or related
to any inaccuracy in, misrepresentation or breach of any of the representations,
warranties, agreements, commitments, obligations, covenants or conditions made
by FNEDC hereunder; or (ii) arising or resulting from any actions of FNEDC
(including acts or omissions by any Shareholder that are committed at the
direction of FNEDC and/or the P.C. or are required pursuant to such
Shareholder's respective arrangement with FNEDC) taken after the Closing Date;
and (b) any and all costs and expenses (including, but not limited to,
reasonable legal expenses) incurred by the Shareholder Indemnitees in connection
with the enforcement of their respective rights hereunder.
VIII.4. Procedure for Indemnification. Any party making a claim for
indemnification hereunder (the "Indemnitee") shall notify the indemnifying party
(the "Indemnifying Party") of the claim in writing, describing the claim, the
amount thereof, and the basis therefor. The Indemnifying Party shall respond to
each such claim within 30 days of receipt of such notice. No action shall be
taken pursuant to the provisions of this Agreement or otherwise by the
Indemnitee until the later of (a) the expiration of the 30-day response period
(unless reasonably necessary to protect the rights of the Indemnitee), or (b) 30
days following the receipt of a response within such 30-day period by the
Indemnitee requesting an opportunity to cure the matter giving rise to
indemnification (and, in such event, the amount of such claim for
indemnification shall be reduced to the extent so cured within such 30-day cure
period). If such demand is based on a claim by a third party, the Indemnifying
Party shall have the right to assume the entire control of the defense,
compromise or settlement thereof, including at its own expense, employment of
counsel reasonably satisfactory to the Indemnitee, and, in connection therewith,
the Indemnitee shall cooperate fully to make available to the Indemnifying Party
all pertinent information under its control. No claim for indemnification
resulting from the breach or falsity or any of the representations or warranties
set forth herein or in any certificate or other instrument delivered pursuant
hereto shall be made after a date on which such representation, warranty or
agreement shall have expired under the provisions of Section 10.1 hereof.
VIII.5. Limitations on Indemnity Obligations. The Indemnifying Party
shall have no obligation to pay any claim for indemnification hereunder unless
and until the aggregate amount of all such claims arising under both this
Agreement and the Stock Purchase Agreement exceeds Fifty Thousand Dollars
($50,000) (the "Threshold Indemnity Amount"). In the event the aggregate amount
of all claims for which an Indemnified Party seeks indemnification hereunder
exceeds the Threshold Indemnity Amount, the Indemnifying Party shall be liable
for the entire indemnity amount with respect to such aggregated claims,
including the Threshold Indemnity Amount. Notwithstanding any other provision of
this Article VIII, the maximum aggregate amount that either
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FNEDC, on the one hand, or the Shareholders, on the other hand, shall be
obligated to pay as indemnity under this Agreement and the Stock Purchase
Agreement shall be the product of Four Million Dollars ($4,000,000) and a
fraction the numerator of which is the sum of the Purchase Price or the Adjusted
Purchase Price, if any, for each of this Agreement and the Stock Purchase
Agreement and the denominator of which is Five Million Seven Hundred Thousand
Dollars ($5,700,000).
VIII.6. Exclusive Remedy for Certain Indemnity Claims. Each Party
acknowledges and agrees that its sole and exclusive remedy with respect to any
and all claims relating to the subject matter of this Agreement and the
Schedules hereto, shall be pursuant to the indemnification provisions set forth
in this Article VIII; provided, however, that the Shareholders acknowledge and
agree that FNEDC shall be entitled to obtain injunctive relief with respect to
the enforcement of the non-competition and non-solicitation covenants set forth
in Article VII; and further provided that nothing in this Article VIII shall
prevent the Parties from obtaining any remedy specifically provided for in this
Agreement including arbitration of purchase price adjustments, refund or partial
refund of the Deposit, indemnification by the Shareholders for any tax liability
of the Company as set forth in Section 2.2(i), liquidated damages during the
Break-Up Fee Period and certain provisions as set forth in Article IX below.
VIII.7. Indemnity Payments by the Shareholders to be Treated as
Purchase Price Adjustments. The Parties agree that indemnity payments made by
the Shareholders in respect of their indemnity obligations under this Article
VIII, if any, shall be treated as proportional purchase price adjustments under
this Agreement and the DPO Stock Purchase Agreement.
