AMERICAN DENTAL PARTNERS, INC.
SERIES A AND SERIES B PREFERRED STOCK PURCHASE AGREEMENT
Dated as of January 8, 1996
AMERICAN DENTAL PARTNERS, INC.
SERIES A AND SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
Dated as of January 8, 1996
INDEX
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Page
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ARTICLE I
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Purchase and Sale of Shares..................................... 1
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1.1 Purchase and Sale of Series A Convertible Preferred
Stock................................................... 1
1.2 Purchase and Sale of Series B Redeemable Preferred
Stock................................................... 1
1.3 The Conversion Shares.................................... 2
1.4 Closings................................................. 2
1.5 Use of Proceeds.......................................... 3
1.6 Termination of Commitment; Right to Repurchase........... 4
1.7 Additional Purchasers.................................... 5
ARTICLE II
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Representations and Warranties of the Company................... 5
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2.1 Organization and Corporate Power......................... 5
2.2 Authorization............................................ 6
2.3 Government Approvals..................................... 6
2.4 Authorized and Outstanding Stock......................... 6
2.5 Subsidiaries............................................. 7
2.6 Financial Information.................................... 7
2.7 Intentionally Omitted.................................... 7
2.8 Litigation............................................... 7
2.9 Compliance with Laws and Other Instruments............... 8
2.10 Taxes.................................................... 8
2.11 Real Property............................................ 9
2.12 Personal Property........................................ 9
2.13 Patents, Trademarks, etc................................. 9
2.14 Agreements of Directors Officers and Employees........... 10
2.15 Governmental and Industrial Approvals.................... 10
2.16 Registration Rights...................................... 10
2.17 Insurance Coverage....................................... 11
2.18 Employee Matters......................................... 11
2.19 No Brokers or Finders.................................... 11
2.20 Transactions with Affiliates............................. 12
2.21 Assumptions, Guarantees, etc. of Indebtedness of Other
Persons................................................. 12
2.22 Restrictions on Subsidiaries............................. 12
2.23 Disclosures.............................................. 12
ARTICLE III
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Affirmative Covenants of the Company............................ 12
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3.1 Accounts and Reports..................................... 12
3.2 Payment of Taxes......................................... 14
3.3 Maintenance of Key Man Insurance......................... 14
3.4 Compliance with Laws, etc................................ 14
3.5 Inspection............................................... 14
3.6 Corporate Existence; Ownership of Subsidiaries........... 15
3.7 Compliance with ERISA.................................... 15
3.8 Board Approval........................................... 16
3.9 Financings............................................... 16
3.10 Meetings of the Board of Directors....................... 16
3.11 Rule 144A Information.................................... 16
ARTICLE IV
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Negative Covenants of the Company and the Summit Entities....... 16
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4.1 Investments in Other Persons............................. 16
4.2 Distributions............................................ 17
4.3 Dealings with Affiliates................................. 18
4.4 Merger................................................... 18
4.5 Option Shares............................................ 18
4.6 No Conflicting Agreements................................ 18
4.7 Restriction of Investments............................... 19
ARTICLE V
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Preemptive Right................................................ 19
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5.1 Right of Purchase........................................ 19
5.2 Definition of New Securities............................. 19
5.3 Notice from the Company.................................. 20
5.4 Sale by the Company...................................... 20
5.5 Termination of Rights.................................... 20
ARTICLE VI
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Investment Representations...................................... 20
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6.1 Representation and Warranties............................ 20
6.2 Permitted Sales; Legends................................. 21
ARTICLE VII
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Conditions of Purchasers' Obligation............................ 22
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7.1 Effect of Conditions..................................... 22
7.2 Representations and Warranties........................... 22
7.3 Performance.............................................. 22
7.4 Certified Documents, etc................................. 22
7.5 Shareholders' Agreement.................................. 22
7.6 Registration Rights Agreement............................ 23
7.7 Employment Agreement..................................... 23
7.8 Stock Option Agreements.................................. 23
ARTICLE VIII
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Conditions of The Company's Obligation.......................... 23
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ARTICLE IX
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Certain Definitions............................................. 23
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ARTICLE X
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Termination..................................................... 25
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10.1 Termination by Mutual Written Consent.................... 25
10.2 Termination for Breach................................... 25
10.3 Rights After Termination................................. 25
ARTICLE XI
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Miscellaneous................................................... 25
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11.1 Survival of Representations.............................. 26
11.2 Parties in Interest...................................... 26
11.3 Shares Owned by Affiliates............................... 26
11.4 Amendments and Waivers................................... 26
11.5 Notices.................................................. 26
11.6 Expenses................................................. 27
11.7 Counterparts............................................. 27
11.8 Effect of Headings....................................... 27
11.9 Adjustments.............................................. 27
11.10 Governing Law............................................ 27
EXHIBITS
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A Description of Preferred Stock
B Shareholders' Agreement
C Registration Rights Agreement
D Employment Agreement
E Stock Option Agreement
January 8, 1996
To: The Persons listed on
Schedule 1.1 attached hereto:
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Re: Series A and Series B Preferred Stock
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Gentlemen:
American Dental Partners, Inc., a Delaware corporation (the "Company")
hereby agrees with you as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
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1.1 Purchase and Sale of Series A Convertible Preferred Stock. From time
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to time after the date hereof, at one or more Closings (as herein defined), the
Company will sell to you (the "Purchasers"), and the Purchasers shall purchase
from the Company, up to an aggregate of 400,000 shares of the Company's Series A
Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock"), at a price of $19.75 per share, for an aggregate purchase price of up
to $7,900,000 payable as provided in Section 1.4. The Series A Preferred Stock
shall have the rights, terms and privileges set forth on Exhibit A attached
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hereto. The shares of Series A Preferred Stock purchased pursuant to this
Section 1.1, together with the shares of Series B Redeemable Preferred Stock,
par value $.01 per share (the "Series B Preferred Stock" and, together with the
Series A Preferred Stock, the "Preferred Stock") purchased pursuant to Section
1.2 are referred to herein as the "Purchased Shares." The initial number of
Purchased Shares to be sold by the Company to each Purchaser is set forth on
Schedule 1.1.
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1.2 Purchase and Sale of Series B Redeemable Preferred Stock. From time
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to time after the Closing the Company will sell to the Purchasers up to an
aggregate of 70,000 shares of the Company's Series B Preferred Stock at a price
of $100 per share, for an aggregate purchase price of up to $7,000,000, payable
as provided in Section 1.4. The Series B Preferred Stock shall have the rights,
terms and privileges set forth on Exhibit A attached hereto.
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1.3 The Conversion Shares. The Company has authorized and reserved and
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hereby
covenants that it will continue to reserve, free of any preemptive rights or
encumbrances, a sufficient number of its authorized but previously unissued
shares of common stock, par value $.01 per share (the "Common Stock"), to
satisfy the rights of conversion of the holders of the Series A Preferred Stock
Shares. The shares of Common Stock issued or issuable upon conversion of the
Series A Preferred Stock are referred to herein as the "Conversion Shares".
1.4 Closings. The Purchased Shares shall be sold to the Purchasers at one
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or more closings (individually a "Closing" and collectively the "Closings") to
be held at the offices of Xxxxxxxx, Xxxxxxx & Xxxxxxx, A Professional
Corporation, 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx. Each Closing shall be
held not later than three Business Days after written notice (a "Purchase
Notice") shall be given by the Company to the Purchasers as herein provided.
Each Purchase Notice shall specify the following:
(i) the aggregate consideration to be paid by the Purchasers for the
Purchased Shares to be sold at such Closing;
(ii) the number of shares of Series A Preferred Stock and Series B
Preferred Stock to be purchased and sold at such Closing (it being
understood and agreed that 53.02% of the consideration to be paid at
each Closing shall be used to purchase Series A Preferred Stock and
46.98% of such consideration shall be used to purchase Series B
Preferred Stock);
(iii) the dollar amount to be paid for the Series A and Series B Preferred
Stock by each Purchaser at such Closing, and the number of shares of
each such series to be issued to each; and
(iv) the date on which such Closing shall occur.
Each Purchase Notice shall be accompanied by an Officer's Financing Certificate
(as defined in Section 1.5). The obligation of the Purchasers to purchase
Purchased Shares at each closing shall be subject to satisfaction to conditions
set forth in Articles VII and VIII hereof at each such closing. Prior to the
first sale of Purchased Shares for the purpose of funding the purchase of a
Clinic (as provided in Section 1.5), an aggregate minimum of $250,000 of
Preferred Stock shall be purchased at each Closing (provided that a lesser
amount may be purchased at the second Closing), and the purchase price of the
Preferred Stock purchased by Summit Ventures IV, L.P. and its affiliates at all
Closings, when added to the purchase price of the Common Stock purchased by such
persons, shall not exceed $1,000,000. Thereafter, an aggregate minimum of
$1,000,000 of Preferred Stock shall be purchased at each Closing. Payment at
each Closing for the Purchased Shares shall be by wire transfer payable in
immediately available federal funds. Each Purchaser shall pay that amount for
the Purchased Shares being acquired by it at the Closing as described in the
Purchase Notice. At each Closing, the Company will deliver to each Purchaser one
or more certificates representing the Purchased Shares purchased by such
Purchaser, in such denominations as may be requested by such Purchaser.
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1.5 Use of Proceeds. Proceeds from the purchase of Purchased Shares shall
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be used as follows:
(a) Proceeds of the Purchased Shares shall be used to fund the
acquisition, consolidation, management and operation of dental
clinics and related professional services (collectively "Clinics"),
and for general working capital, including without limitation
building the Company's management and operational infrastructures.
(b) The cumulative proceeds from the sale of Purchased Shares used to
provide working capital for the Company or for any Clinic (including
working capital received prior to the acquisition of the first
Clinic) shall not exceed $3,000,000.
