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EXHIBIT 10.7
ASSET CONTRIBUTION AGREEMENT
by and between
Monarch Dental Corporation
as Buyer
and
Shears Vanguard, Ltd.
as Seller
and
Shears Vanguard Inc., Shears Vanguard General, Inc.,
Shears Vanguard SMI Inc., MDC Dental, Inc.
and
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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ASSET CONTRIBUTION AGREEMENT
INDEX
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ARTICLE 1. CONTRIBUTION OF ASSETS AND LIABILITIES . . . . . . . . . . . . 2
1.1 Contribution of Assets . . . . . . . . . . . . . . . . . . . . 2
1.2 Assumption of Liabilities . . . . . . . . . . . . . . . . . . 5
1.3 Purchase Price and Payment; Adjustment . . . . . . . . . . . . 7
1.4 Time and Place of Closing . . . . . . . . . . . . . . . . . . 7
1.5 Certain Closing Deliveries . . . . . . . . . . . . . . . . . . 8
1.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 9
1.7 Allocation of Purchase Price . . . . . . . . . . . . . . . . . 9
1.8 Procedures for Assets not Transferable . . . . . . . . . . . . 9
1.9 Non-Competition Agreement . . . . . . . . . . . . . . . . . . 9
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENTS. . . . . 10
2.1 Making of Representations and Warranties . . . . . . . . . . . 10
2.2 Organization and Qualification; Capital Stock . . . . . . . . 10
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4 Authority; Noncontravention . . . . . . . . . . . . . . . . . 10
2.5 Status of Property . . . . . . . . . . . . . . . . . . . . . . 11
2.6 Financial Statements; Undisclosed Liabilities . . . . . . . . 14
2.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.8 Collectibility of Accounts Receivable . . . . . . . . . . . . 16
2.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . . 17
2.10 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . 19
2.11 Banking Relations . . . . . . . . . . . . . . . . . . . . . . 19
2.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . 19
2.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.15 Permits; Compliance with Laws; Licensing and Credentialing;
Health Care Providers . . . . . . . . . . . . . . . . . . . . 24
2.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.17 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . 26
2.18 Transactions with Interested Persons . . . . . . . . . . . . . 26
2.19 Employee Benefit Programs . . . . . . . . . . . . . . . . . . 26
2.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . 28
2.21 List of Certain Employees and Suppliers . . . . . . . . . . . 30
2.22 Employees; Labor Matters . . . . . . . . . . . . . . . . . . . 30
2.23 Material Relationships; Government Contracts . . . . . . . . . 31
2.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.25 Investment Representations . . . . . . . . . . . . . . . . . . 31
(i)
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ARTICLE 3. COVENANTS OF SELLER AND PARENTS . . . . . . . . . . . . . . . 32
3.1 Making of Covenants and Agreements . . . . . . . . . . . . . . 32
3.2 Payment of Obligations . . . . . . . . . . . . . . . . . . . . 32
3.3 Collection of Assets . . . . . . . . . . . . . . . . . . . . . 32
3.4 Availability of Records . . . . . . . . . . . . . . . . . . . 33
3.5 Use of Name . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.6 Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.7 Real Estate Lease Matters . . . . . . . . . . . . . . . . . . 33
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . 34
4.1 Making of Representations and Warranties . . . . . . . . . . . 34
4.2 Organization of Buyer . . . . . . . . . . . . . . . . . . . . 34
4.3 Authority of Buyer . . . . . . . . . . . . . . . . . . . . . . 34
4.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.5 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . 35
4.6 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5. COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . 35
5.1 Making of Covenants and Agreements . . . . . . . . . . . . . . 35
5.2 Availability of Records . . . . . . . . . . . . . . . . . . . 36
ARTICLE 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES, ARRANGEMENTS,
COVENANTS AND OBLIGATIONS . . . . . . . . . . . . . . . . . . 36
ARTICLE 7. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 36
7.1 Indemnification by Seller and Parents . . . . . . . . . . . . 36
7.2 Limitations on Indemnification by Seller and Parents . . . . . 38
7.3 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . 40
7.4 Limitations on Indemnification by Buyer . . . . . . . . . . . 40
7.5 Notice; Defense of Claims . . . . . . . . . . . . . . . . . . 41
7.6 Satisfaction of Indemnification Obligations . . . . . . . . . 43
ARTICLE 8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 43
8.1 Bulk Sales Law . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2 Fees, Expenses and Certain Taxes . . . . . . . . . . . . . . . 43
8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 44
8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(ii)
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8.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 45
8.6 Assignability; Binding Effect . . . . . . . . . . . . . . . . 45
8.7 Captions and Gender . . . . . . . . . . . . . . . . . . . . . 45
8.8 Execution in Counterparts . . . . . . . . . . . . . . . . . . 45
8.9 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.10 Consent to Jurisdiction; Certain Remedies . . . . . . . . . . 46
8.11 Certain Definitions . . . . . . . . . . . . . . . . . . . . . 46
(iii)
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ASSET CONTRIBUTION AGREEMENT
ASSET CONTRIBUTION AGREEMENT entered into as of this 5th day of February
effective as of January 31, 1996 by and between Monarch Dental Corporation, a
Delaware corporation ("Buyer"), on the one hand, and Shears Vanguard Ltd., a
Texas limited partnership, as Seller (the "Seller"), and Shears Vanguard Inc.,
a Delaware corporation ("MDCI"), MDC Dental, Inc., a Texas corporation ("MDC"),
Shears Vanguard SMI Inc., a Delaware corporation ("SMI"), Shears Vanguard
General, Inc., a Texas corporation ("Shears General"), and ▇▇. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇"), direct or indirect owners of all of the outstanding
equity interest in Seller (individually a "Parent" and collectively the
"Parents"), on the other.
W I T N E S S E T H
WHEREAS, Seller is the owner of all of the assets comprising, and
presently conducts, the MacGregor Dental Centers business including the assets
and businesses heretofore owned and conducted by MacGregor Dental Centers, Inc.
(predecessor to MDCI), MDC and Shears Management, Inc. (predecessor to SMI)
(the "MacGregor Dental Centers business"); and
WHEREAS, Buyer wishes to acquire substantially all of the properties and
assets of Seller, and to assume specified liabilities and obligations of
Seller, subject to the terms and conditions hereof; and
WHEREAS, subject to the terms and conditions hereof, Seller desires to
contribute to Buyer substantially all of its properties and assets, consisting
of all of the assets used in connection of the MacGregor Dental Centers
business, and to transfer to Buyer certain specified liabilities and
obligations;
WHEREAS, the parties intend that the contribution of assets and
liabilities pursuant to this Agreement shall qualify as an exchange under
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, Parents own beneficially and of record, directly or indirectly,
all of the outstanding equity interest in Seller;
WHEREAS, Buyer has heretofore completed a redemption of a substantial
amount of its common stock from its stockholder.
