EXHIBIT 2.5
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF FEBRUARY 11, 1997
BY AND AMONG
APPLE ORTHODONTIX, INC.,
ORTHODONTICS EXCLUSIVELY, LTD.
AND
THE STOCKHOLDERS NAMED HEREIN
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS..................................................... 1
Section 1.01 Certain Defined Terms................................... 1
ARTICLE II. THE MERGER AND RELATED MATTERS................................. 4
Section 2.01 Certificate of Merger................................... 4
Section 2.02 The Effective Time...................................... 4
Section 2.03 Certain Effects of the Merger........................... 4
Section 2.04 Effect of the Merger on Capital Stock................... 5
Section 2.05 Delivery, Exchange and Payment.......................... 5
Section 2.06 Fractional Shares....................................... 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF EACH
STOCKHOLDER............................................... 6
Section 3.01 By Each Stockholder..................................... 6
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE STOCKHOLDERS.............................. 8
Section 4.01 By the Company and Each Stockholder..................... 8
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF APPLE......................... 9
Section 5.01 By Apple................................................ 9
ARTICLE VI. COVENANTS EXTENDING TO THE EFFECTIVE TIME...................... 9
Section 6.01 Of Each Party........................................... 9
ARTICLE VII. THE CLOSING AND CONDITIONS TO CLOSING AND
CONSUMMATION.............................................. 9
Section 7.01 The Closing and Certain Conditions...................... 9
ARTICLE VIII. COVENANTS FOLLOWING THE EFFECTIVE TIME....................... 11
Section 8.01 Of Each Party Other Than the Company.................... 11
ARTICLE IX. INDEMNIFICATION................................................ 11
Section 9.01 Indemnification Rights and Obligations.................. 11
ARTICLE X. LIMITATIONS ON COMPETITION...................................... 11
Section 10.01 Prohibited Activities.................................. 11
Section 10.02 Damages................................................ 12
Section 10.03 Reasonable Restraint................................... 12
Section 10.04 Severability; Reformation.............................. 12
Section 10.05 Independent Covenant................................... 12
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Section 10.06 Materiality............................................ 13
ARTICLE XI. GENERAL PROVISIONS............................................. 13
Section 11.01 Treatment of Confidential Information.................. 13
Section 11.02 Restrictions on Transfer of Apple Common Stock......... 13
Section 11.03 Brokers and Agents..................................... 14
Section 11.04 Assignment; No Third Party Beneficiaries............... 14
Section 11.05 Entire Agreement; Amendment; Waivers................... 15
Section 11.06 Counterparts........................................... 15
Section 11.07 Expenses............................................... 15
Section 11.08 Notices................................................ 16
Section 11.09 Governing Law.......................................... 16
Section 11.10 Exercise of Rights and Remedies........................ 17
Section 11.11 Time................................................... 17
Section 11.12 Reformation and Severability........................... 17
Section 11.13 Remedies Cumulative.................................... 17
Section 11.14 Respecting the IPO..................................... 17
ARTICLE XII. TERMINATION............................................... 17
Section 12.01 Termination of this Agreement.......................... 17
Section 12.02 Liabilities in Event of Termination.................... 18
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ADDENDUM 1 - Listing of Founding Companies
ANNEX 1 - Uniform Provisions
DISCLOSURE STATEMENT
EXHIBIT 4.01(d) - Form of General Release
EXHIBIT 7.01(d) - Form of Service Agreement
EXHIBIT 7.03(b)(iv) - Form of Registration Rights Agreement
EXHIBIT 7.04(a)(ii)(B)(5) - Form of IRC Section 1445 Certificate
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of February 11, 1997, by and among Apple Orthodontix, Inc., a Delaware
corporation ("Apple"), Orthodontics Exclusively, Ltd., an Arizona professional
corporation (the "Company"), and the persons listed on the signature pages
hereof under the caption "Stockholders" (collectively, the "Stockholders," and
each of those persons, individually, a "Stockholder"). This Agreement consists
of the Agreement and Plan of Reorganization set forth below and a separate
document of Uniform Provisions, which shall be a part hereof for all purposes.
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination pursuant to which:
(a) The Company will merge into Apple on the terms and subject to
the conditions set forth herein (that merger being the "Merger");
(b) Apple will merge with, or acquire substantially all of the
tangible and intangible assets of, all or some of the orthodontic
practices listed in the accompanying Addendum 1 (each an "Other Founding
Company" and, collectively with the Company, the "Founding Companies")
pursuant to agreements that are (i) similar to this Agreement and (ii)
entered into among those entities and/or their owners and Apple
(collectively, the "Other Agreements"); and
(c) Apple shall effect a public offering of shares of its common
stock and issue and sell those shares.
The respective boards of directors of Apple and the Company have
approved and adopted this Agreement, intending to effect a transaction pursuant
to Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings contained herein, the parties
hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the meanings assigned to them below in this Section 1.01.
Capitalized terms used in this Agreement and not defined below in this Section
1.01 have the respective meanings assigned to them in the Preliminary Statement
or Section 1.02 found in the Uniform Provisions.
"Agreed Rate" means 8.0% per annum.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Addenda, Annexes and Exhibits,
as each of the same may be amended, modified or supplemented from time to
time pursuant to the provisions hereof or thereof.
"Apple" means Apple Orthodontix, Inc., a Delaware corporation.