(c) The Company shall be entitled to pursue acquisitions of Clinics on
such terms and conditions as the Board of Directors of the Company
shall, from time to time deem necessary or desirable; provided,
however, no such Clinic may be acquired without the consent of the
Purchasers who have purchased or committed to purchase a majority of
the Purchased Shares unless each of the following conditions (the
"Financing Conditions") shall have been satisfied:
(i) the total purchase price of such Clinic (including cash and
other property and the present value of any notes or contingent
payments to be made) shall not exceed six times such Clinic's
annualized EBITDA, which annualized figure shall be determined
based upon the Clinic's EBITDA for the six months ended
immediately prior to the date of the proposed acquisition;
(ii) at the time of the request for the financing for such
acquisition, the Company shall not be in default under the
terms of any indebtedness for borrowed money owed to any bank
or other financial institution (excluding the subordinated
indebtedness which may be owed from time to time by the Company
to Summit Subordinated Debt Fund L.P. (the "Summit Debt Fund");
and
(iii) for the twelve months ended as of the last day of the month
immediately preceding the month in which such acquisition is
scheduled to close, the Company and its Subsidiaries shall have
had EBITDA in excess of $1; provided, however, that with
respect to any sale of Purchased Shares during the period of
twelve months commencing on execution of this Agreement, the
condition set forth in this clause (iii) shall be deemed to
have been satisfied if the historical EBITDA of a Clinic which
the Company proposes to purchase, measured for the twelve
months ending as of the month immediately preceding the month
in which the acquisition is
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proposed to be completed and excluding any expenses associated
with the prior shareholders of the Clinic which will not
continue after the acquisition, exceeds $1.
(d) In connection with each Purchase Notice, the President and Chief
Financial Officer of the Company shall deliver to the Purchasers an
Officer's Certificate ("Officer's Financing Certificate") confirming
that the conditions set forth in Sections 1.5 (including in the event
proceeds will be used to fund the acquisition of one or more Clinics,
those specified in Section 1.5(c)) shall have been satisfied with
respect to such acquisition.
(e) The Company may finance the purchase of Clinics through secured
indebtedness received from one or more banks or other financial
institutions, and through debt financing supplied by the owner of
such a Clinic; provided, however, that in no event shall the Company
be entitled to fund any such acquisition using the proceeds of
capital stock other than the Purchased Shares unless and until all
such Purchased Shares shall have been purchased or commitments to
purchase the Purchased Shares have been terminated as herein
provided.
(f) In addition to the circumstances set forth in Section 1.6, the
Investors' commitments to acquire Purchased Shares shall terminate on
the first to occur of (i) the fourth anniversary of the execution of
this Agreement, (ii) the date on which Xxxxxxx X. Xxxxxx ceases to
serve as President and Chief Executive Officer of the Company, (iii)
consummation by the Company of the first Qualified Public Offering,
and (iv) sale of all or substantially all of the assets of the
Company or all of the capital stock of the Company to a third party.
1.6 Termination of Commitment; Right to Repurchase. If the Company has
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sold to Summit Ventures IV, L.P. and its affiliates an aggregate of $1,000,000
of Preferred Stock and Common Stock to raise working capital and has not
purchased a Clinic before the Company has spent such $1,000,000, then, at any
time after the Company has spent such $1,000,000 and has sent an additional
Purchase Notice to the Purchasers, Purchasers who have committed to purchase a
majority of the Purchased Shares may, by notice to the Company, elect on behalf
of all Purchasers to terminate any further obligation to purchase Purchased
Shares. If such an election is made, Xxxxxxx X. Xxxxxx may, at his election,
purchase, or cause the Company to purchase, all capital stock of the Company
owned by the Purchasers (other than himself) at the original purchase price paid
therefor, payable in cash. If Xx. Xxxxxx wishes to exercise such purchase option
he shall give written notice to such effect to all Purchasers within sixty (60)
days after receipt by the Company of the Purchasers' notice of termination of
their purchase commitments, and shall consummate such purchase within sixty (60)
days after he gives notice to the Purchasers of his election to purchase from
them their capital stock of the Company.
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1.7 Additional Purchasers. On or before February 19, 1996, one or more
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persons reasonably acceptable to the Company and those Purchasers who have
committed to purchase a majority of the Purchased Shares (the "Additional
Purchasers") may become Purchasers for the purpose of this Agreement by
executing a counterpart of this Agreement pursuant to which they commit to
purchase up to an aggregate of $1,100,000 of the Purchased Shares and Common
Stock. In such event, the Additional Purchasers shall be deemed to be Purchasers
for all purposes of this Agreement, Schedule 1.1 shall be amended to include
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their names, addresses and purchase commitments, the purchase commitments of
Summit Ventures IV, L.P. and its affiliates shall be reduced proportionately to
reflect the purchase commitments of the Additional Purchasers, and the
Additional Purchasers shall pay to the Company their pro rata share of any
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purchase commitments which have been called prior to their execution of this
Agreement. If and to the extent that the Additional Purchasers do not purchase
an aggregate of $1,100,000 of Purchased Shares and Common Stock on or before
February 19, 1996, Summit Ventures IV, L.P. and Summit Investors III, L.P. shall
on that date purchase the number of such additional Purchased Shares and Common
Stock which were not purchased by the Additional Purchasers, and Schedule 1.1
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shall be amended so as to increase the purchase commitments of each such Summit
entity accordingly.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
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THE COMPANY.
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In order to induce the Purchasers to purchase the Purchased Shares, the
Company, makes the following representations and warranties which shall be true,
correct and complete in all respects on the date hereof and shall be true,
correct and complete in all respects as of the date of each Closing, except to
the extent that such representation or warranty expressly refers to an earlier
date or the disclosure schedules hereto have been updated to reflect any
exception thereto attributable to an action of the Company not prohibited
hereunder, including without limitation the consummation of the acquisition of
one or more Clinics:
2.1 Organization and Corporate Power. The Company and each of its
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Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own its properties and to carry on
its business as presently conducted. The Company and each of its Subsidiaries is
duly licensed or qualified to do business as a foreign corporation in each
jurisdiction wherein the character of its property, or the nature of the
activities presently conducted by it, makes such qualification necessary, except
where the failure so to qualify would not have a material adverse effect on the
Company and its Subsidiaries, taken as a whole.
2.2 Authorization. The Company has all necessary corporate power and has
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taken all necessary corporate action required for the due authorization,
execution, delivery and
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performance by the Company of this Agreement, the Shareholders' Agreement
referenced in Section 7.5, the Registration Rights Agreement referenced in
Section 7.6, the Employment and Non-Competition Agreement referenced in Section
7.7 and the Stock Option Agreement referenced in Section 7.8 (collectively, the
"Related Agreements"), and the consummation of the transactions contemplated
herein or therein, and for the due authorization, issuance and delivery of the
Purchased Shares, and the Conversion Shares issuable upon conversion of the
Series A Preferred Stock. Sufficient shares of authorized but unissued Common
Stock have been reserved for issuance upon exercise of the Series A Preferred
Stock. The issuance of the Purchased Shares does not, and the issuance of the
Conversion Shares upon conversion of the Series A Preferred Stock will not,
require any further corporate action and is not and will not be subject to any
preemptive right, right of first refusal or the like. This Agreement and the
Related Agreements will each be a valid and binding obligation of the Company
enforceable in accordance with its respective terms.
2.3 Government Approvals. No consent, approval, license or authorization
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of, or designation, declaration or filing with, any court or governmental
authority is or will be required on the part of the Company in connection with
the execution, delivery and performance by the Company of this Agreement or any
of the Related Agreements, or in connection with the issuance of the Purchased
Shares or the issuance of the Conversion Shares upon conversion of the Series A
Preferred Stock, except for (i) those which have already been made or
granted,(ii) the filing of registration statements with the Securities and
Exchange Commission (the "Commission") and any applicable state securities
commission as provided for in Registration Rights Agreement, and (iii) other
filings relating to qualifications, exceptions from registration, and related
matters contemplated by the Registration Rights Agreement.
2.4 Authorized and Outstanding Stock. On the date hereof, before giving
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effect to the first Closing, the authorized capital stock of the Company will
consist of (i) 1,000,000 shares of Common Stock, of which 50,000 shares are
validly issued and outstanding and held of record and owned beneficially as set
forth in Schedule 2.4 attached hereto; and (ii) 470,000 shares of Preferred
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Stock, of which (x) 400,000 shares will have been designated as Series A
Preferred Stock with the rights, terms and privileges set forth in Exhibit A,
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and of which no shares will be issued or outstanding; and (y) 70,000 shares will
have been designated as Series B Preferred Stock with the rights, terms and
privileges set forth in Exhibit A, and of which no shares will be issued or
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outstanding. There are no treasury shares held by the Company. All issued and
outstanding shares of capital stock are, and when issued in accordance with the
terms hereof, all Purchased Shares and Conversion Shares issued upon conversion
of the Purchased Shares will be, duly and validly authorized, validly issued and
fully paid and non-assessable and free from any restrictions on transfer, except
for restrictions imposed by federal or state securities or "blue-sky" laws and
except for those imposed pursuant to this Agreement or any Related Agreement.
Except pursuant to this Agreement or the Related Agreements or as set forth on
Schedule 2.4, there are no outstanding warrants, options, commitments,
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preemptive rights, rights to acquire or purchase, conversion rights or demands
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of any character relating to the capital stock or other securities of the
Company. All issued and outstanding shares of capital stock of the Company were
issued (i) in transactions exempt from the registration provisions of the Act,
and (ii) in compliance with or in transactions exempt from the registration
provisions of applicable state securities or "blue-sky" laws.
2.5 Subsidiaries. Except as set forth in Schedule 2.5, the Company has no
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Subsidiaries nor any investment or other interest in, or any outstanding loan or
advance to or from, any Person, including, without limitation, any officer,
director or shareholder. Except as set forth on Schedule 2.5, the Company owns
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of record and beneficially, free and clear of all liens, charges, restrictions,
claims and encumbrances of any nature, all of the issued and outstanding capital
stock of each of its Subsidiaries.