NOW, THEREFORE, in order to consummate said contribution and transfer of
assets and liabilities and in consideration of the mutual agreements set forth
herein, the parties hereto agree as follows:
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ARTICLE 1. CONTRIBUTION OF ASSETS AND LIABILITIES.
1.1 Contribution of Assets.
(a) Assets to be Contributed. Subject to and in reliance upon
the terms, provisions and conditions of this Agreement, Seller shall contribute
and Buyer and Buyer shall acquire, as of the Closing (as defined in Section 1.4
hereof), all of the properties and assets comprising the MacGregor Dental
Centers business of every kind and description, tangible and intangible, real,
personal or mixed, and wherever located, including, without limitation:
(i) all tangible personal property, furniture,
fixtures, equipment, machines, examining tools and supplies used in the
MacGregor Dental Centers business, as described on Schedule 1.1(a)(i)
attached to this Agreement and including those vehicles listed thereon;
(ii) all contracts, agreements and understandings
(collectively, the "Provider Agreements") with any party regarding the
provision of dental services to patients in connection with the
MacGregor Dental Centers business, including, without limitation, all
Provider Agreements with DMOs, HMOs, PPOs, third party payors,
employers, labor unions, hospitals, clinics and dental centers, a list
of which is attached hereto in Schedule 1.1(a)(ii) and copies of which
have been previously provided to Buyer;
(iii) all patient lists, copies of which have been
provided to Buyer, and all records, including all patient records,
documents, written information, computer tapes, programs and files
concerning past, present and potential patients relating to the
MacGregor Dental Centers business (the "Patient Records"), provided that
Buyer and its subsidiaries and affiliates shall maintain the
confidentiality of the same to the extent required by applicable law;
(iv) all supplier and vendor lists, copies of which are
attached to this Agreement as Schedule 1.1(a)(iv), and all records,
including all records, documents, written information, computer tapes,
programs and files concerning past, present and future dealings and
arrangements with suppliers and vendors relating to the MacGregor Dental
Centers business;
(v) all computer hardware, cabling and peripherals,
tools and supplies relating to the MacGregor Dental Centers business to
the extent of Seller's interest therein;
(vi) all of Seller's rights to use all of the
trademarks, service marks, trade names, copyrights, patents and patent
applications and interests thereunder, inventions, processes and
know-how, restrictive covenants, licenses and all other intangible
rights relating to the MacGregor Dental Centers business;
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(vii) copies of the books, records and other data
relating to the assets, business, employees and operations of the
MacGregor Dental Centers business, provided that Seller or Parents shall
retain originals of the tax and accounting records of such business as
heretofore conducted and Seller, Parents and their predecessors and
shall provide true and accurate copies of the same to Buyer at the
Closing;
(viii) all rights of Seller under the contracts,
agreements and powers of attorney relating to the MacGregor Dental
Centers business including without limitation those referred to in this
Section 1.1(a) and those referred to in Section 2.13 and the Schedules
thereto, except as set forth in Schedule 1.1(a)(viii), and including
without limitation all rights to payments from Prudential;
(ix) all permits, privileges, grants, franchises,
licenses and consents used in the MacGregor Dental Centers business,
except as set forth in Schedule 1.1(a)(ix);
(x) all of Seller's title and interest in and to any
and all of the databases used in the MacGregor Dental Centers business
and all software, source code, documentation, manual and computer
processes (collectively, the "Software"), whether owned or licensed,
including without limitation, all proprietary software used in the
MacGregor Dental Centers business;
(xi) all right, title and interest in accounts
receivable and payments for services rendered prior to the Closing
relating to the MacGregor Dental Centers business (collectively, the
"Accounts Receivable"), Schedule 1.1(a)(xi) hereto setting forth the
aggregate amount thereof for each of MDCI and SMI together with aging
data, and including any and all trade installment notes;
(xii) all right, title and interest in and to the real
property leases listed in Schedule 1.1(a)(xii) attached hereto relating
to the MacGregor Dental Centers business together with all leasehold
improvements;
(xiii) all right, title and interest to the leased
personal property as described in Schedule 1.1(a)(xiii) (including
without limitation all right, title and interest under capital leases),
and including all options to purchase leased personal property relating
to the MacGregor Dental Centers business, a list of which is attached
hereto as Schedule 1.1(a)(xiii);
(xiv) all contracts, agreements and understandings with
all dentists (including specialists), dental assistants, technicians and
allied health care professionals relating to the MacGregor Dental
Centers business (those individuals shall be collectively referred to as
the "Health Care Providers"), a list of whom is attached hereto as
Schedule 1.1(a)(xiv);
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(xv) all goodwill related to the MacGregor Dental
Centers business and the exclusive right to use the names or acronyms
"MacGregor," "MacGregor Dental Centers" and "MDC"and all associated
logos as all or part of a trade or corporate name or otherwise and any
other intangible assets including without limitation all prepaid
expenses;
(xvi) cash and cash equivalents in the aggregate amount
of $125,000 (the "Required Cash Amount") currently held in an account of
Seller at First Interstate Bank plus cash in an amount equal to all
payments received by the MacGregor Dental Centers business on or after
February 1, 1996, such cash to be held in a segregated account of Seller
at First Interstate Bank (the "Monarch Collections"); and
(xvii) all other property rights of every kind and nature,
tangible or intangible, owned or leased, relating to the MacGregor
Dental Centers business, including without limitation all assets shown
on the Base Balance Sheet (as defined in Section 2.6(a)(ii)), other than
any such assets disposed of in the ordinary course of business and in a
manner consistent with the terms of this Agreement since the date of the
Base Balance Sheet and also not including the Excluded Assets (as
defined below).
The assets, property and business to be contributed to and acquired by
Buyer under this Agreement, subject to Section 1.1(b), are hereinafter
sometimes referred to as the "Subject Assets." Seller and each Parent hereby
represent and warrant that the assets of Seller being conveyed hereunder
comprise all of the assets, including all personal property, used in the
conduct of the MacGregor Dental Centers business as heretofore conducted by
MDCI, MDC and SMI and their predecessors except as contemplated by Section
1.1(b), such assets having been contributed to Seller by MDCI, MDC, SMI and
Shears General, respectively, and as of the date hereof MDCI, MDC, SMI and
Shears General have no assets other than their partnership interests in Seller.
Seller and Parents have provided to Buyer true and accurate copies of the
agreements and instruments pursuant to which MDCI, MDC, SMI and Shears General
conveyed the MacGregor Dental Centers business to Seller. Buyer hereby directs
Seller to transfer those assets described in Sections 1.1(a)(ii), (iii) and
(xiv) to its affiliate ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S., P.C. at the Closing and
Seller hereby agrees to make such transfer.
(b) Excluded Assets. Notwithstanding anything herein to the
contrary, there shall be excluded from such purchase and sale and from the
definition of "Subject Assets" the following property.
