AMENDMENT TO ASSET PURCHASE AGREEMENT
This Amendment to Asset Purchase Agreement ("Amendment") is made and
entered into this 28th day of February, 1998, by and between Gentle Dental
Service Corporation, a Washington corporation ("GDSC"), California Dental
Practice Management Company, a California General Partnership ("DPM"), Xxxxxx X.
Xxxxxx, D.D.S, Xxxxxx X. Xxxxxx, and Xxxxxxxx Au, D.D.S. ("Au").
RECITALS
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The parties listed above are parties to that certain Asset Purchase
Agreement dated September 21, 1997 ("Agreement") pursuant to which the Sellers
have agreed to sell to GDSC substantially all of the assets associated with the
Dental Practice. The parties mutually desire to make certain amendments to the
Agreement as set forth in this Amendment. Capitalized terms used in this
Amendment and not otherwise defined shall have the meanings ascribed to such
terms in the Agreement.
In consideration of the mutual covenants contained herein and in the
Agreement, the parties agree as follows:
1. Section 1.04-5 of the Agreement is amended to read as follows:
1.04-5 An additional payment to be made to Au (the "Earnout Payment")
to be made as provided in this Section 1.04-5. The average annual EBITDA (as
defined below) for the 24-month period beginning on the day after the Closing
Date shall be multiplied by .384 to determine the Earnout Payment. The "EBITDA"
shall mean the combined net income of (a) the Professional Corporation, and (b)
GDSC from the provision of services to the Professional Corporation, before any
reduction for interest, income taxes, depreciation or amortization, and
excluding any allocation of GDSC corporate or regional overhead expense, as
reflected on a combined income statement for the Practice Locations prepared in
conformity with generally accepted accounting principles applied in a manner
consistent with the application of such principles to the preparation of GDSC's
audited financial statements. In the event that GDSC exercises its rights under
Sections 1.4 or 1.5 of the Assignable Option Agreement described in Section 8.07
of this Agreement, the "EBITDA" shall mean the net income of the Successor
Shareholder (as defined in the Assignable Option Agreement) from the Dental
Practice, before any reduction for interest, income taxes, depreciation or
amortization and excluding any allocation of corporate or regional overhead
expense, as reflected on income statement for the Practice Locations prepared in
conformity with generally accepted accounting principles applied in a manner
consistent with the application of such principles to the preparation of GDSC's
audited financial statements. The calculation of the Earnout Amount and payment
of the Earnout Payment, if any, shall be completed within 90 days of the
completion of the aforementioned 24- month period. The parties understand and
agree that during the aforementioned 24-month period the Dental Practice will be
operated in the same general manner as it was operated prior to the Closing
Date.
2. Section 1.08 of the Agreement is amended to read as follows:
1.08 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Stoel Rives LLP,
Portland, Oregon, effective as of the close of business on the last day of the
month in which all conditions to the Closing are satisfied (other than those
conditions that by their terms are to occur at the Closing) or at another date,
time and place agreed upon in writing by the parties (the "Closing Date");
provided, however, that if all conditions to the Closing (other than those
conditions that by their terms are to occur at the Closing) are satisfied on or
after the 20th day of a month, the Closing shall occur effective as of the close
of business on the last day of the following month or at an earlier date and
time agreed upon in writing by the parties.
3. Section 5.08-2 of the Agreement is amended to read as follows:
5.08-2 Supplemental Lock-Up. Au agrees that until the first
anniversary of the Closing Date he will not directly or indirectly sell, offer
to sell, contract to sell (including, without limitation, any short sale), grant
any option to purchase or otherwise transfer or dispose of (other than to donees
or pledgees who agree to be similarly bound) any Shares owned by him, except
Shares sold pursuant to the piggyback registration rights provided for in
Section 6.01. Au consents to having appropriate legends placed on the
certificates representing the Shares relating to the lock-up restriction.
4. Section 6.01-1 of the Agreement is amended to read as follows:
6.01-1 Piggyback Rights. The rights provided in this Section 6.01
shall apply if GDSC determines to register shares of GDSC Common Stock under the
1933 Act for an underwritten offering for its account, except that this Section
6.01 shall not apply to the offering covered by the Registration Statement on
Form SB-2 filed by GDSC on January 9, 1998 or to any registration that is filed
after the second anniversary of the Closing Date. Prior to filing a registration
statement for any such offering, GDSC shall give Au written notice thereof and
will include in such registration and underwriting all the Registrable
Securities specified in a written request or requests, made within 10 days after
receipt of such written notice from GDSC by Au, except as set forth in Section
6.01-2 below. For purposes of this Agreement, the term "Registrable Securities"
means (i) the Shares and (ii) any GDSC Common Stock issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, the Shares.
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5. Section 6.01-3 of the Agreement is amended to read as follows:
6.01-3 S-3 Registration. No later than 30 days after the Closing Date,
GDSC shall file a Registration Statement on Form S-3 to register all Registrable
Securities for resale by Au in ordinary market transactions; provided, however,
that GDSC may delay such filing on a one-time basis for up to 90 days if GDSC
reasonably determines that (a) such filing might be detrimental to the offering
covered by the Registration Statement on Form SB-2 filed by GDSC on January 9,
1998, or (b) additional time is necessary to obtain and file financial
statements required for such Registration Statement on Form S-3. GDSC shall use
its best efforts to maintain an effective registration statement permitting the
unrestricted sale of such remaining Registrable Securities until the second
anniversary of the Closing Date.
6. Section 8.10 of the Agreement is deleted.
7. Section 10.01-4 of the Agreement is amended to read as follows:
10.01-4 by either Sellers or GDSC, by written notice to the other
party, if the Closing shall not have occurred on or prior to December 31, 1998;
provided, however, that if the California Department of Corporations shall not
have approved the material modification (filed by DDS in connection with the
Transactions) to the license of DDS under the Xxxx-Xxxxx Health Care Service
Plan Act of 1975 prior to December 31, 1998, such date shall be extended to the
date 45 days after the receipt of such approval; provided further, however, that
the right to terminate this Agreement under this Section 10.01-4 shall not be
available to any party whose failure to fulfill or perform any obligation under
this Agreement has been the cause of, or resulted in, the failure of the Closing
to occur on or before such date.
8. The following Exhibits to the Agreement are replaced with the
corresponding Exhibits attached to this Amendment:
Exhibit D Support Services Agreement
Exhibit E Assignable Option Agreement
Exhibit F Employment Agreement
9. Except as expressly provided in this Amendment, the Agreement is not
otherwise modified and remains in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
GDSC: DENTAL SERVICE CORPORATION
By: X. X. XXX XXXXXX
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X. X. Xxx Xxxxxx
Title: Executive V. P.
DPM: CALIFORNIA DENTAL PRACTICE
MANAGEMENT COMPANY
By: XXXXXX X. XXXXXX, D.D.S.
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Xxxxxx X. Xxxxxx, D.D.S.
Title: Partner
The Partners: XXXXXX X. XXXXXX, D.D.S.
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Xxxxxx X. Xxxxxx, D.D.S.
XXXXXX X. XXXXXX
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Xxxxxx X. Xxxxxx
Au: XXXXXXXX AU, D.D.S.
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