"Apple Acquisition Candidate" means any Entity engaged in any of the
businesses of providing orthodontic services to patients (i) which was
called on by any of the Company, Apple or the Subsidiaries of the Company
in connection with the possible acquisition by any of them of that Entity
or (ii) of which any of them has made an acquisition analysis.
"BCA" means the Arizona Business Corporation Act.
"Closing" has the meaning specified in Section 7.01.
"Closing Memorandum" means the form of closing memorandum to be
prepared by Apple for the Closing under this Agreement in which are
included the forms of certificates of officers, the opinions of counsel
and certain other documents to be delivered at the Closing as provided in
Article VII.
"Company" means Orthodontics Exclusively, Ltd., an Arizona
professional corporation.
"Company Common Stock" means the common stock, par value $10.00 per
share, of the Company.
"Counsel for Apple" means Xxxxxxx & Xxxxxx, L.L.P.
"Counsel for the Company and the Stockholders" means Xxxxxxx X.
Xxxxxxx.
"Current Balance Sheet" means the unaudited balance sheet of the
Company as at the Current Balance Sheet Date.
"Current Balance Sheet Date" means September 30, 1996.
"Disclosure Statement" means the written statement attached to and
made a part of this Agreement in which (a) exceptions are taken to certain
of the representations and warranties made by the Company and the
Stockholders herein, (b) it is confirmed that no exception is taken to
that representation and warranty or (c) additional information is provided
with respect to a particular provision herein or in the Uniform
Provisions.
"Dissenting Shares" has the meaning specified in Section 2.04.
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"Founding Companies" has the meaning specified in the Preliminary
Statement of this Agreement.
"Initial Financial Statements" means (a) the consolidated balance
sheet of the Company as at September 30, 1996 and the related consolidated
statements of income (operations), cash flows and stockholders' equity for
the Company's nine-month period ended September 30, 1996, and (b) the
Current Balance Sheet and the related unaudited consolidated statements of
income (operations), cash flows and stockholders' equity for the
nine-month period ended on the Current Balance Sheet Date.
"Merger" has the meaning specified in the Preliminary Statement of
this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Orthodontic Entity" means the Arizona professional corporation or
association to be formed pursuant to Section 6.06.
"Orthodontic Entity Common Stock" has the meaning specified in
Section 3.01.
"Other Agreements" has the meaning specified in the Preliminary
Statement of this Agreement.
"Other Founding Company" has the meaning specified in the
Preliminary Statement of this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed
as a percentage (a) the numerator of which is the number of shares of
outstanding Company Common Stock owned by that Person, as set forth in
Section 3.02 of the Disclosure Statement, and (b) the denominator of which
is the total number of shares of outstanding Company Common Stock owned by
all Stockholders, as set forth in Section 3.02 of the Disclosure
Statement.
"Purchaser Representative" means a "purchaser representative" as
defined in Securities Act Rule 501(h).
"Required Stockholders" means, at the time of any determination,
Stockholders who, at the Effective Time, will be or were entitled, subject
to the provisions of Section 2.05, to receive Merger Consideration
representing not less than 80% of the total Merger Consideration to be
received by all Stockholders pursuant to Section 2.04.
"Responsible Officer" means Xxxx X. Xxxxxx.
"Restricted Period" has the meaning specified in Section 11.02.
"Scheduled Agreements" means the agreements described in Section
4.11 of the Disclosure Statement.
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"Service Agreement" means the Service Agreement to be entered into
as of the IPO Pricing Date among Apple, the Stockholders and the
Orthodontic Entity.
"Stockholder" has the meaning specified in the preamble of this
Agreement.
"Stockholder Employment Agreement" means the Employment Agreement to
be entered into as of the IPO Pricing Date between the Orthodontic Entity
and the Stockholder.
"Surviving Corporation" means Apple, the Person to be designated in
the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Transaction Value.
"Transaction Value" means an amount equal to the Company's gross
revenues (less bad debt) for the 12-month period ended December 31, 1996
multiplied by 1.2.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the
Acquisition of Founding Companies attached hereto as Annex 1.
ARTICLE II.
THE MERGER AND RELATED MATTERS
Section 2.01 CERTIFICATE OF MERGER. Subject to the terms and
conditions hereof, the Company will cause a Certificate of Merger to be duly
executed and delivered on or promptly after the date of the Closing to the
Secretary of State of the State of Arizona.
Section 2.02 THE EFFECTIVE TIME. The effective time of the Merger
(the "Effective Time") will be the time on the IPO Closing Date which the
Certificate of Merger specifies or, if the Certificate of Merger does not
specify another time, 8:00 a.m., eastern daylight or standard time, on the IPO
Closing Date.