(i) Assets and property disposed of by Seller or MDCI,
MDC or SMI (or their predecessors) since the date of the Base Balance
Sheet (as defined in Section 2.6(a)(ii)) provided such disposition was
in the ordinary course of business and consistent with the terms hereof;
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(ii) Seller's limited partnership franchise, record
books containing minutes of meetings and such other records as have to
do exclusively with Seller's organization or capitalization
(collectively, the "Corporate Records");
(iii) cash and cash equivalents of Seller in excess of
the Required Cash Amount and Monarch Collections; and
(iv) those assets of Seller listed on Schedule 1.1(b).
The assets, property and business of Seller which are excluded from the
Subject Assets are hereinafter sometimes referred to as the "Excluded Assets."
1.2 Assumption of Liabilities. Upon the sale and purchase of the
Subject Assets, Buyer (subject to the last sentence of Section 1.1(a)) shall
assume and agree to pay or discharge when due in accordance with their
respective terms (a) those liabilities shown or reflected on the Base Balance
Sheet and thereafter assumed by Seller which are outstanding at the time of the
Closing and those liabilities and obligations incurred by MDCI, MDC, SMI or
Seller in connection with the MacGregor Dental Centers business since the date
of the Base Balance Sheet in the ordinary course of business consistent with
past practice and otherwise in a manner consistent with the terms of this
Agreement which are outstanding at the time of the Closing (in each case,
except as provided in clauses (i) through (vii) below), subject to Section 1.6
in the case of accounts payable-trade, (b) obligations for performance from
after the date hereof of those agreements listed on Schedule 1.2(b) (the
"Assumed Contracts"), (c) fees of attorneys, investment bankers and accountants
for Seller and Parents as described in clause (i) below and Section 8.2(a) in
an amount not to exceed $1,050,000, and (d) those obligations listed in
Schedule 1.2(d) up to the amounts specified (the "Disclosed Matters"). The
liabilities to be assumed by Buyer under this Agreement are hereinafter
sometimes referred to as the "Liabilities." Except as specifically provided in
the first sentence of this Section 1.2, Buyer shall not assume or be bound by
any obligations or liabilities of Seller, any Parent or any of their affiliates
or predecessors of any kind or nature, known, unknown, accrued, absolute,
contingent or otherwise, whatsoever, and without limiting the generality of the
foregoing, Buyer shall not assume and shall not pay any of the following
liabilities:
(i) liabilities incurred by Seller, any Parent or any
of their affiliates or predecessors in connection with this Agreement
and the transactions provided for herein, except as contemplated by the
preceding paragraph and Section 8.2(a);
(ii) Taxes (as defined in Section 2.7(a) hereof) due or
to become due from Seller, any Parent or any affiliate (as defined in
Section 8.11(a)) thereof (whether relating to periods before or after
the transactions contemplated in this Agreement) including without
limitation any such Taxes incurred in connection with this Agreement or
the transactions contemplated hereby, franchise or sales taxes shown on
the Base Balance Sheet or otherwise due, and property or unemployment
Taxes (subject to Section 8.2(b));
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(iii) liabilities, if any, of Seller to any of its direct
or indirect equity owners or other affiliates;
(iv) liabilities for workers compensation insurance
relating to the MacGregor Dental Centers business in respect of periods
ending on or prior to January 31, 1996 as contemplated by Section
8.2(b);
(v) liabilities for pension and benefit arrangements of
any type involving employees of Seller or any Parent, including without
limitation those described in Section 2.19 of the Disclosure Schedule
(other than accrued vacation shown thereon), it being understood that
Buyer or one of its subsidiaries or affiliates will offer employment to
the employees of Seller at the date hereof but that benefit arrangements
for employees of Buyer and its subsidiaries and affiliates shall be in
their sole discretion;
(vi) liabilities in connection with any Disclosed Matter
in excess of the respective amount specified on Schedule 1.2(d); and
(vii) liabilities in connection with or relating to
actions, suits, claims, proceedings, demands, assessments, judgments,
costs, losses, liabilities, damages, deficiencies, disposal costs,
obligations, liens, fines and expenses (whether or not arising out of
third-party claims), including, without limitation, interest, penalties,
attorneys', accountants', engineers' and experts' fees, as the same are
incurred, of every kind or nature whatsoever, and all amounts paid in
investigation, defense or settlement of any of the foregoing
(collectively, "Claims"), of Seller or any Parent, including those
relating to the operation of the Subject Assets on or prior to the date
of the Closing, or events, acts, omissions, conditions or any other
state of facts occurring or existing in connection with the MacGregor
Dental Centers business on or prior to the date of the Closing, which do
not constitute Liabilities of Seller expressly assumed by Buyer
hereunder (including any Claim relating to or associated with any of the
matters referred to in Section 7.1(f)).
The liabilities which are not assumed by Buyer under this Agreement are
hereinafter sometimes referred to as the "Excluded Liabilities." The
assumption of the Liabilities by Buyer hereunder shall not enlarge any rights
of third parties and nothing herein shall prevent Buyer from contesting in good
faith with any third party any of such Liabilities.
Consistent with the foregoing, Seller agrees that it shall be
responsible for and shall pay any and all Claims made by or owed to any person
to the extent any such Claim constitutes an Excluded Liability.
Seller or its predecessors have paid payroll associated with the
MacGregor Dental Centers business due on February 1, 1996. Buyer or its
subsidiaries shall not be obligated to
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reimburse Seller or Parents for such payment but shall assume responsibility
for such payroll subsequent to such date.
1.3 Purchase Price and Payment; Adjustment.
(a) In consideration of the sale by Seller to Buyer of the
Subject Assets, subject to the assumption by Buyer and its affiliate of the
Liabilities, Buyer agrees that at the Closing it will (a) pay Seller cash in
the aggregate amount of $14,886,053, with such amount to be paid by wire
transfer in immediately available funds to such account as Seller shall have
indicated in writing to Buyer not less than three (3) business days prior to
the date of the Closing and (b) issue and deliver to Seller 1,400,000 shares of
Common Stock, par value $.01 per share, of Buyer ("Common Stock"). The parties
hereto intend that the transaction covered by this Agreement shall not be
taxable under Section 351 of the Code with respect to stock received and taxed
as cash "boot" with respect to cash received. The transaction is to be
considered part of a single integrated plan to acquire the Subject Assets and
other assets from other parties as a part of a single Section 351 transaction.
Both Buyer and Seller will file federal income tax and other tax returns
consistent with the intent set forth above and will adhere to the reporting
requirements under regulations promulgated under Section 351 of the Code.