2.6 Financial Information. As of the date hereof: (a) the Company has
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been newly formed for the purpose of exploring acquisition opportunities
relating to dental clinics and other specialty practice groups; and (b) the
Company has no assets or liabilities other than those associated with its
formation, the negotiation herein contemplated, and the consideration of
selected acquisitions.
2.7 [Intentionally Omitted]
2.8 Litigation. Except as otherwise set forth on Schedule 2.8, there is
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no litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company, threatened, against the Company or any Subsidiary or
affecting any of the Company's or such Subsidiary's properties or assets, or
against any officer, key employee or shareholder of the Company or any
Subsidiary in his capacity as such, which litigation, proceeding, or
investigation is reasonably likely to have a material adverse effect on the
Company and its Subsidiaries, taken as a whole, nor, to the knowledge of the
Company, has there occurred any event or does there exist any condition on the
basis of which any litigation, proceeding or investigation is reasonably likely
to be properly instituted with any substantial chance of recovery where such
recovery would likely have a material adverse effect on the Company and its
Subsidiaries, taken as a whole. Neither the Company nor any Subsidiary, nor any
officer, key employee or shareholder of the Company or any Subsidiary in his
capacity as such is, to the knowledge of the Company, in default with respect to
any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency which may materially and adversely
affect the business or assets of the Company and its Subsidiaries, taken as a
whole.
2.9 Compliance with Laws and Other Instruments. The Company and its
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Subsidiaries are in compliance with all of the provisions of this Agreement and
of its charter and by-laws, and in all material respects with the provisions of
each mortgage, indenture, lease, license, other agreement or instrument,
judgment, decree, judicial order, statute, and regulation by which any of them
is bound or to which any of them or any of their respective properties are
subject, except, in any such case, where noncompliance would not have a
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material adverse effect on the Company and its Subsidiaries, taken as a whole.
Neither the execution, delivery or performance of this Agreement and the Related
Agreements, nor the offer, issuance, sale or delivery of the Purchased Shares,
or the Conversion Shares upon conversion of the Purchased Shares, on the terms
of this Agreement will violate, or result in any breach of, or constitute a
default under, or result in the imposition of any encumbrance upon any asset of
the Company or any Subsidiary pursuant to any provision of the Company's or such
Subsidiary's charter or by-laws, or any statute, rule or regulation, contract,
lease, judgment, decree or other document or instrument by which the Company or
any Subsidiary is bound or to which the Company or any Subsidiary or any of
their respective properties are subject, which violation, breach, default, or
imposition would have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, or, to the knowledge of the Company, will cause
the Company or any Subsidiary to lose the benefit of any material right or
privilege it presently enjoys or cause any Person who is expected to normally do
business with the Company or any Subsidiary to discontinue to do so on the same
basis, which discontinuation would have a material adverse effect on the Company
and its Subsidiaries, taken as a whole.
2.10 Taxes. The Company and each of its Subsidiaries has filed all tax
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returns (including statements of estimated taxes owed) required to be filed
within the applicable periods for such filings and has paid all taxes required
to be paid, and has established adequate reserves (net of estimated tax payments
already made) for the payment of all taxes payable in respect to the period
subsequent to the last periods covered by such returns, except for any failure
to file or establish reserves which would not have a material adverse effect on
the Company and its Subsidiaries, taken as a whole. No deficiencies for any tax
are currently assessed against the Company or any Subsidiary, which deficiencies
are material to the Company and its Subsidiaries, taken as a whole, and except
as set forth on Schedule 2.10, no tax returns of the Company or any Subsidiary
have ever been audited, and, to the knowledge of the Company, there is no such
audit pending or contemplated. There is no tax lien, whether imposed by any
federal, state or local taxing authority, outstanding against the material
assets, properties or business of the Company. For the purposes of this
Agreement, the term "tax" shall include all federal, state and local taxes,
including income, franchise, property, sales, withholding, payroll and
employment taxes.
2.11 Real Property.
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(a) Schedule 2.11 sets forth the addresses and uses of all real
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property that the Company or any Subsidiary owns, leases or subleases, and any
material lien or encumbrance on any such owned real property or the Company's or
Subsidiary's leasehold interest therein, specifying in the case of each such
lease or sublease, the name of the lessor or sublessor, as the case may be, and
the lease term.
(b) Except as set forth on Schedule 2.11, the Company or its
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Subsidiary, as the case may be, has good and marketable title to, and owns free
and clear of all material liens and encumbrances, all property listed as owned
by the Company or any Subsidiary on
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Schedule 2.11, and there is no violation of any law, regulation or ordinance
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(including without limitation laws, regulations or ordinances relating to
zoning, environmental, city planning or similar matters) relating to any real
property owned, leased or subleased by the Company or any Subsidiary, which
violation would have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
(c) There are no defaults by the Company or any Subsidiary which are
reasonably likely to curtail in any material respect the present use of the
Company's or such Subsidiary's property listed on Schedule 2.11. The
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performance by the Company of this Agreement and the Related Agreements will not
result in the termination of, or in any increase of any amounts payable under,
any lease listed on Schedule 2.11.
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2.12 Personal Property. Except as set forth on Schedule 2.12 and except
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for property sold or otherwise disposed of in the ordinary course of business,
the Company and its Subsidiaries own free and clear of any material liens or
encumbrances, all of the personal property reflected as owned by the Company and
its Subsidiaries in the balance sheet contained in the Unaudited Financial
Statements, and all other material items of personal property acquired by the
Company and its Subsidiaries through the date hereof. All material items of such
personal property are in good operating condition, normal wear and tear
excepted.
2.13 Patents, Trademarks, etc. Set forth on Schedule 2.13 is a list and
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brief description of all material patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service xxxx applications
trade names and copyrights owned by or registered in the name of the Company or
any Subsidiary, or of which the Company or any Subsidiary is a licensor or
licensee or in which the Company or any Subsidiary has any material right, and
in each case a brief description of the nature of such right. The Company and
its Subsidiaries own or possess adequate licenses or other rights to use all
patents, patent applications, trademarks, trademark applications, service marks,
service xxxx applications, trade names, copyrights, manufacturing processes,
formulae, trade secrets and know how (collectively, "Intellectual Property")
necessary to the conduct of their business as conducted, and no claim is pending
or, to the knowledge of the Company, threatened to the effect that the
operations of the Company infringe upon or conflict with the asserted rights of
any other person under any Intellectual Property, and there is no known basis
for any such claim (whether or not pending or threatened), which would have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.
No claim is pending or, to the knowledge of the Company, threatened to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company or any Subsidiary otherwise has the right to use, is invalid
or unenforceable by the Company or such Subsidiary, and there is no known basis
for any such claim (whether, or not pending or threatened) which would have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.
To the knowledge of the Company, all technical information developed by and
belonging to the Company and its Subsidiaries which has not been patented or
copywritten has been kept confidential, except for
9
any such information the disclosure of which would not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole.
2.14 Agreements of Directors, Officers and Employees. To the knowledge of
-----------------------------------------------
the Company, no director, officer or employee of or consultant to the Company or
any Subsidiary is in violation of any material terms of any written employment
contract, non-competition agreement, non-disclosure agreement, patent disclosure
or assignment agreement or other written contract or agreement containing
restrictive covenants relating to the right of any such director, officer,
employee or consultant to be employed or engaged by the Company or such
Subsidiary because of the nature of the business conducted by the Company or
such Subsidiary, or relating to the use of trade secrets or proprietary
information of others.
2.15 Governmental and Industrial Approvals. The Company and each of its
-------------------------------------
Subsidiaries has all the material permits, licenses, orders, franchises and
other rights and privileges of all federal, state, local or foreign governmental
or regulatory bodies necessary for the Company and such Subsidiaries to conduct
their respective businesses as presently conducted, except to the extent the
failure to acquire same would not have a material adverse effect on the Company
and its Subsidiaries, taken as a whole. All such permits, licenses, orders,
franchises and other rights and privileges are in full force and effect and, to
the knowledge of the Company, no suspension or cancellation of any of them is
threatened, except to the extent the failure of same to be in full force and
effect would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, and none of such permits, licenses, orders,
franchises or other rights and privileges will be materially and adversely
affected by the consummation of the transactions contemplated in this Agreement
and the Related Agreements.
2.16 Registration Rights. The Company has not granted any rights relating
-------------------
to registration of its capital stock under the Act or state securities laws
other than those contained in this Agreement, or the Registration Rights
Agreement.
2.17 Insurance Coverage. Schedule 2.17 hereto contains an accurate list of
------------------ -------------
the insurance policies currently maintained by the Company and its Subsidiaries.
Except as described on Schedule 2.17, there are currently no claims pending
-------------
against the Company or any Subsidiary under any insurance policies currently in
effect and covering the property, business or employees of the Company and its
Subsidiaries, except for any claims which would not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, and all premiums
due and payable with respect to the policies maintained by the Company and its
Subsidiaries has been paid to date.