ARTICLE IX
TERMINATION OF AGREEMENT
Notwithstanding anything in this Agreement to the contrary, this
Agreement and the obligations of the parties hereunder may be terminated
immediately upon written notice given on or prior to Closing Date as follows:
(a) by written consent of FNEDC and the Shareholders;
(b) by FNEDC if (i) any Shareholder has breached or violated any
material provision of this Agreement or failed to perform any material covenant
or agreement to be performed by such Shareholder under this Agreement, and (ii)
FNEDC has given such Shareholder reasonably specific written notice of such
breach or violation, and (iii) such Shareholder has failed to cure such breach
or violation within a reasonable period time (not to exceed 30 days) after the
giving of notice;
(c) by the Shareholders if (i) FNEDC has breached or
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violated any material provision of this Agreement or failed to perform any
material covenant or agreement to be performed by FNEDC under the terms of this
Agreement, and (ii) the Shareholders have given FNEDC reasonably specific
written notice of such breach or violation, and (iii) FNEDC has failed to cure
such breach or violation within a reasonable period of time (not to exceed 30
days) after the giving of notice; and
(d) by either Party if this Agreement and the Stock Purchase
Agreement do not both close by December 15, 1997.
In the event this Agreement shall be terminated pursuant to the
provisions of this Article IX, all rights and obligations of the Parties
hereunder shall terminate without any liability of the Shareholders, on the one
hand, and FNEDC, on the other, except for (i) any liability of any Party then in
breach, (ii) the respective obligations of the Parties pursuant to Article X
herein, (iii) in accordance with the provisions of Section 1.2 hereof, the
Shareholders may be required to return all or a portion of the Deposit to FNEDC,
and (iv) in the event that the Shareholders shall be required to deliver the
Deposit to FNEDC by wire transfer of immediately available funds no later than
ten (10) days following the date of notice of termination and the Shareholders'
obligations pursuant to Sections 3.14 hereof shall survive.
ARTICLE X
CONFIDENTIAL INFORMATION
The Parties hereby acknowledge the confidential nature of this
Agreement and the transactions contemplated hereby. Neither any Shareholder on
the one hand, nor FNEDC, on the other hand, shall at any time from and after the
execution of this Agreement, directly or indirectly, without the prior written
consent of the Shareholders or FNEDC, as the case may be, disclose or use, in
any way harmful to the business, operations, assets, prospects or condition of
the Shareholders or FNEDC, as the case may be, or any of their affiliates, or
otherwise contrary to the interests of such other party or their affiliates, any
confidential information involving or relating to the Company or FNEDC, as the
case may be, or any of their affiliates or any business, venture or other
activity of the Company or FNEDC, as the case may be, past, present or future,
actual or prospective; provided, however, that such confidential information
shall not include any information which (A) is already in a party's possession,
or (B) becomes generally available to the public other than as a result of
disclosure in violation hereof by the receiving party or its directors,
officers, employees, agents or advisors; or (C) becomes available to a party on
a non-confidential basis from a source other than another party or its
affiliates, directors,
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officers, employees or agents; and provided, further, that the provisions of
this Article X shall not prohibit any disclosure required by law in connection
with any Governmental Approval or judicial or administrative proceeding or
inquiry, pursuant to any applicable regulatory requirements including disclosure
required by any statute, rule or regulation, by generally accepted accounting
principles, or for purposes of correcting any information contained in any
public medium. This Article X shall survive the Closing or termination of this
Agreement for any reason whatsoever, as applicable, for an unlimited period of
time.
ARTICLE XI
MISCELLANEOUS
XI.1. Notices. All notices to a Party hereunder shall be deemed to have
been adequately given if delivered in person or mailed, certified mail, return
receipt requested, to such Party at its address set forth below (or such other
address as it may from time to time designate in writing to the other parties
hereto):
To the Shareholders: Xxxx Xxxxxx, D.D.S.
00 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Xxxxxx Xxxxxxx, D.D.S.
00 Xxx Xxxxx
Xxxxx Xxxxxxxx, XX 00000
with a copy to: Cole, Schotz, Meisel, Xxxxxx,
Xxxxxxx, P.C.