(b) Buyer and Seller and Parents have agreed that the
difference between the receivables and pro forma payables shown on the Base
Balance Sheet (as defined in Section 2.6(a)(ii)) at September 30, 1995 is
$226,748 ("Sept. 1995 Net Receivables"), as indicated on Schedule 1.3(b), and
that the difference between the estimated receivables and estimated payables of
the MacGregor Dental Centers business at January 31, 1996 is greater than
$226,748 ("Jan. 1996 Estimated Net Receivables"). Within 60 days after the
date hereof Buyer and its accountants shall deliver to Seller and Parents a
statement of the difference between the actual receivables and payables of the
MacGregor Dental Centers business at January 31 1996 (the "Jan. 1996 Actual Net
Receivables"). Seller and Parents shall have 30 days to object in writing to
the amount shown thereon. If they do so, the parties shall endeavor to resolve
the disputed item or items in good faith for an additional period of 20 days.
If the dispute cannot be so resolved, it shall be referred for resolution to
KPMG Peat Marwick or another "big six" accounting firm acceptable to the
parties. Upon resolution, if the Jan. 1996 Actual Net Receivables are less
than 95% of the September 1995 Net Receivables, then an amount equal to the
difference between the Sept. 1995 Net Receivables and the Jan. 1996 Actual Net
Receivables shall be paid promptly by Seller to Buyer. The determination of
receivables and payables as set forth above shall be made in accordance with
generally accepted accounting principles and consistent with the computed
balances as of September 30, 1995 as to class, net realizable value,
collectibility and aging methodology allowance. There shall be no adjustment
in respect of any maintenance or positive change in the relationship of
payables and receivables.
1.4 Time and Place of Closing. The closing of the purchase and sale
provided for in this Agreement shall be held at the offices of ▇▇▇▇▇▇▇, Procter
& ▇▇▇▇ at ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇
▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇. For all purposes the closing of such transaction shall
be deemed to have occurred on and to be effective as of the close of business
on January 31, 1996 (herein the "Closing" and the "Closing Date").
1.5 Certain Closing Deliveries.
(a) Consideration Price. At the Closing, Buyer shall deliver
the consideration specified in Section 1.3(a) hereof to Seller.
(b) Transfer of Subject Assets. At the Closing, Seller shall
deliver or cause to be delivered to Buyer good and sufficient instruments of
transfer transferring to Buyer good and valid title to all the Subject Assets
free and clear of all liens, restrictions, encumbrances and other claims not
shown or reflected on the Base Balance Sheet, except as provided in Schedule
1.5(b), and shall cause the Required Cash Amount and all Monarch Collections to
be transferred to the account of Buyer or a subsidiary of Buyer, as designated
by Buyer, promptly following the Closing, and promptly as received from time to
time thereafter, Seller and Parents shall transfer to such account any
additional Monarch Collections.
(c) Delivery of Records and Contracts. At the Closing, Seller
shall deliver or cause to be delivered to Buyer all the leases, contracts,
commitments, agreements and rights constituting Subject Assets, with such
assignments thereof and consents to assignments as are necessary to assure
Buyer of the full benefit of the same, subject to Section 2.4 with respect to
agreements not freely assignable at the date hereof. Seller shall also deliver
to Buyer at the Closing all business records, tax returns, books and other data
relating to the MacGregor Dental Centers business (or true and complete copies
in the case of tax and accounting records), except the Corporate Records and
other Excluded Assets, and Seller shall take all requisite steps to put Buyer
in actual possession and operating control of the Subject Assets as of the
Closing. After the Closing, Buyer shall afford to Seller and Parents and their
accountants and attorneys, for the purpose of preparing such tax returns of
Seller or any Parent as may be required after the Closing, reasonable access to
the books and records of Seller delivered to Buyer under this Section and shall
permit Seller and each Parent, at Seller's and each Parent's expense, to make
extracts and copies therefrom, provided that all such information shall be held
in confidence.
(d) Delivery of Agreement of Assumption of Liabilities. At
the Closing, Buyer shall deliver or cause to be delivered to Seller an
Agreement of Assumption of Liabilities in the form attached hereto as Schedule
1.5(d) relating to the Liabilities to be assumed by Buyer from Seller.
(e) Other Deliveries. Buyer and Seller and each Parent shall
also deliver at the Closing such other documents and instruments as are
customary for transactions of the type contemplated hereby and as shall be
reasonably requested in advance of the Closing by any of them, including any
documents required to change the names of Seller and Parents to
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corporate names which do not include "MacGregor," "MacGregor Dental Centers" or
"MDC" as provided in Section 3.5.
1.6 Further Assurances. Seller and Parents from time to time after
the Closing at the request of Buyer and without further consideration shall
execute and deliver such further instruments of transfer and assignment and
take such other action as Buyer may reasonably require to more effectively
transfer and assign to, and vest in, Buyer of the Subject Assets. Seller and
Parents shall cooperate with Buyer to assist Buyer in obtaining Seller's and
Parents' rating and benefits under the ▇▇▇▇▇▇▇'▇ compensation laws and
unemployment compensation laws of applicable jurisdictions, to the extent
permitted by such laws. Nothing herein shall be deemed a waiver by Buyer of
its right to receive at the Closing an effective assignment of each of the
leases, contracts, commitments or rights of Seller as otherwise set forth in
this Agreement, except to the extent contemplated by Section 2.4 of the
Disclosure Schedule, if applicable. Without limitation of the foregoing, not
later than February 20, 1996, Buyer or a subsidiary of Buyer shall transfer to
the account of Seller funds representing reimbursement for payables assumed by
Buyer and discharged by Seller provided that such payables are due on or after
February 1, 1996 and not prior thereto.
1.7 Allocation of Purchase Price. Within a reasonable period of time
following the Closing, Buyer and Seller shall agree upon the allocation of the
consideration paid by the Buyer to Seller (including the assumption of the
Liabilities) among the Subject Assets and shall set forth the allocation of
such consideration and the tax basis of the Subject Assets for federal income
tax purposes in writing. Such allocation will be made in accordance with the
applicable rules under Section 351 of the Code as interpreted by Revenue Ruling
68-55 and when completed shall be binding upon Buyer and Seller and Parents for
all purposes (including financial accounting purposes, financial and regulatory
reporting purposes and tax purposes). Buyer and Seller also each agree to file
appropriate documents with the IRS under Treasury Regulation Section 1.351-3
reflecting the foregoing.
1.8 Procedures for Assets not Transferable. Without limitation of
Sections 3.7 and 7.1(e), if any of the contracts or agreements or any other
property or rights included in the Subject Assets are not assignable or
transferable either by virtue of the provisions thereof or under applicable law
without the consent of some party or parties and any such consent cannot be
obtained prior to the Closing, Seller and Parents shall use all commercially
reasonable efforts to obtain any such consent as soon as possible after the
Closing or otherwise obtain for Buyer and its assignees the practical benefit
of such property or rights and Buyer shall use all commercially reasonable
efforts to assist in that endeavor.
1.9 Non-Competition Agreement. As a material inducement to and a
condition precedent of Buyer's acquisition of the Subject Assets and assumption
of the Liabilities, Seller and each Parent are executing and delivering at the
Closing a Non-Competition Agreement in the form of Schedule 1.9 attached hereto
(the "Non-Competition Agreement").