Section 2.03 CERTAIN EFFECTS OF THE MERGER. At and as of the
Effective Time, (a) the Company will be merged with and into Apple in accordance
with the provisions of the BCA, (b) the Company will cease to exist as a
separate legal entity, (c) Apple will be the Surviving Corporation and, as such,
will, all with the effect provided by the BCA, (i) possess all the properties
and rights, and be subject to all the restrictions and duties, of the Company
and Apple and (ii) be governed by the laws of the State of Delaware, (d) the
Charter Documents of Apple then in effect will become and thereafter remain
(until changed in accordance with (i) the applicable law (in the case of the
articles of incorporation) or (ii) its terms (in the case of the bylaws)) the
Charter Documents of the Surviving Corporation, (e) the board of directors of
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Apple immediately prior to the Effective Time will be the board of directors of
the Surviving Corporation, and those persons will hold the office of director of
the Surviving Corporation subject to the provisions of the applicable laws of
the State of Delaware and the Charter Documents of the Surviving Corporation,
and (f) the officers of Apple immediately prior to the Effective Time will be
the respective officers of the Surviving Corporation, subject to the provisions
of the Charter Documents of the Surviving Corporation, until that person's
successor is duly elected to, and, if necessary, qualified for, that office.
Section 2.04 EFFECT OF THE MERGER ON CAPITAL STOCK. As of the
Effective Time, as a result of the Merger and without any action on the part of
any holder thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, subject to the provisions of Section 2.05, without
interest, on surrender of the certificate evidencing those shares, (A) the
amount of cash and the number of whole shares of Apple Common Stock
determined as provided in Section 2.04 of the Disclosure Statement (the
"Merger Consideration"), (ii) cease to be outstanding and to exist and
(iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or any Company Subsidiary will (i) cease to be outstanding and to
exist and (ii) be canceled and retired; and
(c) each share of Apple Common Stock issued and outstanding
immediately prior to the Effective Time will remain outstanding as one
share of Common Stock, par value $0.01 per share, of the Surviving
Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Sections 2.05 and 2.06, without
interest, the Merger Consideration. Notwithstanding the foregoing, the right to
receive the Merger Consideration will not apply to any shares of Company Common
Stock which shall have statutory appraisal rights perfected with respect thereto
("Dissenting Shares"), if those rights are available, pursuant to the provisions
of Chapter 13 of the BCA, it being intended and agreed that any holder of those
shares shall have in consideration for the cancellation thereof only the rights,
if any, afforded to that holder under Chapter 13 of the BCA.
Section 2.05 DELIVERY, EXCHANGE AND PAYMENT. (a) At or after the
Effective Time: (i) each Stockholder, as the holder of certificates representing
shares of Company Common Stock, will, on surrender of those certificates to
Apple (or any agent that may be appointed by Apple for purposes of this Section
2.05), receive, subject to the provisions of this Section 2.05 and Section 2.06,
his Pro-Rata Share of the Merger Consideration; and (ii) until any certificate
representing Company Common Stock has been surrendered and replaced pursuant to
this Section 2.05, that certificate will, for all purposes, be deemed to
evidence ownership of the number of whole shares of Apple Common Stock included
in the Merger Consideration payable in respect of that certificate pursuant to
Section 2.04. All shares of Apple Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by
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Apple at the Effective Time.
(b) Each Stockholder will deliver to Apple (or any agent that may be
appointed by Apple for purposes of this Section 2.05) on or before the IPO
Closing Date the certificates representing Company Common Stock owned by the
Stockholder, duly endorsed in blank by that Person, or accompanied by duly
executed stock powers in blank, and with all necessary transfer tax and other
revenue stamps, acquired at that Person's expense, affixed and canceled. Each
Stockholder shall cure any deficiencies in the endorsement of the certificates
or other documents of conveyance respecting, or in the stock powers
accompanying, the certificates representing Company Common Stock delivered by
that Person.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to Apple Common Stock and payable
to the holders of record thereof after the Effective Time will be paid to the
holder of any unsurrendered certificates representing shares of Company Common
Stock for which shares of Apple Common Stock have been issued in the Merger
until those certificates are surrendered as provided herein, but (i) on that
surrender Apple will cause to be paid, to the Person in whose name the
certificates representing such shares of Apple Common Stock shall then be
issued, the amount of dividends or other distributions previously paid with
respect to such whole shares of Apple Common Stock with a record date, or which
have accrued, subsequent to the Effective Time, but prior to surrender, and the
amount of any cash payable to such Person for and in lieu of fractional shares
pursuant to Section 2.06 and (ii) at the appropriate payment date or as soon as
practicable thereafter, Apple will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been accrued,
subsequent to the Effective Time, but which are not payable until a date
subsequent to surrender, which are payable with respect to such whole shares of
Apple Common Stock, subject in all cases to any applicable escheat laws. No
interest will be payable with respect to the payment of such dividends or other
distributions or cash for and in lieu of fractional shares on surrender of
outstanding certificates.