2.18 Employee Matters. Except as set forth on Schedule 2.18, neither the
---------------- -------------
Company nor any Subsidiary has in effect any material written employment
agreements, consulting agreements, deferred compensation, pension or retirement
agreements or arrangements, bonus, incentive or profit-sharing plans or
arrangements, or labor or collective bargaining
10
agreements. Except as set forth on Schedule 2.18, the Company has no knowledge
that any of the officers or other key employees of the Company or any Subsidiary
presently intends to terminate his employment. The Company and its Subsidiaries
are in compliance in all material respects with all applicable laws and
regulations relating to labor, employment, fair employment practices, terms and
conditions of employment, and wages and hours. The Company and each Subsidiary
is in material compliance with the terms of all plans, programs and agreements
listed on Schedule 2.18, and each such plan, program or agreement is in
-------------
compliance in all material respects with all of the requirements and provisions
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Except as set forth on Schedule 2.18, no such plan or program has engaged in any
"prohibited transaction" as defined in Section 4975 of the Internal Revenue Code
of 1986 (the "Code"), or has incurred any "accumulated funding deficiency" as
defined in Section 302 of ERISA, nor has any reportable event as defined in
Section 4043(b) of ERISA occurred with respect to any such plan or program, and
neither the Company nor any Subsidiary has or has maintained any group health
plan subject to Section 4980B of the Code or Section 162(i) or (k) of the Code
as amended by the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended by the Technical and Miscellaneous Revenue Act of 1988. With respect to
each plan listed on Schedule 2.18, all required filings, including all filings
-------------
required to be made with the United States Department of Labor and Internal
Revenue Service, have been timely filed, except to the extent the failure to so
file would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
2.19 No Brokers or Finders. No person has or will have, as a result of the
---------------------
transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company or any of its Subsidiaries for any commission, fee
or other compensation as a finder or broker because of any act or omission by
the Company or any of its Subsidiaries.
2.20 Transactions with Affiliates. Except as contemplated by this
----------------------------
Agreement or the Related Agreements or as set forth on Schedule 2.20, there are
-------------
no loans, leases or other continuing transactions between the Company or any
Subsidiary on the one hand, and any officer or director of the Company or any
Subsidiary or any person owning five percent (5%) or more of the Common Stock of
the Company or any respective family member or affiliate of such officer,
director or shareholder on the other hand.
2.21 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.
--------------------------------------------------------------
Except as set forth on Schedule 2.21, neither the Company nor any Subsidiary has
-------------
assumed, guaranteed, endorsed or otherwise become directly or contingently
liable on or for any indebtedness of any other Person, except guarantees by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
2.22 Restrictions on Subsidiaries. Except as set forth on Schedule 2.22,
---------------------------- -------------
there are no restrictions on the Company or any of its Subsidiaries which
prohibit or otherwise restrict the transfer of cash or other assets between the
Company and any of its Subsidiaries or between
11
any Subsidiaries of the Company.
2.23 Disclosures. Neither this Agreement, any Schedule or Exhibit to this
-----------
Agreement, nor the Related Agreements, nor any other agreement, document or
written statement made by the Company and furnished by the Company to the
Purchasers in connection with the transactions contemplated hereby, contains any
untrue statement of material fact or omits to state any material fact necessary
to make the statements contained herein or therein not misleading.
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
------------------------------------
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that unless otherwise permitted, approved, or waived by
Purchasers then owing or having the right to acquire a majority of the
Conversion Shares, it will observe the following covenants on and after the date
hereof and until the consummation of the first public offering of its securities
pursuant to a registration statement filed under the Securities Act of 1933, as
amended:
3.1 Accounts and Reports. The Company will, and will cause each of its
--------------------
Subsidiaries to, maintain a standard system of accounts in accordance with
generally accepted accounting principles consistently applied and the Company
will, and will cause each of its Subsidiaries to, keep full and complete
financial records. The Company will furnish to each Purchaser the information
set forth in this Section 3.1.
(a) Within ninety (90) days after the end of each fiscal year, a
copy of the consolidated and consolidating balance sheet of the Company and its
Subsidiaries as at the end of such year, together with consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Company and its Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all in
reasonable detail and duly certified by an independent public accountant of
national recognition selected by the Board of Directors of the Company and
reasonably acceptable to Purchasers.
(b) Within thirty (30) days after the end of each calendar month, a
preliminary consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such month and preliminary consolidated and
consolidating statements of income, shareholders' equity and cash flow for such
month and for the period commencing at the end of the previous fiscal year and
ending with the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the preceding
fiscal year, all in reasonable detail.
12
(c) At the time of delivery of each monthly and annual statement, a
certificate, executed by the either the president or chief financial officer of
the Company stating (i) that such officer has caused this Agreement and the
terms of the Preferred Stock to be reviewed and has no knowledge of any default
by the Company or any Subsidiary in the performance or observance of any of the
provisions of this Agreement or such Preferred Stock or, if such officer has
such knowledge, specifying such default, and (ii) with respect to the delivery
of annual statements, a statement as to the then Applicable Conversion Value of
the Series A Preferred Stock and the number of Conversion Shares into which each
share of Series A Preferred Stock may then be converted.
(d) Prior to the end of each fiscal year, a copy of the operating
plan and budget for the next fiscal year required under Section 3.8, in form
consistent with good business practice.
(e) Promptly upon receipt thereof, any written report, so called
"management letter", and any other communication submitted to the Company or any
Subsidiary by its independent public accountants relating to the business,
prospects or financial condition of the Company and its Subsidiaries;
(f) Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company (or any Subsidiary) which, if successful, could have a
material adverse effect on the Company and its Subsidiaries, taken as a whole;
and (ii) all material defaults by the Company or any Subsidiary (whether or not
declared) under any agreement for money borrowed (unless waived or cured within
applicable grace periods);
(g) Promptly upon sending, making available, or filing the same, all
reports and financial statements as the Company (or any Subsidiary) shall send
or make available generally to the shareholders of the Company as such or to the
Commission; and
(h) Such other information with regard to the business, properties
or the condition or operations, financial or otherwise, of the Company or its
Subsidiaries as the Purchaser may from time to time reasonably request.
3.2 Payment of Taxes. The Company will pay and discharge (and cause any
----------------
Subsidiary to pay and discharge) all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Company (or any Subsidiary), provided that neither the Company
nor any Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings
if the Company or such Subsidiary shall have set aside on its books adequate
13
reserves with respect thereto.
3.3 Maintenance of Key Man Insurance. The Company will, at its expense,
--------------------------------
use all reasonable efforts to obtain within thirty (30) days of the date hereof
and thereafter maintain a life insurance policy with a responsible and reputable
insurance company payable to the Company on the life of Xxxxxxx X. Xxxxxx in the
face amount of $1,000,000. The Company will maintain such policy and will not
cause or permit any assignment of the proceeds of such policy and will not
borrow against such policy. The Company will add one designee of the Purchasers
as a notice party to such policy, and will request that the issuer of such
policy provide such designee with ten (10) days' notice before such policy is
terminated (for failure to pay premium or otherwise) or assigned, or before any
change is made in the designation of the beneficiary thereof.
3.4 Compliance with Laws, etc. The Company will comply (and cause each of
--------------------------
its Subsidiaries to comply) with all applicable laws, rules, regulations and
orders of any governmental authority, the noncompliance with which could
materially adversely affect the business or condition, financial or otherwise,
of the Company and its Subsidiaries, taken as a whole.
3.5 Inspection. At any reasonable time during normal business hours and
----------
from time to time, but not more frequently than once every six months for all
Purchasers and transferees of Purchasers as a group, upon five (5) days prior
written notice, the Company (and each of its Subsidiaries) will permit any one
or more of the Purchasers who then own, of record or beneficially, or have the
right to acquire, any of the Conversion Shares, or any transferee of a Purchaser
who owns, of record or beneficially, or has the right to acquire, at least five
percent (5%) of the then outstanding Common Stock, or any of the agents or
representatives of the foregoing Persons, to examine and make copies of and
extracts from the records and books of account of and visit the properties of
the Company (and any of its Subsidiaries) and to discuss the Company's affairs,
finances and accounts with any of its officers or directors; provided that any
Person or Persons exercising rights under this Section 3.5 shall (i) use all
reasonable efforts to ensure that any such examination or visit results in a
minimum of disruption to the operations of the Company and (ii) shall agree in
writing to keep any confidential or proprietary information of the Company or
any of its Subsidiaries disclosed to him in the course of such inspection
confidential in a manner consistent with prudent business practices and
treatment of such Person's or Persons' own confidential information and not use
such proprietary information for any purpose other than reviewing or analyzing
the operations, results of operation, or condition of the Company or its
Subsidiaries. The rights granted under this Section 3.5 shall be in addition to
any rights which any Purchaser may have under applicable law in its capacity as
a shareholder of the Company.
3.6 Corporate Existence; Ownership of Subsidiaries. The Company will, and
----------------------------------------------
will cause its Subsidiaries to, at all times preserve and keep in full force and
effect their corporate existence, and rights and franchises material to the
business of the Company and its
14
Subsidiaries, taken as a whole, and will qualify, and will cause each of its
Subsidiaries to qualify, to do business as a foreign corporation in any
jurisdiction where the failure to do so would have a material adverse effect on
the business, condition (financial or other), assets, properties or operations
of the Company and its Subsidiaries, taken as a whole. The Company shall at all
times own of record and beneficially, free and clear of all liens, charges,
restrictions, claims and encumbrances of any nature, all of the issued and
outstanding capital stock of each of its Subsidiaries.
3.7 Compliance with ERISA. The Company will comply, (and cause each of
---------------------
its Subsidiaries to comply) in all material respects with all minimum funding
requirements applicable to any pension or other employee benefit plans which are
subject to ERISA or to the Code, and comply in all other material respects with
the provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any of its
Subsidiaries will permit any event or condition to exist which could permit any
such plan to be terminated under circumstances which cause the lien provided for
in Section 3068 of ERISA to attach to the assets of the Company or any of its
Subsidiaries if the lien would be material to the Company and its Subsidiaries,
taken as a whole.
3.8 Board Approval. Prior to the end of each fiscal year, the Company
--------------
will prepare and submit to its Board of Directors for its approval prior to such
year end an operating plan and budget, cash flow projections and profit and loss
projections, all itemized in reasonable detail for the immediately following
year.
3.9 Financings. The Company will promptly provide to the Board of
----------
Directors the details and terms of, and any brochures or investment memoranda
prepared by the Company related to, any proposed financing of any nature for the
Company (or any of its Subsidiaries), whether initiated by the Company or any
other Person.