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ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENTS.
2.1 Making of Representations and Warranties. As a material
inducement to Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller and Parents, jointly and severally,
but subject to Section 7.2 including Section 7.2(d), hereby make to Buyer the
representations and warranties contained in this Section 2. For the purposes
of this Agreement, references to "knowledge" or "best knowledge" of Seller or a
Parent shall be deemed to include such knowledge as any executive officer or
manager of Seller or any Parent listed in Section 2.1 of the Disclosure
Schedule (as hereinafter defined) actually has after reasonable inquiry. For
purposes of this Agreement, references to the "Disclosure Schedule" shall mean
the Disclosure Schedule delivered by Seller and Parents to Buyer on the date
hereof.
2.2 Organization and Qualification; Capital Stock. Each of Seller
and each Parent which is not an individual is a limited partnership or
corporation duly organized, validly existing and in good standing under the
laws of the state of its organization as listed in Section 2.2 of the
Disclosure Schedule with full partnership or corporate power and authority to
own or lease its properties and to conduct its business in the manner and in
the places where such properties are owned or leased or such business is
currently conducted or proposed to be conducted. The copies of the charter
document of Seller and each such Parent as amended to date and certified by the
Secretary of State of each relevant jurisdiction, and of the partnership
agreement or by-laws of Seller and each such Parent, as amended to date,
certified by its Secretary, and heretofore delivered to Buyer's counsel, are
complete and correct, no amendments thereto are pending, and none of Seller or
any Parent is in violation thereof. Each of Seller and each such Parent is not
required to be licensed or qualified to conduct its businesses or own its
properties in any jurisdiction in which the failure to be so qualified would
have a material adverse effect on the business, operations, results of
operations, assets, condition (financial or other) or prospects of the
MacGregor Dental Centers business taken as a whole. All of the issued and
outstanding capital stock or other equity interest of Seller and each such
Parent is owned beneficially and of record as set forth in Section 2.2 of the
Disclosure Schedule, and there are no outstanding options, warrants, rights,
commitments, pre-emptive rights or agreements of any kind for the issuance or
sale of, or outstanding securities convertible into, any additional shares of
capital stock of any class of Seller or any Parent.
2.3 Subsidiaries. None of Seller or any Parent has any subsidiaries
(as defined in Section 8.11(d)) or owns any securities issued by any other
business organization or governmental authority or has any direct or indirect
interest in or control over any corporation, partnership, joint venture or
entity of any kind relating to the MacGregor Dental Centers business, except as
listed in Section 2.3 of the Disclosure Schedule.
2.4 Authority; Noncontravention. Each of Seller and each Parent has
full partnership or corporate power and authority or capacity, as applicable,
to enter into this Agreement, each agreement, document and instrument to be
executed and delivered by it or
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them pursuant to or contemplated by this Agreement, the Stockholders' Agreement
dated as of February 5, 1996 (the "Stockholders Agreement"), the Employment
Agreement dated as of February 5, 1996 (the "Employment Agreement") and the
Non-Competition Agreement dated as of February 5, 1996 (the "Non-Competition
Agreement") executed in connection herewith by Seller and/or Parents, as
applicable, and to carry out the transactions contemplated hereby and thereby.
The execution, delivery and performance by Seller and each Parent of this
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary action of Seller and each Parent including any
required action of their respective owners and no other action on the part of
Seller or any such Parent or its owners is required in connection therewith.
This Agreement and each such agreement, document and instrument executed and
delivered by Seller or any Parent pursuant to this Agreement constitute valid
and binding obligations of Seller and/or such Parent enforceable in accordance
with their respective terms.
The execution, delivery and performance by Seller and each Parent of
this Agreement and each such agreement, document and instrument contemplated by
this Agreement to which it is a party:
(i) do not and will not violate any provision of the
charter, by-laws or equivalent constituent documents of Seller or any
Parent;
(ii) do not and will not violate any laws of the United
States or any state or other jurisdiction applicable to Seller or any
Parent or require Seller, any Parent or any other direct or indirect
owner of Seller to obtain any approval, consent or waiver of, or make
any filing with, any person or entity (governmental or otherwise) that
has not been obtained or made; and
(iii) except as set forth in Section 2.4 of the
Disclosure Schedule, do not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award, whether written or oral, to which
Seller, any Parent or any other direct or indirect owner of Seller is a
party or by which the property of Seller, any Parent or any other direct
or indirect owner of Seller is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest
or other charge or encumbrance on any of the Subject Assets, except to
the extent that any of the foregoing would not have a material adverse
effect on the business, operations, results of operations, assets,
condition (financial or other) or prospects of the MacGregor Dental
Centers business taken as a whole.
2.5 Status of Property.
(a) Real Property. The Subject Assets do not include any
owned real estate.
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(b) Leased Real Property. All of the leased real property
used in connection with the MacGregor Dental Centers business is identified in
Section 2.5(b) of the Disclosure Schedule (collectively referred to herein as
the "Leased Real Property"). Further:
(i) Leases. All of the leases of any of the Leased
Real Property (collectively, the "Leases") are listed in Section
2.5(b)(i) of the Disclosure Schedule. The copies of the Leases
heretofore delivered or furnished by Seller and Parents to Buyer are
complete, accurate, true and correct copies of each of the Leases,
except as set forth in Section 2.5(b)(i) of the Disclosure Schedule.
With respect to each of the Leases, except as set forth in Section
2.5(b)(i) of the Disclosure Schedule:
(A) each of the Leases is in full force and effect on
the terms set forth therein and has not been modified, amended or
altered, in writing or otherwise;
(B) all obligations of the landlord or lessor under the
Leases which have accrued have been performed, and to the best of
the knowledge of Seller and Parents, no landlord or lessor is in
default under or in arrears in the payment of any sum or in the
performance of any obligation required of it under any Lease, and
no circumstance presently exists which, with notice or the
passage of time, or both, would give rise to a default by the
landlord or lessor under any Lease, except for any default which
would not have a material adverse effect on the business,
operations, results of operations, assets, condition (financial
or other) or prospects of the MacGregor Dental Centers business
taken as a whole;
(C) all obligations of the tenant or lessee under the
Leases which have accrued have been performed, and none of Seller
or any Parent is in default under or in arrears in the payment of
any sum or in the performance of any obligation required of it
under any Lease, and no circumstance presently exists which, with
notice or the passage of time, or both, would give rise to a
default by Seller or any Parent; and
(D) Seller and Parents have obtained the consent of
each landlord or lessor under any Leases whose consent is
required to the assignment of any Lease to Buyer and its
assignees or the collateral assignment of any Lease by Buyer or
its assignees, except as set forth in Section 2.5(b)(i) of the
Disclosure Schedule.