Section 2.06 FRACTIONAL SHARES. Notwithstanding any other provision
herein, no fractional shares of Apple Common Stock will be issued, and any
Stockholder entitled hereunder to receive a fractional share of Apple Common
Stock but for this Section 2.06 will have the cash portion of the Merger
Consideration hereunder reduced in an amount sufficient to enable the issuance
of an additional whole share of Apple Common Stock.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Section 3.01 BY EACH STOCKHOLDER. Each of the Stockholders
represents and warrants to Apple that, as applied solely to himself, all the
following representations and warranties in this Article III are as of the date
of this Agreement, and will be, as amended or supplemented pursuant to Section
6.08, on the date of the Closing and the IPO Closing Date, true and correct:
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(a) (i) he will be acquiring the shares of Apple Common Stock to be
issued pursuant to Section 2.04 to him solely for his account, for
investment purposes only and with no current intention or plan to
distribute, sell or otherwise dispose of any of those shares in connection
with any distribution; (ii) he is not a party to any agreement or other
arrangement for the disposition of any shares of Apple Common Stock other
than this Agreement and the Registration Rights Agreement; (iii) he is
either an "accredited investor" as defined in Securities Act Rule 501(a)
or, if he is not such an investor, Section 3.01(a) of the Disclosure
Statement sets forth the name and address of his Purchaser Representative;
(iv) he (A) is able to bear the economic risk of an investment in the
Apple Common Stock acquired pursuant to this Agreement, (B) can afford to
sustain a total loss of that investment, and (C) either (1) has such
knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment in
the Apple Common Stock, or (2) his Purchaser Representative has had an
adequate opportunity to ask questions and receive answers from the
officers of Apple concerning any and all matters relating to the
transactions contemplated hereby, including the background and experience
of the current and proposed officers and directors of Apple, the plans for
the operations of the business of Apple, the business, operations and
financial condition of the Other Founding Companies and any plans of Apple
for additional acquisitions, or his Purchaser Representative has asked all
questions of the nature described in the immediately preceding clause, and
all those questions have been answered to his satisfaction and the
satisfaction of his Purchaser Representative;
(b) the capitalization of the Orthodontic Entity shall be in
compliance with the requirements of the applicable regulations in the
Organization State, and no shares of capital stock of the Orthodontic
Entity (the "Orthodontic Entity Common Stock") are, or will be, held in
treasury;
(c) except as set forth in Section 3.01(c) of the Disclosure
Statement, the Stockholders own, or will own, all of the issued and
outstanding shares of Orthodontic Entity Common Stock, free and clear of
all security interests, liens, adverse claims, encumbrances, equities,
proxies and shareholders' agreements;
(d) each outstanding share of Orthodontic Entity Common Stock has
been, or will be, legally and validly issued and is, or will be, fully
paid and nonassessable, and there exist no options, warrants,
subscriptions or other rights to purchase, or securities convertible into
or exchangeable for, any of the authorized or outstanding securities of
the Orthodontic Entity;
(e) no shares of capital stock of the Orthodontic Entity have been
issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of the Orthodontic Entity's
stockholders; and
(f) the representations and warranties contained in Article III of
the Uniform Provisions (the text of which Article hereby is incorporated
herein by this reference) are
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true and correct as applied solely to himself, and his agreements set
forth in that Article hereby are agreed to.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF
THE COMPANY AND THE STOCKHOLDERS
Section 4.01 BY THE COMPANY AND EACH STOCKHOLDER. The Company and
each Stockholder jointly and severally represent and warrant to, and agree with,
Apple that all the following representations and warranties in this Article IV
are as of the date of this Agreement, and will be, as amended or supplemented
pursuant to Section 6.08, on the date of the Closing and the IPO Closing Date,
true and correct:
(a) the Organization State of each of the Company and the Company
Subsidiaries is the State of Arizona, and each of the Company and the
Company Subsidiaries (i) is a corporation duly organized, validly existing
and in good standing under the laws of that State, (ii) has all requisite
corporate power and authority under those laws and its Charter Documents
to own or lease and to operate its properties and to carry on its business
as now conducted and (iii) is duly qualified and in good standing as a
foreign corporation in all jurisdictions (other than the State of Arizona)
in which it owns or leases property or in which the carrying on of its
business as now conducted so requires except where the failure to be so
qualified, singly or in the aggregate, would not have a Material Adverse
Effect;
(b) (i) the authorized Capital Stock of the Company is comprised of
30,000 shares of Company Common Stock, of which 100 shares have been
issued and are now outstanding and no shares are held by the Company as
treasury shares, and (ii) no outstanding Derivative Securities of the
Company exist;
(c) (i) the terms and conditions of each of the Scheduled Agreements
are no less favorable to the Company than the Company reasonably could
have expected to obtain in an arm's-length transaction with a Person other
than an Affiliate of the Company, (ii) the rentals provided for in the
Scheduled Agreements constituting leases do not and will not exceed fair
market rentals of the properties being rented or leased under those
Scheduled Agreements and (iii) the payments provided to be made in the
other Scheduled Agreements do not exceed the fair market value of the
services performed;
(d) prior to the IPO Pricing Date: (i) (A) the articles of
incorporation of the Company shall have been duly amended by all necessary
corporate action on the part of the Company and the Stockholders to (1)
authorize the Company to engage in any business in which the BCA permits a
corporation incorporated thereunder lawfully to engage (if the applicable
Organization State laws governing the Company so permit) and (2) abolish
the preemptive rights of holders of Company Common Stock and (B) the
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articles reflecting these amendments shall have been duly filed with and
accepted by the Secretary of State of the State of Arizona; and (ii) each
Stockholder shall have executed and delivered to the Company, in form and
substance satisfactory to Apple, a written instrument that: (A)
acknowledges the Company is and has, and releases the Company for having
and continuing to be, engaged in businesses beyond the purposes presently
set forth in the Company's articles of incorporation; and (B) (1)
acknowledges the Company may have issued and sold Company Common Stock to
one or more of the other Stockholders in violation of the preemptive
rights the BCA affords the acknowledging Stockholder and (2) releases all
claims of every kind the acknowledging Stockholder has or might have
against the Company and each other Stockholder as a result of those sales;
and
(e) the representations and warranties contained in Article IV of
the Uniform Provisions (the text of which Article hereby is incorporated
herein by this reference) are true and correct, and the agreements set
forth in that Article hereby are agreed to.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF APPLE
Section 5.01 BY APPLE. Apple represents and warrants to the Company
and each Stockholder that all the following representations and warranties in
this Article V are as of the date of this Agreement, and will be on the date of
the Closing and the IPO Closing Date, true and correct: the representations and
warranties contained in Article V of the Uniform Provisions (the text of which
Article hereby is incorporated herein by this reference) are true and correct.