3.10 Meetings of the Board of Directors. The Directors shall schedule
----------------------------------
regular meetings not less frequently than once every calendar quarter. The
Company shall reimburse the Purchasers for all direct out-of-pocket expenses
incurred by any director designee of the Purchasers in attending such meetings.
3.11 Rule 144A Information. Subject to the Related Agreements, the
---------------------
Company shall, upon the written request of any Purchaser, provide to such
Purchaser and to any prospective institutional transferee of the Purchased
Shares or Conversion Shares designated by such Purchaser, such financial and
other information as is available to the Company or can be obtained by the
Company without material expense and as such Purchaser may reasonably determine
is required to permit such transfer to comply with the requirements of Rule 144A
promulgated under the Act.
ARTICLE IV
15
NEGATIVE COVENANTS OF THE COMPANY AND SUMMIT ENTITIES
-----------------------------------------------------
Without limiting any other covenants and provisions hereof, unless
otherwise permitted, approved or waived by Purchasers then owning or having the
right to acquire a majority of the Conversion Shares the Company, covenants and
agrees that it will comply (and will cause each of their respective Subsidiaries
and affiliates to comply) with each of the provisions of this Article IV that
applies to them, as the case may be, on and after the date hereof and until the
consummation of the first public offering of its securities pursuant to a
registration statement filed under the Securities Act of 1933, as amended.
4.1 Investments in Other Persons. The Company will not make or permit any
----------------------------
Subsidiary to make any loan or advance to any Person, or purchase, otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, the capital
stock, assets comprising the business of, obligations of, or any interest in,
any Person, except:
------
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America and
having a maturity of not more than one year from the date of acquisition;
(ii) investments by the Company or a Subsidiary in certificates of
deposit, notes, acceptances and repurchase agreements having a maturity of
not more than one year from the date of acquisition issued by a bank
organized in the United States having capital, surplus and undivided
profits of at least $50,000,000;
(iii) loans or advances from a Subsidiary to the Company or from a
Subsidiary to another Subsidiary;
(iv) investments by the Company or a Subsidiary in A-rated or better
commercial paper having a maturity of not more than one year from the date
of acquisition;
(v) investments by the Company or a Subsidiary in "money market"
fund shares, or in "money market" accounts fully insured by the Federal
Deposit Insurance Corporation and sponsored by banks and other financial
institutions, provided that such "money market" fund or "money market"
accounts invest principally in investments of the types described in
clauses (i), (ii) or (iv) of this subsection 4.1; and
(vi) investments by the Company or a Subsidiary constituting an
acquisition of a Clinic to the extent permitted under Section 1.5.
4.2 Distributions. The Company will not declare or pay any dividends,
-------------
except dividends payable with respect to the Preferred Stock in accordance with
Exhibit A, purchase, redeem, retire, or otherwise acquire for value any of its
---------
capital stock (or rights, options or
16
warrants to purchase such shares) now or hereafter outstanding, return any
capital to its shareholders as such, or make any distribution of assets to its
shareholders as such, or permit any Subsidiary to do any of the foregoing,
except that the Subsidiaries may declare and make payment of cash and stock
dividends, return capital and make distributions of assets to the Company and
except that nothing herein contained shall prevent the Company from:
(i) effecting a stock split or declaring or paying any dividend
consisting of shares of any class of capital stock to the holders of shares
of such class of capital stock;
(ii) complying with any terms of the Preferred Stock as contained in
Exhibit A attached hereto relating to the payment of dividends, liquidation
---------
preferences or redemption payments on or with respect to the Preferred
Stock or redemption of the Preferred Stock; or
(iii) repurchase of shares from Xx. Xxxxxx pursuant to the terms of
his Employment Agreement of even date.
4.3 Dealings with Affiliates. Except for this Agreement and the Related
------------------------
Agreements, the Company will not enter into any transaction including, without
limitation, any loans or extensions of credit or royalty agreements with any
officer or director of the Company or any Subsidiary or holder of any class of
capital stock of the Company, or any member of their respective immediate
families or any corporation or other entity directly or indirectly controlled by
one or more of such officers, directors or shareholders or members of their
immediate families, except for advances in reasonable amounts made to employees
of the Company or any Subsidiary for valid business purposes.
4.4 Merger. The Company shall not, and shall not permit any Subsidiary to
------
merge or consolidate with any other corporation, or sell, assign, lease or
otherwise dispose of or voluntarily part with the control of (whether in one
transaction or in a series of transactions) all, or substantially all, of its
assets (whether now owned or hereinafter acquired) or sell, assign or otherwise
dispose of (whether in one transaction or in a series of transactions) any of
its material accounts receivable (whether now in existence or hereinafter
created) at a discount or with recourse, to any Person, or permit any Subsidiary
to do any of the foregoing, (i) except for sales or other dispositions of assets
------
in the ordinary course of business, and (ii) except that (a) any wholly owned
Subsidiary may merge into or consolidate with or transfer assets to any other
wholly owned Subsidiary, (b) any wholly owned Subsidiary may merge into or
transfer assets to the Company, and (c) the foregoing shall not prohibit, to the
extent commercially reasonable, (i) the settlement of accounts which are not
reasonably collectible in full at less than the full amount of such accounts, or
(ii) the assignment of such accounts to a third party under terms which allow
such third party to retain a portion of the amount collected.
17
4.5 Option Shares. The Company will not issue shares of its capital stock
-------------
and will not grant any options, rights or warrants to acquire its capital stock,
except up to an aggregate of 100,601 shares of Common Stock may be issued to
employees of the Company pursuant to the Related Agreements or options granted
under a stock option plan approved by the Compensation Committee of the
Company's Board of Directors, which number shall include options for not in
excess of 45,045 shares of Common Stock which may be issued to Xx. Xxxxxx;
provided that all such options shall have an exercise price per share that is
not less than $2.00. The numbers of shares and exercise price set forth in this
Section shall be proportionately adjusted to reflect any stock dividend, stock
split or other form of recapitalization occurring after the date hereof.
4.6 No Conflicting Agreements. The Company agrees that neither it nor any
-------------------------
Subsidiary will, without the consent of the Purchasers, enter into or amend any
agreement, contract, commitment or understanding which would restrict or
prohibit the exercise by the Purchasers of any of their rights under this
Agreement or any of the Related Agreements.
4.7 Restriction of Investments. Summit Ventures IV, L.P., Summit Ventures
--------------------------
III, L.P. and Summit Investors II, L.P. each agree that as long as they
collectively hold at least 20% of the issued and outstanding stock of the
Company on a fully diluted basis they will not, nor permit their affiliates to,
acquire an interest in any company, entity, or venture more than one third of
the revenues of which the preceding twelve months were derived from the
ownership, operation or management of dental service providers or providers of
services in the related specialty practices of orthodontics, periodontics,
endodontics, pedidontics or oral surgery. The restriction set forth in this
Section shall not apply to any investment in a portfolio company which exists as
of the date hereof, or to any follow-on investment in such a portfolio company.
If the Purchasers terminate their commitment to purchase Purchased Shares in
accordance with Section 1.6 of this Agreement, the restrictions in this Section
4.7 shall terminate.
ARTICLE V
PREEMPTIVE RIGHT
----------------
5.1 Right of Purchase. The Company hereby grants to each Purchaser so
-----------------
long as it or he shall own, of record or beneficially, or have the right to
acquire from the Company, any Purchased Shares, Conversion Shares or Common
Stock, the right to purchase all or part of its or his pro rata share of New
--- ----
Securities (as defined in Section 5.2) which the Company, from time to time,
proposes to sell and issue. A Purchaser's pro rata share, for purposes of this
--- ----
preemptive right, is the ratio of the number (without duplication) of Purchased
Shares, Conversion Shares and shares of Common Stock which such Purchaser owns
or has the right to acquire from the Company to the total number (without
duplication) of Purchased Shares, Conversion Shares and shares of Common Stock
then outstanding. The Purchasers shall have
18
a right of over-allotment pursuant to this Article V such that to the extent a
Purchaser does not exercise its or his preemptive right in full hereunder, such
additional shares of New Securities which such Purchaser did not purchase may be
purchased by the other Purchasers in proportion to the total number (without
duplication) of Purchased Shares, Conversion Shares or other shares of Common
Stock which each such other Purchaser owns or has the right to acquire from the
Company compared to the total number (without duplication) of Purchased Shares,
Conversion Shares or other shares of Common Stock which all such other
Purchasers own or have the right to acquire from the Company.
5.2 Definition of New Securities. "New Securities" shall mean any capital
----------------------------
stock of the Company whether now authorized or not, and rights, options or
warrants to purchase capital stock, and securities of any type whatsoever that
are, or may become convertible into or exchangeable for capital stock, issued on
or after the date hereof; provided that the term "New Securities" does not
--------
include (i) securities purchased under this Agreement or Conversion Shares
issuable upon conversion of the Series A Preferred Stock, (ii) Common Stock
issued as a stock dividend to holders of Common Stock or upon any stock split,
subdivision or combination of shares of Common Stock, (iii) Preferred Stock
issued as a dividend to holders of Preferred Stock or upon any stock split,
subdivision or combination of Preferred Stock, (iv) the aggregate number of
shares of Common Stock issuable upon exercise of options permitted under Section
4.5 hereof, (v) securities issued in connection with the acquisition of a Clinic
authorized under Section 1.5; and (vi) issuance of securities in connection with
borrowing of subordinated indebtedness from Summit Subordinated Debt Fund, L.P.