Court Plaza North, 00 Xxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxx Xxxxx, Esq.
To FNEDC: FNEDC of New Jersey, Inc.
00 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Attention: President
with a copy to: Xxxxxxx X. Xxxx, Esq.
XxXxxxxxx, Will & Xxxxx
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
XI.2. No Waiver. No failure to exercise and no delay in exercising, on
the part of FNEDC or the Shareholders, any right, power or remedy hereunder
shall operate as a waiver thereof; nor
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shall any single or partial exercise of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The rights provided are cumulative and not exclusive of
any rights provided by law.
XI.3. Amendments and Waivers. This Agreement may be modified or amended
only by a writing signed by each Party hereto. No waiver of any term or
provision hereof shall be effective unless in writing signed by the Party
waiving such term or provision.
XI.4. Governing Law; Headings. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts without regard to the conflict of law principles thereof. The
descriptive headings of the several Articles and Sections hereof are for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.
XI.5. No Assignment. None of the parties hereto may assign this
Agreement or any of their respective rights or obligations hereunder without
first obtaining the prior written consent of the other parties hereto; provided,
however, that FNEDC may (i) assign any or all of its rights and interests
hereunder to one or more of its affiliates, including First Dental, or to the
P.C., and (ii) designate one or more of its affiliates or the P.C. to perform
its obligations hereunder.
XI.6. Binding Effect and Benefits; Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
heirs, successors and assigns. FNEDC agrees to cause any entity that acquires
all or substantially all of FNEDC's assets to assume FNEDC's obligations
hereunder, unless assumption of such obligations is expressly waived in writing
by the Shareholders, and further agrees that in the event of a merger,
consolidation or change of control between FNEDC and a third party FNEDC will
not exclude its obligations hereunder from such merger, consolidation or change
of control.
XI.7. Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties with respect to the subject matter hereof
and supersedes all prior discussions, understandings and agreements concerning
the matters covered hereby.
XI.8. Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
XI.9. Transfer Taxes. All stock transfer taxes, if any, incident to the
sale of the Stock shall be paid by the Shareholders.
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XI.10. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the State of New Jersey
any action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other Party with respect thereto. Any
Party may make service on the other Party by sending or delivering a copy of the
process to the Party to be served at the address for the giving of notices in
Section 11.1 above. Nothing in this Section 11.10, however, shall affect the
right of any Party to serve legal process in any other manner permitted by law
or in equity. Each Party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law or in equity.
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IN WITNESS WHEREOF, the undersigned have set their hands and seals as
of the date first set forth above.
FNEDC OF NEW JERSEY, INC.
By:
-----------------------------------------
Xxxxxx X. Xxxxxxx
Executive Vice President
-----------------------------------------
Xxxx X. Xxxxxx, D.D.S.
-----------------------------------------
Xxxxxx Xxxxxxx, D.D.S.
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SCHEDULES AND EXHIBITS
Schedules
Schedule 1.1 Allocation of Purchase Price
Schedule 2.1(d) FNEDC Required Consents
Schedule 2.1(f) FNEDC Litigation
Schedule 2.1(h) FNEDC Compliance
Schedule 2.2(d) Capitalization
Schedule 2.2(e) Debts, Liabilities
Schedule 2.2(f) Unfunded Liabilities
Schedule 2.2(g) Title Exceptions and Lease
Schedule 2.2(h) Compensation
Schedule 2.2(i) Tax Deficiencies and/or Claims
Schedule 2.2(j) Permits
Schedule 2.2(k) Insurance
Schedule 2.2(l) Employees and Compensation
Schedule 2.2(m) Employee Benefits
Schedule 2.2(n) Material Contracts
Schedule 2.2(o) Books and Records
Schedule 2.2(p) Banking Relationships
Schedule 2.2(q) Company's Required Consents
Schedule 2.2(r) Bad Debt Reserve
Schedule 2.2(s) Company Litigation
Schedule 2.3(f) Litigation (Shareholders)
Schedule 3.11 Automobile Leases
Exhibits
Exhibit A Escrow Agreement
Exhibit B Legal Opinion of Cole, Schotz, Meisel, Xxxxxx
and Xxxxxxx, P.C.