ARTICLE VI.
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Section 6.01 OF EACH PARTY. Until the Effective Time, subject to the
waiver provisions of Section 11.05, each party hereto will comply with each
covenant for which provision is made in Article VI of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that party.
ARTICLE VII.
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01 THE CLOSING AND CERTAIN CONDITIONS. (a) THE CLOSING. On
or before the IPO Pricing Date, the parties hereto will take all actions
necessary to (i) effect the Merger (including, as permitted by the BCA, (A) the
execution of a Certificate of Merger (1) meeting the requirements of the BCA and
(2) providing that the Merger will become effective on the IPO Closing Date and
(B) the filing of such Certificate of Merger with the Secretary of State of the
State of Arizona), (ii) verify the existence and ownership of the certificates
evidencing the Company Common Stock to be exchanged for the Merger Consideration
pursuant
9
to Section 2.05 and (iii) satisfy the document delivery requirements to which
the obligations of the parties to effect the Merger and the other transactions
contemplated hereby are conditioned by the provisions of this Article VII (all
those actions collectively being the "Closing"). The Closing will take place at
the offices of Xxxxxxx & Xxxxxx, L.L.P., 42nd Floor, 0000 Xxxxxxxxx, Xxxxxxx,
Xxxxx at 10:00 a.m., Houston time, or at such later time on the IPO Pricing Date
as Apple shall specify by written notice to Xxxxxx X. Xxxxxxxx. The actions
taken at the Closing will not include the completion of either the Merger or the
delivery of the Company Common Stock or the Merger Consideration pursuant to
Section 2.05. Instead, on the IPO Closing Date, the Certificates of Merger will
become effective pursuant to Section 2.02, and all transactions contemplated by
this Agreement to be closed or completed on or before the IPO Closing Date,
including the surrender of the Company Common Stock in exchange for the Merger
Consideration (including a certified check or checks in an amount equal to the
cash portion of the Merger Consideration) will be closed or completed, as the
case may be. During the period from the Closing to the IPO Closing Date, this
Agreement may be terminated by the parties only pursuant to Section 12.01(b)(i).
(b) CERTAIN CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS. The obligations of the Company and the Stockholders with respect
to the actions to be taken by them at or before the Closing are subject to the
satisfaction on or before the date of the Closing, or waiver by them pursuant to
Section 11.05, of all the conditions set forth in Sections 7.02(a) and 7.03. The
obligations of the Stockholders with respect to the actions to be taken on the
IPO Closing Date are subject to the satisfaction on that date of all the
conditions set forth in Section 7.02(b) and 7.03.
(c) CERTAIN CONDITIONS TO THE OBLIGATIONS OF APPLE. The obligations
of Apple with respect to actions to be taken at or before the Closing are
subject to the satisfaction on or before the date of the Closing, or waiver by
them pursuant to Section 11.05, of the following conditions: (i) the Company
shall have delivered to Apple copies of the articles of incorporation, each as
amended to the date of the Closing and certified by the Secretary of State of
the State of Arizona as of a Current Date, of the Company and each Company
Subsidiary; and (ii) all the conditions set forth in Sections 7.02(a) and
7.04(a). The obligations of Apple with respect to the actions to be taken on the
IPO Closing Date are subject to the satisfaction on that date of the following
conditions: (i) the Stockholder Employment Agreement and the Service Agreement
in substantially the form attached hereto as Exhibit 7.01(d), then shall be in
full force and effect; and (ii) all the conditions set forth in Sections 7.02(b)
and 7.04(b).
(d) The text of Article VII of the Uniform Provisions hereby is
incorporated herein by this reference.
ARTICLE VIII.
COVENANTS FOLLOWING THE EFFECTIVE TIME
Section 8.01 OF EACH PARTY OTHER THAN THE COMPANY. From and after
the Effective Time, subject to the waiver provisions of Section 11.05, each
party hereto (other than the Company) will comply with each covenant for which
provision is made in Article VIII of
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the Uniform Provisions (the text of which Article hereby is incorporated herein
by this reference) to be performed or observed by that party.
ARTICLE IX.
INDEMNIFICATION
Section 9.01 INDEMNIFICATION RIGHTS AND OBLIGATIONS. The text of
Article IX of the Uniform Provisions hereby is incorporated herein by this
reference. For purposes of Section 9.07(a), the Pro Rata Share of the
Transaction Value is 100% for Xxxx X. Xxxxxx.
ARTICLE X.