5.3 Notice from the Company. In the event the Company proposes to
-----------------------
undertake an issuance of New Securities, it shall give each Purchaser written
notice of its intention, describing the type of New Securities and the price and
the terms upon which the Company proposes to issue the same. Each Purchaser
shall have 20 calendar days from the date of receipt of any such notice to agree
to purchase up to the Purchaser's pro rata share of such New Securities (and any
--- ----
over-allotment amount pursuant to the operation of Section 5.1 hereof) for the
price and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
5.4 Sale by the Company. In the event any Purchaser fails to exercise in
-------------------
full its preemptive right (after giving effect to the over-allotment provision
of Section 5.1 hereof), the Company shall have 90 days thereafter to sell the
New Securities with respect to which the Purchaser's option was not exercised,
at a price and upon terms no more favorable to the purchasers thereof than
specified in the Company's notice. To the extent the Company does not sell all
the New Securities offered within said 90 day period, the Company shall not
thereafter issue or sell such New Securities without first again offering such
securities to the Purchasers in the manner provided above.
5.5 Termination of Rights. The rights granted to the Purchasers under
---------------------
this Article V shall expire immediately prior to, and shall not apply in
connection with, the consummation
19
of the first Qualified Public Offering.
ARTICLE VI
INVESTMENT REPRESENTATIONS
--------------------------
6.1 Representations and Warranties. Each Purchaser hereby represents and
------------------------------
warrants to the Company as follows:
(a) Assuming due execution and delivery by the Company of the
Agreement and the Related Agreements, this Agreement and the Related Agreements
to which such Purchaser is a party constitute legal, valid and binding
obligations of such Purchaser, enforceable against such Purchaser in accordance
with their respective terms;
(b) Such Purchaser has been advised and understands that the
Purchased Shares have not been registered under the Act, on the grounds that no
distribution or public offering of the Purchased Shares is to be effected, and
that in this connection, the Company is relying in part on the representations
of such Purchasers set forth in this Article VI;
(c) Such Purchaser has been further advised and understands that no
public market now exists for any of the securities issued by the Company and
that a public market may never exist for the Purchased Shares or Conversion
Shares;
(d) Such Purchaser is purchasing the Purchased Shares for investment
purposes, for its own account and not with a view to, or for sale in connection
with, any distribution thereof in violation of Federal or state securities laws;
(e) By reason of its business or financial experience, such
Purchaser has the capacity to protect its own interest in connection with the
transactions contemplated hereunder;
(f) Such Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Purchased Shares;
provided, however, that nothing in this Section 6.1 shall be deemed to vitiate
or limit the representations, warranties and covenants of the Company contained
in this Agreement; and
(g) No person has or will have, as a result of the transaction
contemplated by this Agreement, any right, interest or claim against or upon the
Company or any of its Subsidiaries for any commission, fee or other compensation
as a finder or broker because of any act or omission by such Purchaser.
6.2 Permitted Sales; Legends. Notwithstanding the foregoing
------------------------
representations, so
20
long as there is full compliance with all applicable federal and state
securities laws, and subject to the Shareholders Agreement, the Company agrees
that it will permit (i) a distribution of Purchased Shares or Conversion Shares
by a partnership to one or more of its partners, where no consideration is
exchanged therefor by such partners, or to a retired or withdrawn partner who
retires or withdraws after the date hereof in full or partial distribution of
his interest in such partnership, or to the estate of any such partner or the
transfer by gift, will or intestate succession of any partner to his spouse or
to the siblings, lineal descendants or ancestors of such partner or his spouse,
or to a trust created for the benefit of one or more of the foregoing, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if it were an original Purchaser hereunder and (ii) a sale or other
transfer of any of the Purchased Shares, or Conversion Shares upon obtaining
assurance satisfactory to the Company that such transaction is exempt from the
registration requirements of, or is covered by an effective registration
statement under, the Act and applicable state securities or "blue-sky" laws,
including, without limitation, receipt of an unqualified opinion to such effect
of counsel reasonably satisfactory to the Company. The certificates representing
the Purchased Shares and any Conversion Shares thereof shall bear a legend
evidencing such restriction on transfer substantially in the following form:
"The shares represented by this certificate have been
acquired for investment and have not been registered
under the Securities Act of 1933 (the "Act") or the
securities laws of any state. The shares may not be
transferred by sale, assignment, pledge or otherwise
unless (i) a registration statement for the shares
under the Act is in effect or (ii) the corporation has
received an opinion of counsel, which opinion is
reasonably satisfactory to the corporation, to the
effect that such registration is not required under
the Act."
ARTICLE VII
CONDITIONS OF PURCHASERS' OBLIGATION
------------------------------------
7.1 Effect of Conditions. The obligation of the Purchasers to purchase
--------------------
and pay for the Purchased Shares at any Closing shall be subject at their
election to the satisfaction of each of the conditions stated in the following
Sections of this Article.
7.2 Representations and Warranties. The representations and warranties of
------------------------------
the Company contained in this Agreement shall be true and correct on the date of
such Closing with the same effect as though made on and as of that date, except
to the extent that such representations and warranties expressly relate to a
prior date.
7.3 Performance. The Company shall have performed and complied in all
-----------
21
material respects with all of the agreements, covenants and conditions
contained in this Agreement required to be performed or complied with by it and
him at or prior to such Closing.
7.4 Certified Documents, etc. The Certificate of Incorporation
------------------------
of the Company shall have been amended to include the provisions of Exhibit A
---------
attached hereto.
7.5 Shareholders' Agreement. A Shareholders' Agreement in the form of
-----------------------
Exhibit B attached hereto shall have been executed by each Purchaser and the
---------
Company.
7.6 Registration Rights Agreement. A Registration Rights Agreement in the
-----------------------------
form of Exhibit C shall have been executed by the Company and the other parties
---------
thereto.
7.7 Employment Agreement. Xx. Xxxxxx shall have executed an Employment
--------------------
and Non-Competition Agreement in the form of Exhibit D attached hereto.
---------
7.8 Stock Option Agreements. The Company and Xx. Xxxxxx shall have
-----------------------
executed a stock option agreement in the form of Exhibit E attached hereto (the
---------
"Stock Option Agreements") pursuant to which the Company grants to Xx. Xxxxxx
options to purchase up to an aggregate of 45,045 shares of Common Stock (subject
to adjustment to reflect any stock split, stock dividend or the like occurring
after the date hereof).
ARTICLE VIII
CONDITIONS OF THE COMPANY'S OBLIGATION
--------------------------------------
The Company's obligation to sell the Purchased Shares shall be subject to
the accuracy on the date of the applicable Closing of the representations and
warranties of the Purchasers contained in this Agreement, and the performance by
the Purchasers of all agreements, covenants, and conditions contained in this
Agreement required to be performed by them at or prior to such Closing.
ARTICLE IX
CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Agreement" means this Series A and Series B Preferred Stock Purchase
Agreement as from time to time amended and in effect between the parties.
22
"Applicable Conversion Value" shall mean the Applicable Conversion Value of
the Preferred Stock under Section 5(c) of Exhibit A.
---------
"Business Day" shall mean a day which is not a legal holiday in the City of
Boston, Massachusetts.
"Closing" shall have the meaning set forth in Section 1.4.
"Common Stock" will include (a) the Company's Common Stock as authorized on
the date of this Agreement, (b) any other capital stock of any class or classes
of the Company authorized on or after the date hereof, the holders of which
shall have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference, and
(c) any other securities of the Company into which or for which any of the
securities described in (a) or (b) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise.
"Company" means and shall include American Dental Partners, Inc., a
Delaware corporation, and its successors and assigns.
"Conversion Shares" shall have the meaning set forth in Section 1.3.
"EBITDA" shall mean the consolidated earnings before interest, taxes,
depreciation and amortization, as determined in accordance with generally
accepted accounting principles, consistently applied.
"Holders" shall have the meaning set forth in Section 7.1.
"New Securities" shall have the meaning set forth in Section 5.2.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Preferred Stock" shall have the meaning set forth in Section 1.2.
"Purchased Shares" shall have the meaning set forth in Section 1.2.
"Purchaser" shall have the meaning set forth in Section 1.1.
"Qualified Public Offering" means the closing of an underwritten public
offering by the Company pursuant to a registration statement filed and declared
effective under the Act covering the offer and sale of Common Stock for the
account of the Company in which the aggregate net proceeds to the Company equal
at least $20,000,000 and in which the price per
23
share of Common Stock equals or exceeds two (2) times the then Applicable
Conversion Value of the Series A Preferred Stock under Section 5(c) of Exhibit
-------
A.
-
"Related Agreements" shall have the meaning set forth in Section 2.2.
"Series A Preferred Stock" shall have the meaning set forth in Section 1.1.
"Series B Preferred Stock" shall have the meaning set forth in Section 1.2.
"Subsidiary" or "Subsidiaries" means any corporation, association or other
business entity of which the Company and/or any of its other Subsidiaries (as
herein defined) directly or indirectly owns at the time more than fifty percent
(50%) of the outstanding voting shares of every class of such corporation or
trust other than directors' qualifying shares.
ARTICLE X
TERMINATION
10.1 Termination by Mutual Written Consent. This Agreement may be
-------------------------------------
terminated, and the transactions contemplated hereby abandoned, at any time
prior to any Closing by the written agreement of the Company and the Purchasers;
provided however, that except as set forth in Section 10.2, the Purchasers may
not terminate this Agreement without the consent of Xx. Xxxxxx so long as he
shall serve as President of the Company.
10.2 Termination for Breach. This Agreement may be terminated and the
----------------------
transactions contemplated hereby may be abandoned at any time before the Closing
(or any date to which the Closing may have been extended by the written
agreement of the parties obligated to perform on such Closing) by any party
obligated to perform on the Closing if the conditions for its benefit set forth
in Article VII or VIII, as the case may be, have not been satisfied on or prior
to the Closing and remain unsatisfied for at least 10 days after notice thereof
from such party to the other parties and if the conditions for the benefit of
the other parties have been satisfied or waived, and if such performing party
shall have given written notice of termination to the non-performing party.
10.3 Rights After Termination. Upon termination of this Agreement under
------------------------
this Article X, the parties shall be released from all obligations arising
hereunder.