(ii) Title and Description. Seller holds good, clear,
valid and enforceable leasehold interests in the Leased Real Property
leased by it pursuant to the Leases, subject only to the right of
reversion of the landlords or lessors under such Leases and landlord's
liens created under the Leases or existing under applicable law (which
liens have been released or subordinated as set forth in Schedule
2.5(b)(i)), in all cases free and clear of all other prior or
subordinate interests encumbering the
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leasehold estate, including, without limitation, mortgages, deeds of
trust, ground leases, leases, subleases, security interests or similar
encumbrances, liens, assessments, tenancies, licenses, claims, rights of
first refusal, options, covenants, conditions, restrictions, rights of
way, easements, judgments or other encumbrances upon the leasehold
estate, except for encumbrances which may exist on the fee simple
estates in the Leased Real Property which is not owned by any Parent or
any affiliate thereof (it being understood that the representations
contained in this subparagraph (ii) are not representations regarding
the status of title to such fee simple estates except as to those owned
by any Parent or any affiliate thereof), and except for those other
matters set forth in Section 2.5(b)(ii) of the Disclosure Schedule
(collectively, the "Title Exceptions").
(iii) Compliance with Law; Government Approvals. Neither
Seller nor any Parent has received notice from any municipal, state,
federal or other governmental authority of any violation of any zoning,
building, fire, water, use, health or other law, ordinance, code,
regulation, license, permit or authorization issued in respect of any of
the Leased Real Property that has not been heretofore corrected, and to
the best knowledge of Seller and Parents, no such violation or
violations now exist which would have a material adverse effect on the
conduct of the MacGregor Dental Centers business taken as a whole.
Improvements located on or constituting a part of the Leased Real
Property and the construction, installation, use and operation thereof
(including, without limitation, the construction, installation, use and
operation of any signs located thereon) were completed and installed and
to the best knowledge of Seller and Parents are now in compliance, in
each case in all material respects, with all applicable municipal,
state, federal or other governmental laws, ordinances, codes,
regulations, licenses, permits and authorizations, including, without
limitation, applicable zoning, building, fire, water, use or health
laws, ordinances, codes, regulations, licenses, permits and
authorizations except as set forth in Section 2.5(b)(iii) of the
Disclosure Schedule, and there are presently in effect all certificates
of occupancy, licenses, permits and authorizations required by law,
ordinance, code or regulation or by any governmental or private
authority having jurisdiction over any of the Leased Real Property or
any portion thereof, or the occupancy thereof or any present use thereof
(collectively, "Governmental Approvals"), which are necessary or
otherwise material to the conduct of the MacGregor Dental Centers
business, except as set forth in Section 2.5(b)(iii) of the Disclosure
Schedule. All Governmental Approvals currently in effect and required
by law, ordinance, code, regulation or otherwise to be held by the owner
of any of the Leased Real Property shall be transferred to Buyer and its
assignees at Closing, except as set forth in Section 2.5(b)(iii) of the
Disclosure Schedule with respect to negation of waivers or
grandfathering of particular matters as described therein. To the best
knowledge of Seller and Parents, the Leased Real Property has at least
the minimum access required by applicable subdivision or similar law.
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(iv) Real Property Taxes. None of Seller nor any Parent
has received notice of any pending or threatened reassessment of all or
any portion of any of the Leased Real Property, and, to the best
knowledge of Seller and Parents, the transfer of the Leased Real
Property to Buyer and its assignees will not result in any such
reassessment.
(c) Personal Property. Except as specifically disclosed in
said Section 2.5(c) of the Disclosure Schedule or in the Base Balance Sheet (as
defined in Section 2.6(a)(ii)) Seller has good and valid title to all of the
personal property used in connection with the conduct of the MacGregor Dental
Centers business and none of such personal property or assets is subject to any
mortgage, pledge, lien, conditional sale agreement, restriction on transfer,
stockholder or similar agreement, security title, encumbrance or other charge
except as specifically disclosed in said Schedule or in the Base Balance Sheet.
The Base Balance Sheet reflects all personal property used in connection with
the conduct of the MacGregor Dental Centers business, subject to dispositions
and additions in the ordinary course of business and consistent with this
Agreement. The Subject Assets are owned by Seller and include all of the
assets which are used in, or which are necessary to permit Buyer and its
subsidiaries to continue and carry on, the MacGregor Dental Centers business.
Except as otherwise specified in Section 2.5(c) of the Disclosure Schedule, the
Subject Assets consisting of tangible personal property are in generally good
operating condition and repair, normal wear and tear excepted, have been well
maintained, and conform in all material respects with all applicable
ordinances, regulations and other laws. None of Seller, MDCI, SMI, Shears
General or MDC has disposed of any tangible personal property constituting
operating assets used in its business within the past year except in the
ordinary course of business, except for "occasional sales" as defined in
Section 151.304(b)(2) of the Texas Tax Code and except as set forth in Schedule
1.1(b) hereto.
(d) Transfer of Title. Upon delivery to Buyer of the ▇▇▇▇ of
sale and assignments referred to in Section 1.5, Buyer will receive good, valid
and (if applicable) marketable title to all of the Subject Assets, free and
clear of all liens, encumbrances, charges, restrictions on transfer,
stockholder or similar agreements, equities and other Claims of every kind,
including the right and ability to transfer such Subject Assets to its
subsidiaries, except as disclosed in Section 2.5(d) of the Disclosure Schedule.
2.6 Financial Statements; Undisclosed Liabilities.
(a) Seller and Parents have delivered to Buyer the following
financial statements, copies of which are attached hereto as Schedule 2.6:
(i) Unaudited pro forma combined balance sheets for the
MacGregor Dental Centers business (including Professional Service
Bureau) for the fiscal years ended September 30, 1994 and 1993 and
related statements of income, retained earnings and cash flows for the
years then ended, certified by the chief financial officers of Seller;
and
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(ii) Audited balance sheets as of September 30, 1995 for
the predecessors of each of MDCI and SMI (herein the "Base Balance
Sheet") and audited statements of income, retained earnings and cash
flows for the year then ended for such entities.
Said financial statements have been prepared from the books and records of the
MacGregor Dental Centers business, present fairly in all material respects the
financial condition of the predecessors of MDCI and SMI, as applicable, at the
dates of said statements and the results of their operations for the periods
covered thereby, and, in the case of the audited statements referred to in
Section 2.6(a)(ii), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis.
(b) As of the date hereof, there are no liabilities or
obligations of any nature, whether accrued, absolute, contingent or otherwise,
asserted or unasserted, known or unknown, relating to the MacGregor Dental
Centers business, of a type required to be reflected on a balance sheet
prepared in accordance with generally accepted accounting principles, except
liabilities (i) stated or adequately reserved against on the Base Balance Sheet
or the notes thereto, (ii) specifically disclosed in Schedules furnished to
Buyer hereunder on the date hereof and attached hereto, or (iii) incurred in
the ordinary course of business consistent with the terms of this Agreement
subsequent to the date of the Base Balance Sheet.