LIMITATIONS ON COMPETITION
Section 10.01 PROHIBITED ACTIVITIES. Each Stockholder agrees,
severally and not jointly with any other Person, that he will not, during the
period beginning on the date hereof and ending on the fifth anniversary of the
date hereof, directly or indirectly, for any reason, for his own account or on
behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as
an employee, independent contractor, consultant or advisor, or as a sales
representative or distributor of any kind, in any business selling any
products or providing any services in competition with the Company, any
Company Subsidiary or Apple or any Subsidiary of Apple (Apple and its
Subsidiaries collectively being "Apple" for purposes of this Article X)
within a radius of 10 miles of each location in which any of the Company
or the Company Subsidiaries was engaged in business on the date hereof or
immediately prior to the Effective Time (those locations collectively
being the "Territory");
(b) call on any natural person who is at that time employed by the
Company, any Company Subsidiary or Apple with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or Apple, provided that the Stockholder may call on and hire
any of his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within
one year prior to that time was, a customer of the Company, any Company
Subsidiary or Apple within the Territory, (i) for the purpose of
soliciting or selling any product or service in competition with the
Company, any Company Subsidiary or Apple within the Territory and (ii)
with the knowledge of that customer relationship; or
(d) call on any Apple Acquisition Candidate, with the knowledge of
that Person's status as an Apple Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than Apple.
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Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of the outstanding Capital Stock of a competing Entity if
that class of Capital Stock is listed on the New York Stock Exchange or included
in the Nasdaq National Market. For purposes hereof and the respective Tax
reporting positions of the parties hereto, each party hereto agrees that the
percentage of the cash portion of the Merger Consideration to be received by
each Stockholder pursuant to Section 2.04 which equals 1% of that Stockholder's
Pro Rata Share of the Transaction Value will represent, and be received as,
consideration for that Stockholder's agreement to observe the covenants in this
Section 10.01.
Section 10.02 DAMAGES. Because of the difficulty of measuring
economic losses to Apple as a result of any breach by a Stockholder of his
covenants in Section 10.01, and because of the immediate and irreparable damage
that could be caused to Apple for which it would have no other adequate remedy,
each Stockholder agrees that Apple may enforce the provisions of Section 10.01
by injunctions and restraining orders against that Stockholder if he breaches
any of those provisions.
Section 10.03 REASONABLE RESTRAINT. The parties hereto each agree
that Sections 10.01 and 10.02 impose a reasonable restraint on the Stockholders
in light of the activities and business of Apple on the date hereof, the current
business plans of Apple and the investment by each Stockholder in Apple as a
result of the Merger.
Section 10.04 SEVERABILITY; REFORMATION. The covenants in this
Article X are severable and separate, and the unenforceability of any specific
covenant in this Article X is not intended by any party hereto to, and shall
not, affect the provisions of any other covenant in this Article X. If any court
of competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth in Section 10.01 are unreasonable as applied to any
Stockholder, the parties hereto, including that Stockholder, acknowledge their
mutual intention and agreement that those restrictions be enforced to the
fullest extent the court deems reasonable, and thereby shall be reformed to that
extent as applied to that Stockholder and any other Stockholder similarly
situated.
Section 10.05 INDEPENDENT COVENANT. All the covenants in this
Article X are intended by each party hereto to, and shall, be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of any Stockholder against Apple,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Apple of any covenant in this Article X. It is
specifically agreed that the period specified in Section 10.01 shall be computed
in the case of each Stockholder by excluding from that computation any time
during which that Stockholder is in violation of any provision of Section 10.01.
The covenants contained in this Article X shall not be affected by any breach of
any other provision hereof by any party hereto.
Section 10.06 MATERIALITY. The Company and each Stockholder,
severally and not jointly with any other Person, hereby agree that this Article
X is a material and substantial part of the transactions contemplated hereby.
ARTICLE XI.
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GENERAL PROVISIONS
Section 11.01 TREATMENT OF CONFIDENTIAL INFORMATION. Each party
hereto will comply with each covenant for which provision is made in Section
11.15 of the Uniform Provisions (the text of which Section hereby is
incorporated herein by this reference) to be performed or observed by that
party.