ARTICLE XI
MISCELLANEOUS
24
11.1 Survival of Representations. The representations, warranties,
---------------------------
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the closing of the transaction contemplated hereby.
11.2 Parties in Interest. Except as otherwise set forth herein, all
-------------------
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and assigns of the parties hereto (including transferees
of any of the Purchased Shares or Conversion Shares).
11.3 Shares Owned by Affiliates. For the purposes of applying all
--------------------------
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
number or percentage of shares, the shares owned of record by any affiliate of a
Purchaser shall be deemed to be owned by such Purchaser. For the purpose of this
Agreement, the term "affiliate" shall mean any Person controlling, controlled by
or under common control with, a Purchaser and any general or limited partner of
a Purchaser.
11.4 Amendments and Waivers. Amendments or additions to this Agreement may
----------------------
be made, agreements with any decision of the Company may be made, and compliance
with any term, covenant, agreement, condition or provision set forth herein may
be omitted or waived (either generally or in a particular instance and either
retroactively or prospectively) upon the written consent of the Company and the
holders of a majority of the issued and issuable Conversion Shares; provided,
however, that no such amendment may be made without the consent of Xx. Xxxxxx so
long as he shall continue to serve as President of the Company. Prompt notice of
any such amendment or waiver shall be given to any Person who did not consent
thereto. This Agreement (including the Schedules and Exhibits annexed hereto,
which are an integral part of this Agreement) constitutes the full and complete
agreement of the parties with respect to the subject matter hereof.
11.5 Notices. All notices, requests, consents, reports and demands shall
-------
be in writing and shall be hand delivered, sent by facsimile or other electronic
medium, or mailed, postage prepaid, to the Company or to the Purchasers at the
address set forth below or to such other address as may be furnished in writing
to the other parties hereto:
The Company: American Dental Partners, Inc.
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000-0000
Attn. Xxxxxxx X. Xxxxxx, President
The Purchasers: The address set forth opposite the Purchaser's name on
25
Schedule 1.1 attached hereto.
------------
with copy to: Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
and in the case of notice of Xxxxxxx X. Xxxxxx, with copy to:
Xxxxx & Xxxxxxxxx
Capitol Square
00 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
11.6 Expenses. Each party hereto will pay its own expenses in connection
--------
with the transactions contemplated hereby, provided, however, that the Company
-------- -------
shall pay all reasonable costs and expenses of the Purchasers in connection with
the investigation, preparation, execution and delivery of this Agreement and the
other instruments and documents to be delivered hereunder and the transactions
contemplated hereby and thereby, including, the reasonable fees and
disbursements of Xxxxxxxx, Xxxxxxx & Xxxxxxx, A Professional Corporation,
special counsel to the Purchasers.
11.7 Counterparts. This Agreement and any exhibit hereto may be executed
------------
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any exhibit hereto may be delivered via telecopier, with
the intention that they shall have the same effect as an original counterpart
hereof.
11.8 Effect of Headings. The article and section headings herein are for
------------------
convenience only and shall not affect the construction hereof.
11.9 Adjustments. All provisions of this Agreement shall be automatically
-----------
adjusted to reflect any stock dividend, stock split or other such form of
recapitalization.
11.10 Governing Law. This Agreement shall be deemed a contract made under
-------------
the laws of the State of Delaware and together with the rights and obligations
of the parties hereunder, shall be construed under and governed by the laws of
such State.
[Rest of Page Intentionally Left Blank]
26
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon, this letter shall become a binding agreement among us.
Very truly yours,
AMERICAN DENTAL PARTNERS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
PURCHASERS:
SUMMIT VENTURES IV, L.P.
By: Summit Partners, IV, L.P.,
Its General Partner
By: Stamps, Xxxxxxx & Co. IV,
Its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
General Partner
SUMMIT INVESTORS III, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
General Partner
/s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx
27
FIRST AMENDMENT TO SERIES A AND SERIES B
PREFERRED STOCK PURCHASE AGREEMENT
This amendment is made effective February 19, 1996, among American Dental
Partners, Inc., a Delaware corporation (the "Company"), and Summit Ventures IV,
L.P., Summit Investors III, L.P., and Xxxxxxx X. Xxxxxx (collectively, the
"Original Purchasers").
Background Information
----------------------
A. The Company and the Original Purchasers are all of the parties (the
"Parties") to the Series A and Series B Preferred Stock Purchase Agreement dated
January 8, 1996 (the "Agreement").
B. Pursuant to (S)1.7 of the Agreement, certain third parties may, upon
execution of a counterpart to the Agreement on or before February 19, 1996 (the
"Investment Deadline"), become parties to the Agreement and thereby purchase
shares of Preferred Stock of the Company, and commit to purchase additional
shares of Preferred Stock, on the same terms as the Original Purchasers.
C. A number of third parties have expressed an interest in purchasing
Preferred Shares in this manner. However, it will be impractical for the
closing of such purchases to be consummated by the Investment Deadline.
Accordingly, the Parties desire to amend the Agreement in order to extend the
Investment Deadline.
Statement of Agreement
----------------------
The Parties hereby acknowledge the accuracy of the foregoing Background
Information and agree as follows:
(S)1. Definitions. All capitalized terms used in this amendment which
-----------
are not otherwise defined herein shall have the respective meanings given those
terms in the Agreement.
(S)2. Additional Purchasers. Each reference in (S)1.7 of the Agreement
---------------------
to "February 19, 1996" is hereby changed to "April 30, 1996."
(S)3. Construction. In the event of any inconsistency between the
------------
provisions of this amendment and the provisions of the Agreement, the provisions
of this amendment shall control. Except as modified in this amendment, the
Agreement shall continue in full force and effect without change. This
amendment shall be binding upon, inure to the benefit of, and be enforceable by
and against the respective successors and assigns of each Party.
(S)4. Counterparts. This amendment may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same amendment.
SUMMIT VENTURES IV, L.P. SUMMIT INVESTORS III, L.P.
By: Summit Partners IV, L.P. By /s/ Xxxxxx X. Xxxxxxx
----------------------------
General Partner Its General Partner
By /s/ Xxxxxx X. Xxxxxxx
-------------------------
General Partner
By: Stamps, Xxxxxxx & Co. IV
General Partner
By /s/ Xxxxxx X. Xxxxxxx
-------------------------
General Partner
AMERICAN DENTAL PARTNERS, INC.
By /s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxx
---------------------------- -----------------------------
Xxxxxxx X. Xxxxxx XXXXXXX X. XXXXXX
President
SECOND AMENDMENT TO SERIES A AND SERIES B
PREFERRED STOCK PURCHASE AGREEMENT
This amendment is made effective May 1, 1996, among American Dental
Partners, Inc., a Delaware corporation (the "Company"), and those Persons listed
on the Schedule of Purchasers attached hereto (the "Purchasers").
Background Information
----------------------
A. The Company and the Purchasers are all of the parties (the "Parties")
to a Series A and Series B Preferred Stock Purchase Agreement dated January 8,
1996, as previously amended (the "Agreement").
B. The Company desires and intends to request additional funds from the
Purchasers pursuant to (S)1.4 of the Agreement.
C. The Parties desire to amend the Agreement in order to: (i) expand the
right of the Company to request additional funds prior to closing an acquisition
of a Clinic; and (ii) clarify certain other provisions contained in the
Agreement.
Statement of Agreement
----------------------
The Parties hereby acknowledge the accuracy of the foregoing Background
Information and agree as follows:
(S)1. Definitions. All capitalized terms used in this amendment which
-----------
are not otherwise defined herein shall have the respective meanings given those
terms in the Agreement.
(S)2. Closings. The first two sentences of the first paragraph of
--------
(S)1.4 of the Agreement are hereby replaced by the following:
The Purchased Shares shall be sold to the Purchasers at one or
more closings (individually a "Closing" and collectively the
"Closings") to be held at the offices of the Company or at such
other location as may be set forth in the Purchase Notice
(defined below). Each Closing shall be held no sooner than two
Business Days and no later than 10 Business Days after written
notice (a "Purchase Notice") shall be given by the Company to the
Purchasers as herein provided.
(S)3. Commitment Prior to Initial Acquisition. The reference to
---------------------------------------
"$1,000,000" at the end of the third sentence in the last paragraph of (S)1.4 of
the Agreement is hereby changed to "$2,000,000".
Each reference in (S)1.6 of the Agreement to "$1,000,000" is
hereby changed to "$2,000,000".
(S)4. Subsequent Investment. The last sentence of Section 1.7 of the
---------------------
Agreement is hereby replaced in its entirety by the following:
If and to the extent that the Additional Purchasers do not commit to
purchase an aggregate of $1,100,000 of Purchased Shares and Common Stock on
or before April 30, 1996: (a) Summit Ventures IV, L.P. and Summit Investors
III, L.P. shall on that date (i) commit to purchase that number of such
additional Purchased Shares and Common Shares which the Additional
Purchasers did not commit to purchase (the "Additional Commitment"), and
(ii) pay to the Company the pro rata share of the Additional Commitment
which has been called prior to such date; and (b) Schedule 1.1 shall be
amended so as to increase the purchase commitments of each such Summit
entity accordingly. Notwithstanding the foregoing, Xxxxx & Xxxxx, Inc.:
(a) has already purchased all of the shares of Preferred Stock which may be
purchased by it under this Agreement and paid the full consideration
therefor; and (b) shall have neither the right nor the obligation to
purchase additional shares of Preferred Stock under this Agreement or
otherwise participate in Closings pursuant to (S)1.4 of this Agreement.