2.7 Taxes.
(a) Seller, Parents (for purposes of this Section 2.7 other
than Section 2.7(c), not including ▇▇. ▇▇▇▇▇▇) and their predecessors have paid
or caused to be paid all federal, state, local, foreign, and other taxes,
including, without limitation, income taxes, estimated taxes, alternative
minimum taxes, excise taxes, sales taxes, use taxes, value-added taxes, gross
receipts taxes, franchise taxes, capital stock taxes, employment and
payroll-related taxes, withholding taxes, stamp taxes, transfer taxes, windfall
profit taxes, environmental taxes and property taxes, whether or not measured
in whole or in part by net income, and all deficiencies, or other additions to
tax, interest, fines and penalties owed by it (collectively, "Taxes"), shown to
be due on all tax returns required to be filed through the date hereof, whether
disputed or not.
(b) Seller, Parents and their predecessors have in accordance
with applicable law filed all federal, state, local and foreign tax returns
required to be filed through the date hereof. Complete and correct copies of
all federal, state, local and foreign income tax returns filed with respect to
Seller, Parents and their predecessors for taxable periods ended on or after
December 31, 1989 have been previously provided to Buyer, together with any
examination reports and statements of deficiencies assessed against or agreed
to with respect to said returns.
(c) Neither the Internal Revenue Service nor any other
governmental authority is now asserting or, to the best knowledge of the Seller
and Parents, threatening to
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assert against Seller, any Parent or any predecessors any deficiency or claim
for additional Taxes. No claim has ever been made by an authority in a
jurisdiction where Seller, Parents and their predecessors do not file reports
and returns that Seller, any Parent or any predecessor is or may be subject to
taxation by that jurisdiction. There are no security interests on any of the
Subject Assets that arose in connection with any failure (or alleged failure)
to pay any Tax. None of Seller, any Parent or any predecessor has entered into
a closing agreement pursuant to Section 7121 of the Code.
(d) Except as set forth in Section 2.7 of the Disclosure
Schedule, there has not been during the past five years any audit of any tax
return filed by Seller, any Parent or any predecessor, no audit of any tax
return of Seller, any Parent or any predecessor is in progress, and none of
Seller, any Parent or any predecessor has been notified by any tax authority
that any such audit is contemplated or pending. Except as set forth in Section
2.7 of the Disclosure Schedule, no extension of time with respect to any date
on which a tax return was or is to be filed by Seller, any Parent or any
predecessor is in force, and no waiver or agreement by Seller, any Parent or
any predecessor is in force for the extension of time for the assessment or
payment of any Taxes.
(e) None of Seller, any Parent or any predecessor has ever
been (and have never had any liability for unpaid Taxes because they once were)
a member of an "affiliated group" (as defined in Section 1504(a) of the Code).
None of Seller, any Parent or any predecessor has ever filed, or has ever been
required to file, a consolidated, combined or unitary tax return with any other
entity. None of Seller, any Parent or any predecessor owns or has ever owned a
direct or indirect interest in any trust, partnership, corporation or other
entity except as set forth in Section 2.7(e) of the Disclosure Schedule and the
Subject Assets do not include an interest in any such entity. None of Seller,
any Parent or any predecessor is a party to any tax sharing agreement.
(f) Seller is not a "foreign person" within the meaning of
Section 1445 of the Code and Treasury Regulations Section 1.1445-2.
(g) Each of MDCI and SMI is (and each of their predecessors
was) a "small business corporation" within the meaning of Section
280G(b)(5)(A)(i) of the Code.
(h) Each of MDCI and SMI is (and each of their predecessors
was) a "S corporation" within the meaning of Section 1361(a)(1) of the Code,
and Seller qualifies as a partnership for federal income tax purposes.
(i) For purposes of this Agreement, all references to Sections
of the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
2.8 Collectibility of Accounts Receivable. All of the accounts
receivable constituting Subject Assets (less the reserve for bad debts set
forth on the Base Balance Sheet
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and subject to contractual allowances consistent with the past practices of the
MacGregor Dental Centers business as described in Section 2.8 of the Disclosure
Schedule) are valid and enforceable claims, and to the best knowledge of Seller
and Parents are not subject to setoff or counterclaim, provided that the
foregoing representation is not a guarantee of collectibility. The Subject
Assets do not include any accounts or loans receivable from any person, firm or
corporation which is affiliated with Seller or any Parent or from any
stockholder, director, officer or employee of Seller or any Parent or any
affiliate thereof. No MacGregor Dental Centers receivables have been factored
except through Professional Service Bureau.
2.9 Absence of Certain Changes. Except as disclosed in Section 2.9
of the Disclosure Schedule, since the date of the Base Balance Sheet there has
not been:
(a) Any change in the properties, assets, liabilities,
business, operations, condition (financial or other) or prospects of the
MacGregor Dental Centers business taken as a whole which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has been material;
(b) Any contingent liability relating to the MacGregor Dental
Centers business as guarantor or otherwise with respect to the obligations of
others or any cancellation of any material debt or claim owing to, or waiver of
any material right of, the MacGregor Dental Centers business;
(c) Any mortgage, encumbrance or lien placed on any of the
properties used in the MacGregor Dental Centers business which remains in
existence on the date hereof;
(d) Any obligation or liability of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown, incurred in connection with the MacGregor Dental Centers business
other than obligations and liabilities incurred in the ordinary course of
business consistent with the terms of this Agreement;
(e) Any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of the
properties or assets relating to the MacGregor Dental Centers business other
than in the ordinary course of business;
(f) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting any of the properties, assets or
business relating to the MacGregor Dental Centers business;
(g) Any declaration, setting aside or payment of any dividend
or distribution by any Parent (or their predecessors) or Seller, or the making
of any other distribution in respect of the capital stock or other equity
interest of any Parent (or their predecessors) or Seller, or any direct or
indirect redemption, purchase or other acquisition by any Parent (or
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their predecessors) or Seller of its own capital stock or other equity interest
except as described in Section 2.9(g) of the Disclosure Schedule;
(h) Any labor trouble or claim of unfair labor practices
involving the MacGregor Dental Centers business;
(i) Except as set forth in Section 2.9(i) of the Disclosure
Schedule, any change in the compensation (in the form of salaries, wages,
incentive arrangements or otherwise) payable or to become payable by the
MacGregor Dental Centers business to any officers, employees, agents,
independent contractors, dentists or dental professional corporations other
than normal merit increases in accordance with its usual practices, or any
bonus payment or arrangement made to or with any such person or entity; or any
entering into any employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) with any such person or
entity;
(j) Any change, or the obtaining of information concerning a
prospective change, with respect to any officers, management employees or
dentists (including dental professional corporations) involved in the MacGregor
Dental Centers business, any grant of any severance or termination pay to any
officer, employee, agent, independent contractor, dentist or dental
professional corporation involved in the MacGregor Dental Centers business or
any increase in benefits payable under any existing severance or termination
pay policies or employment agreement or relationship;
(k) Any payment or discharge of a material lien or liability
relating to the MacGregor Dental Centers business which was not shown on the
Base Balance Sheet or incurred in the ordinary course of business thereafter;
(l) Any payment made or obligation or liability incurred by
Seller or any Parent (or its predecessor) to, or any other transaction by
Seller or any Parent (or its predecessor) with, any of its officers, directors,
partners, stockholders, employees or independent contractors (including
dentists and dental professional corporations), or any loans or advances made
by Seller or any Parent (or its predecessor) to any of its officers, directors,
partners, stockholders, employees or independent contractors (including
dentists and dental professional corporations), except as disclosed in Section
9.2(i) of the Disclosure Schedule and normal compensation and expense
allowances consistent with past practice;
(m) Any change in accounting methods or practices, credit
practices, collection policies or payment policies used by Seller or any Parent
(or its predecessor) including without limitation any change in the discharge
or recording of payables relative to past practices;
(n) Any cancellation or loss of any material right or asset,
or waiver of any right, of the MacGregor Dental Centers business;
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(o) Any change in the relationships with suppliers,
distributors, licensees, licensors, customers or others with whom the MacGregor
Dental Centers business it has business relationships which would have a
material adverse effect on the MacGregor Dental Centers business taken as a
whole, and Seller and Parents do not have knowledge of any fact or contemplated
event which may cause any such material adverse change;
(p) Any alteration or change in the methods of operation
employed by the MacGregor Dental Centers business;
(q) Any other transaction relating to the MacGregor Dental
Centers business other than transactions in the ordinary course of business; or
(r) Any agreement or understanding whether in writing or
otherwise, that would result in any of the transactions or events or require
Seller or any Parent to take any of the actions specified in paragraphs (a)
through (q) above.