Section 11.02 RESTRICTIONS ON TRANSFER OF APPLE COMMON STOCK. (a)
During the two-year period ending on the second anniversary of the IPO Closing
Date (the "Restricted Period") (or if the two-year "holding" period for
restricted securities under Rule 144 under the Securities Act is reduced by the
SEC, the Restricted Period will be correspondingly reduced), no Stockholder
voluntarily will, except pursuant to and in accordance with the applicable
provisions of the Registration Rights Agreement: (i) sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint or otherwise dispose of (A) any
shares of Apple Common Stock received by any Stockholder in the Merger or (B)
any interest in (including any option to buy or sell) any of those shares of
Apple Common Stock, in whole or in part, and Apple will have no obligation to,
and shall not, treat any such attempted transfer as effective for any purpose;
or (ii) engage in any transaction, whether or not with respect to any shares of
Apple Common Stock or any interest therein, the intent or effect of which is to
reduce the risk of owning the shares of Apple Common Stock acquired pursuant to
Section 2.04 (including, for example engaging in put, call, short-sale, straddle
or similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of Apple Common Stock acquired by a Stockholder
pursuant to Section 2.04 to any of that Stockholder's Related Persons who agree
in writing to be bound by the provisions of Section 11.01 and this Section
11.02. The certificates evidencing the Apple Common Stock delivered to each
Stockholder pursuant to Section 2.05 will bear a legend substantially in the
form set forth below and containing such other information as Apple may deem
necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION
AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE OTHER PARTIES
THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED
TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION OF ANY OF THOSE SHARES, DURING THE TWO-YEAR PERIOD ENDING ON
__________ [DATE THAT IS THE SECOND ANNIVERSARY OF THE IPO CLOSING DATE]
(THE "RESTRICTED PERIOD") (OR IF THE TWO YEAR "HOLDING" PERIOD FOR
RESTRICTED SECURITIES UNDER RULE 144 UNDER THE SECURITIES ACT OF 1933 IS
REDUCED BY THE SECURITIES AND EXCHANGE COMMISSION, THE RESTRICTED PERIOD
WILL BE CORRESPONDINGLY REDUCED). ON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE
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THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENT) AFTER THE DATE SPECIFIED ABOVE.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of Apple Common Stock to be delivered
to that Stockholder pursuant to Section 2.04 have not been and, except pursuant
to the Registration Rights Agreement, if applicable, will not be registered
under the Securities Act and therefore may not be resold by that Stockholder
without compliance with the Securities Act and (ii) covenants that none of the
shares of Apple Common Stock issued to that Stockholder pursuant to Section 2.04
will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all the applicable provisions of
the Securities Act and the rules and regulations of the SEC and applicable state
securities laws and regulations. All certificates evidencing shares of Apple
Common Stock issued pursuant to Section 2.04 will bear the following legend in
addition to the legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF
THE HOLDER HEREOF COMPLIES WITH THAT LAW AND OTHER APPLICABLE SECURITIES
LAWS.
In addition, certificates evidencing shares of Apple Common Stock issued
pursuant to Section 2.04 to each Stockholder will bear any legend required by
the securities or blue sky laws of the state in which that Stockholder resides.
Section 11.03 BROKERS AND AGENTS. Except as disclosed in the Private
Placement Memorandum or in Section 11.03 of the Disclosure Statement, the
Stockholders jointly and severally represent and warrant to Apple that the
Company has not directly or indirectly employed or become obligated to pay any
broker or similar agent in connection with the transactions contemplated hereby,
and agree, without regard to the Threshold Amount limitations set forth in
Article IX, to indemnify Apple against all Damage Claims arising out of claims
for any and all fees and commissions of brokers or similar agents employed or
promised payment by the Company.
Section 11.04 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement and the rights of the parties hereunder may not be assigned (except by
operation of law) and shall be binding on and inure to the benefit of the
parties hereto, the successors of Apple, and the heirs and legal representatives
of the Stockholders (and, in the case of any trust, the successor trustees of
that trust). Neither this Agreement nor any other Transaction Document is
intended, or shall be construed, deemed or interpreted, to confer on any Person
not a party hereto or thereto any rights or remedies hereunder or thereunder,
except as provided in Section 6.05(b) or 11.14, in Article IX or as otherwise
provided expressly herein or therein.
Section 11.05 ENTIRE AGREEMENT; AMENDMENT; WAIVERS. This Agreement
and the documents delivered pursuant hereto constitute the entire agreement and
understanding among the Stockholders, the Company and Apple and supersede all
prior agreements and understandings, both written and oral, relating to the
subject matter of this Agreement. This
14
Agreement may be amended, modified or supplemented, and any right hereunder may
be waived, if, but only if, that amendment, modification, supplement or waiver
is in writing and signed by the Required Stockholders, the Company and Apple;
provided, however, that no such amendment, modification, supplement or waiver
will be effective unless it is signed by each Stockholder affected thereby to
the extent that it (a) changes the several nature of that Stockholder's
representations and warranties (to the extent they are not already joint and
several as provided in Sections 4.01 and 11.03), (b) reduces the amount, or
changes the components, of the Merger Consideration that Stockholder is entitled
to receive pursuant to Section 2.04, as adjusted pursuant to Section 2.05(f),
(c) waives the consummation of the IPO as a condition to consummation of the
Merger or (d) amends or waives this sentence. The waiver of any of the terms and
conditions hereof shall not be construed or interpreted as, or deemed to be, a
waiver of any other term or condition hereof.
Section 11.06 COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which will be an original, but all of which
together will constitute one and the same instrument.
Section 11.07 EXPENSES. Whether or not the transactions contemplated
hereby are consummated, (a) Apple will pay the fees, expenses and disbursements
of Apple and their Representatives which are incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance of and compliance with all conditions
to be performed by Apple under this Agreement, including the costs of preparing
the Registration Statement, and (b) the Stockholders will pay from personal
funds, and not from funds of the Company or any Company Subsidiary, all sales,
use, transfer and other similar taxes and fees (collectively, "Transfer Taxes")
incurred in connection with the transactions contemplated hereby, and the fees,
expenses and disbursements of Counsel for the Company and the Stockholders
incurred in connection with the subject matter of this Agreement and the
Registration Statement on or before the IPO Closing Date; provided, however, if
the Company or the Required Stockholders terminate this Agreement otherwise than
as permitted by Article XII, the Company will, no later than 00 Xxxxxxx, Xxxxx
business days after Apple makes a written request therefor, reimburse Apple in
the amount equal to the aggregate fees, costs and other expenses invoiced to
Apple by Xxxxxx Xxxxxxxx LLP in connection with its audit of the Company's
financial statements at December 31, 1996 and for the 12-month period then
ended; provided further, however, that a Stockholder's estate shall not be
required to reimburse Apple for such fees, costs and expenses in the event such
termination follows the death of the Stockholder. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company or Apple or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to that Stockholder pursuant to Article II.