(S)5. Issuances. Section 4.5 of the Agreement is hereby replaced in
---------
its entirety by the following:
Option Shares. The Company will not issue shares of its
-------------
capital stock, except for issuances which would not constitute an
issuance of New Securities (as defined in (S)5.2, below), and
will not grant any options, rights or warrants to acquire its
capital stock, except up to an aggregate of 100,601 shares of
Common Stock may be issued to employees of the Company pursuant
to the Related Agreements or options granted under a stock option
plan approved by the Compensation Committee of the Company's
Board of Directors, which number shall include options for not in
excess of 45,045 shares of Common Stock which may be issued to
Xx. Xxxxxx; provided that all such options shall have an exercise
price per share that is not less than $2.00. The numbers of
shares and exercise price set forth in this Section shall be
proportionately adjusted to reflect any stock dividend, stock
split or other form of recapitalization occurring after the date
hereof.
(S)6. Preemptive Rights. Section 5.2 of the Agreement is hereby
-----------------
replaced in its entirety by the following:
Definition of New Securities. "New Securities" shall
----------------------------
mean any capital stock of the Company whether now authorized or
not, and rights, options or warrants to purchase capital stock,
and securities of any type whatsoever that are, or may become
convertible into or exchangeable for capital stock, issued on or
after the date hereof; provided that the term "New Securities"
does not include (i) securities purchased under this Agreement or
Conversion Shares issuable upon conversion of the Series A
Preferred Stock, (ii) Common Stock issued as a stock dividend to
holders of Common Stock or upon any stock split, subdivision or
combination of shares of Common Stock, (iii) Preferred Stock
issued as a dividend to holders of Preferred Stock or upon any
stock split, subdivision or combination of Preferred Stock, (iv)
the aggregate number of shares of Common Stock issuable upon
exercise of options permitted under Section 4.5 hereof, (v)
securities issued in connection with the acquisition of a Clinic
authorized under Section 1.5 or otherwise approved by the board
of directors of the Company; (vi) issuance of securities in
connection with borrowing of subordinated indebtedness from
Summit Subordinated Debt Fund, L.P; and (vii) securities issued
pursuant to the Subscription Agreement and Investment
Representation dated January 11, 1996, among the Company and the
Purchasers, as amended.
(S)7. Revised Schedule. Schedule 1.1 of the Agreement is hereby
----------------
replaced in its entirety with the attached Schedule of Purchasers, and all
references in the Agreement to "Schedule 1.1" shall hereafter be deemed to be
references to the attached Schedule of Purchasers.
(S)8. Effectiveness. Pursuant to (S)11.4 of the Agreement, this
-------------
amendment shall become effective upon its execution by the Company, Xxxxxxx X.
Xxxxxx, and the holders of a majority of the issued and issuable Conversion
Shares.
(S)9. Construction. In the event of any inconsistency between the
------------
provisions of this amendment and the provisions of the Agreement, the provisions
of this amendment shall control. Except as modified in this amendment, the
Agreement shall continue in full force and effect without change. This
amendment shall be binding upon, inure to the benefit of, and be enforceable by
and against the respective successors and assigns of each Party.
(S)10. Counterparts. This amendment may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same amendment.
SUMMIT VENTURES IV, L.P. SUMMIT INVESTORS III, L.P.
By: Summit Partners IV, L.P. By /s/ Xxxxxx X. Xxxxxxx
General Partner -----------------------------
Its General Partner
----------------------------
By /s/ Xxxxxx X. Xxxxxxx
------------------------
General Partner
By: Stamps, Xxxxxxx & Co. IV
General Partner
By /s/ Xxxxxx X. Xxxxxxx
------------------------
General Partner
AMERICAN DENTAL PARTNERS, INC.
By /s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxx
---------------------------- --------------------------------
Xxxxxxx X. Xxxxxx XXXXXXX X. XXXXXX
President
/s/ Xxxxxx X. Xxxxxx /s/ Xxxxxx Xxxxx
------------------------------- -------------------------------
XXXXXX X. XXXXXX XXXXXX XXXXX
/s/ M. Xxxxxx XxXxx /s/ Xxxxxxx Xxxxx
------------------------------- -------------------------------
M. XXXXXX XxXXX XXXXXXX XXXXX
/s/ Xxxxxx Xxxxxxx /s/ Xxxxxxx Xxxxxx
------------------------------- -------------------------------
XXXXXX XXXXXXX XXXXXXX XXXXXX
[Signatures continued on following page]
/s/ Xxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxxxx
----------------------------- ------------------------------
XXXX X. XXXXXX XXXXXX X. XXXXXXXX
F & F, L.L.C. XXXXX & XXXXX, INC.
By By
--------------------------- --------------------------
Its Its
--------------------------- --------------------------
NORO-XXXXXXX PARTNERS
By
---------------------------
General Partner
THIRD AMENDMENT TO SERIES A AND SERIES B
PREFERRED STOCK PURCHASE AGREEMENT
This amendment is made effective November 1, 1996, among American Dental
Partners, Inc., a Delaware corporation (the "Company"), and those Persons listed
on the Schedule of Purchasers attached hereto (collectively, the "Purchasers").
Background Information
----------------------
A. The Company and the Purchasers are all of the parties (the "Parties")
to a Series A and Series B Preferred Stock Purchase Agreement dated January 8,
1996, as previously amended February 19, 1996, and May 1, 1996 (the
"Agreement").
B. The Company desires and intends to request additional funds from the
Purchasers pursuant to (S)1.4 of the Agreement. In connection with such
request, the Company and the Purchasers desire to amend the Agreement for the
purpose of clarifying, updating, and amending certain provisions and information
contained in the Agreement.
Statement of Agreement
----------------------
The Parties hereby acknowledge the accuracy of the foregoing Background
Information and agree as follows:
(S)1. Definitions. All capitalized terms used in this amendment which
-----------
are not otherwise defined herein shall have the respective meanings given those
terms in the Agreement.
(S)2. Acquisition of Park. The Purchasers hereby consent to the
-------------------
Company's acquisition of PDHC, Ltd., a Minnesota professional corporation, dba
"Park Dental," and the use by the Company of up to $6,200,000 of proceeds from
the sale of Purchased Shares for such acquisition.
(S)3. Schedules. Schedules 2.4, 2.11, 2.17, and 2.18 of the Agreement
---------
are hereby replaced in their entirety with the attached updated Schedules 2.4,
2.11, 2.17, and 2.18, respectively, and any reference in the Agreement to any
such Schedule shall hereafter be deemed to be a reference to the corresponding
attached Schedule.
(S)4. Accounts and Reports. Section 3.1(b) of the Agreement is hereby
--------------------
replaced in its entirety with the following:
(b) Within 45 days after the end of each (i) calendar
month with respect to Summit Ventures IV, L.P., Summit
Investors III, L.P., and Noro-Xxxxxxx Partners III,
L.P., and (ii) calendar quarter with
respect to all other Purchasers, a preliminary
consolidated balance sheet of the Company and its
Subsidiaries as of the end of such quarter and
preliminary consolidated statements of income,
shareholders' equity, and cash flows for such quarter
and for the period commencing at the end of the
previous fiscal year and ending with the end of such
quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding period
of the preceding fiscal year, all in reasonable detail.
Immediately following the word "monthly" in the first sentence of Section
3.1(c), the following is hereby inserted ", quarterly,". The Purchasers hereby
waive any non-compliance by the Company with Section 3.1(b) of the Agreement
prior to the date of this amendment.
(S)5. Merger. Clause (ii)(a) of Section 4.4 of the Agreement is hereby
------
replaced in its entirety with the following:
(a) any wholly owned Subsidiary may merge with or into
or consolidate with or transfer assets to any other
entity which is or becomes a wholly owned Subsidiary,
(S)6. Option Shares. The aggregate share limitation contained in the
-------------
first sentence of Section 4.5 of the Agreement is hereby increased from 100,601
to 150,601.
(S)7. Effectiveness. Pursuant to (S)11.4 of the Agreement, this
-------------
amendment is effective upon its execution by the Company, the holders of a
majority of the issued and issuable Conversion Shares, and Xxxxxxx X. Xxxxxx.
(S)8. Construction. In the event of any inconsistency between the
------------
provisions of this amendment and the provisions of the Agreement, the provisions
of this amendment shall control. Except as modified in this amendment, the
Agreement shall continue in full force and effect without change. This
amendment shall be binding upon, inure to the benefit of, and be enforceable by
and against the respective successors and assigns of each Party.
(S)9. Counterparts. This amendment may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same amendment.
SUMMIT VENTURES IV, L.P. SUMMIT INVESTORS III, L.P.
By: Summit Partners IV, L.P. By /s/ Xxxxxx X. Xxxxxxx
----------------------------
General Partner Its General Partner
---------------------------
By /s/ Xxxxxx X. Xxxxxxx
-------------------------
General Partner
By: Stamps, Xxxxxxx & Co. IV
General Partner
By /s/ Xxxxxx X. Xxxxxxx
-------------------------
General Partner
AMERICAN DENTAL PARTNERS, INC.
By /s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxx
----------------------------- -----------------------------
Xxxxxxx X. Xxxxxx XXXXXXX X. XXXXXX
President
/s/ Xxxxxx X. Xxxxxx /s/ Xxxxxx Xxxxx
------------------------------- -----------------------------
XXXXXX X. XXXXXX XXXXXX XXXXX
/s/ M. Xxxxxx XxXxx /s/ Xxxxxxx Xxxxx
------------------------------- -----------------------------
M. XXXXXX XxXXX XXXXXXX XXXXX
/s/ Xxxxxx Xxxxxxx /s/ Xxxxxxx Xxxxxx
------------------------------- -----------------------------
XXXXXX XXXXXXX XXXXXXX XXXXXX
[Signatures continued on following page]
/s/ Xxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxxxx
------------------------------- ------------------------------
XXXX X. XXXXXX XXXXXX X. XXXXXXXX
F & F, L.L.C. XXXXX & XXXXX, INC.
By By
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Its Its
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NORO-XXXXXXX PARTNERS III, L.P.
By: Xxxxxxx & Company III, L.L.C.
General Partner
By
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Member