Section 11.08 NOTICES. All notices required or permitted hereunder
shall be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Houston, Texas business day next following the day when placed in
the mail, postage prepaid, certified or registered, addressed to the appropriate
party or parties, at
15
the address of such party set forth below (or at such other address as such
party may designate by written notice to all other parties in accordance
herewith):
(i) if to Apple, addressed to it at:
Apple Orthodontix, Inc.
Xxx Xxxx Xxxx Xxxxx Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn.: Xxxxxx X. Xxxxxxxx, President
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Xxxxxxx & Xxxxxx, L.L.P.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.;
(ii) if to the Stockholders, addressed to them at their addresses
set forth in Section 2.04 of the Disclosure Statement; and
(iii) if to the Company, addressed to it at:
Orthodontics Exclusively, Ltd.
0000 X. XxXxxxxxxx, Xxxxx 0
Xxxxx, Xxxxxxx 00000
Attn: Xx. Xxxx X. Xxxxxx
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Xxxxxxx X. Xxxxxxx
0000 X. Xxxxxxxx Xxx.
Xxxxxxx, Xxxxxxx
Section 11.09 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
Section 11.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any party hereto as a result of any breach or default
hereunder by any other party hereto shall impair any such right, power or
remedy, nor shall it be construed, deemed or interpreted as a waiver of or
acquiescence in any such breach or default, or of any similar breach or default
occurring later; nor shall any waiver of any single breach or default be
construed, deemed or interpreted as a waiver of any other breach or default
hereunder occurring before or after that waiver.
16
Section 11.11 TIME. Time is of the essence in the performance of
this Agreement in all respects.
Section 11.12 REFORMATION AND SEVERABILITY. If any provision of this
Agreement is invalid, illegal or unenforceable, that provision shall, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties hereto as
expressed herein, and if such a modification is not possible, that provision
shall be severed from this Agreement, and in either case the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
Section 11.13 REMEDIES CUMULATIVE. No right, remedy or election
given by any term of this Agreement shall be deemed exclusive, but each shall be
cumulative with all other rights, remedies and elections available at law or in
equity.
Section 11.14 RESPECTING THE IPO. Each of the Company and the
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither Apple or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that Apple will use its reasonable best efforts to
cause the Registration Statement to become effective prior to December 31, 1997)
or (ii) the IPO to occur at a particular price or within a particular range of
prices or to occur at all; and (c) the decision of Stockholders to enter into
this Agreement, or to vote in favor of or consent to the Merger, has been or
will be made independent of, and without reliance on, any statements, opinions
or other communications of, or due diligence investigations that have been or
will be made or performed by, any prospective underwriter relative to Apple or
the IPO. The Underwriter shall have no obligation to any of the Company and the
Stockholders or with respect to any disclosure contained in the Registration
Statement.
ARTICLE XII.
TERMINATION
Section 12.01 TERMINATION OF THIS AGREEMENT. (a) This Agreement may
be terminated at any time prior to the Closing solely:
(i) by the mutual written consent of Apple and the Company;
(ii) by the Stockholders or the Company, on the one hand, or by
Apple, on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated by
December 31, 1997, unless the failure of such transactions to be
consummated results from the willful failure of the party (or in the case
of the Stockholders and the Company, any of them) seeking to
17
terminate this Agreement to perform or adhere to any agreement required
hereby to be performed or adhered to by it prior to or at the Closing or
thereafter on the IPO Closing Date;
(iii) by the Stockholders or the Company, on the one hand, or by
Apple, on the other hand, if a material breach or default shall be made by
the other party (or in the case of the Stockholders and the Company, any
of them) in the observance or in the due and timely performance of any of
the covenants, agreements or conditions contained herein; or
(iv) by Apple if it is entitled to do so as provided in Section
6.08;
(b) This Agreement may be terminated after the Closing solely:
(i) by Apple or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 New York City business days
after the date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section 12.01
after the Certificate of Merger has been filed with the Secretary of State of
the State of Arizona, but before the IPO has been consummated, Apple will take
all actions that Counsel for the Company and the Stockholders advises Apple are
required by the applicable laws of the State of Arizona in order to rescind the
Merger.
Section 12.02 LIABILITIES IN EVENT OF TERMINATION. If this Agreement
is terminated pursuant to Section 12.01, there shall be no liability or
obligation on the part of any party hereto except (a) as provided in Section
11.07 and (b) to the extent that such liability is based on the breach by that
party of any of its representations, warranties or covenants set forth in this
Agreement.
[signatures appear on the following page]
18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
APPLE ORTHODONTIX, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
Printed Name: Xxxxxx X. Xxxxxxxx
Title: President and Chief Operating
Officer
ORTHODONTICS EXCLUSIVELY, LTD.
By: /s/ Xxxx X. Xxxxxx, D.D.S., M.S.
Printed Name: Xxxx X. Xxxxxx, D.D.S.,
M.S.
Title: President
STOCKHOLDERS:
/s/ Xxxx X. Xxxxxx, D.D.S., M.S.
Printed Name: Xxxx X. Xxxxxx, D.D.S., M.S.
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