2.10 Ordinary Course. Since the date of the Base Balance Sheet, the
MacGregor Dental Centers business has conducted its business only in the
ordinary course and in a manner consistent with prior practices.
2.11 Banking Relations. All of the arrangements with any banking
institution relating to the MacGregor Dental Centers business are completely
and accurately described in Section 2.11 of the Disclosure Schedule, indicating
with respect to each of such arrangements the type of arrangement maintained
(such as checking account, borrowing arrangements, safe deposit box, etc.) and
the person or persons authorized in respect thereof.
2.12 Intellectual Property.
(a) Except and as described in Section 2.12 of the Disclosure
Schedule, Seller has exclusive ownership, or exclusive license to use, of all
computer software, patent, copyright, trade secret (including without
limitation customer lists, production processes and inventions), trademark,
service ▇▇▇▇ or other proprietary rights (collectively, "Intellectual
Property") used in the MacGregor Dental Centers business as presently conducted
or as contemplated to be conducted. Seller's rights in all of such
Intellectual Property are freely transferable, provided that no representation
or warranty is made as to licensed software which is generally commercially
available and used in the ordinary course of business, and except as set forth
in Section 2.12(a) of the Disclosure Schedule with respect to Intellectual
Property which is not freely assignable at the date hereof. No proceedings
have been instituted, or are pending or to the best knowledge of Seller and
Parents threatened, which challenge the rights of Seller or any Parent in
respect of any Intellectual Property, and to the best knowledge of Seller and
Parents, except as set forth in Section 2.12(a) of the Disclosure Schedule, no
other person has or alleges any rights in or to the Intellectual Property.
Seller has the right to use, free and clear of claims or rights of other
persons, all customer lists, designs, manufacturing or other processes,
computer software (subject to the second sentence of this paragraph),
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systems, data compilations, research results and other information required for
or incident to the conduct of the MacGregor Dental Centers business as
presently conducted or contemplated.
(b) All patents, patent applications, trademarks, service
marks, trademark and service ▇▇▇▇ applications and registrations and registered
copyrights which are material to the conduct of the MacGregor Dental Centers
business as presently conducted or contemplated to be conducted, are listed in
Section 2.12 of the Disclosure Schedule. Such patents, patent applications,
trademark and service ▇▇▇▇ registrations, trademark and service ▇▇▇▇
applications and registered copyrights have been duly registered in, filed in
or issued by the United States Patent and Trademark Office, the United States
Register of Copyrights, or the corresponding offices of other jurisdictions as
identified on said Schedule, and have been properly maintained and renewed in
accordance with all applicable provisions of law and administrative regulations
in the United States and each such jurisdiction, to the extent, if any, set
forth in Section 2.12(b) of the Disclosure Schedule.
(c) All licenses or other agreements under which the MacGregor
Dental Centers business is granted rights in Intellectual Property are listed
in Section 2.12 of the Disclosure Schedule. All said licenses or other
agreements are in full force and effect, there is no material default by Seller
or any Parent, or to the best knowledge of Seller and Parents, any other party
thereto, and, except as set forth in Section 2.12 of the Disclosure Schedule
and as provided in Section 2.12(a) above, all rights thereunder are freely
assignable. To the best knowledge of Seller and Parents, the licensors under
said licenses and other agreements have and had all requisite power and
authority to grant the rights purported to be conferred thereby. True and
complete copies of all such licenses or other agreements, and any amendments
thereto, have been provided to Buyer.
(d) All licenses or other agreements under which the MacGregor
Dental Centers business has granted rights to others in Intellectual Property
are listed in Section 2.12 of the Disclosure Schedule. All of said licenses or
other agreements are in full force and effect, there is no material default by
Seller or any Parent, or to the best knowledge of Seller and Parents, any other
party thereto, and, except as set forth in Section 2.12 of the Disclosure
Schedule, and as provided in Section 2.12(a) above, all of Seller's rights
thereunder are freely assignable. True and complete copies of all such
licenses or other agreements, and any amendments thereto, have been provided to
Buyer.
(e) To the best knowledge of Seller and Parents, the MacGregor
Dental Centers business has taken all steps required in accordance with sound
business practice to establish and preserve its ownership of all material
copyright, trade secret and other proprietary rights. None of Seller or any
Parent has any knowledge of any infringement by others of any of its
Intellectual Property rights. No employee or consultant of Seller or any
Parent owns any rights in any products, technology or Intellectual Property of
Seller or any Parent which ownership materially and adversely affects the
conduct of the MacGregor Dental Centers business, other than as disclosed in
Section 2.12(a) of the Disclosure Schedule.
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(f) To the best knowledge of Seller and Parents, the conduct
of the MacGregor Dental Centers business does not infringe any Intellectual
Property of any other person. No proceeding charging Seller or any Parent with
infringement of any adversely held Intellectual Property has been filed or to
the best knowledge of Seller and Parents is threatened to be filed. To the
best knowledge of Seller and Parents, there exists no unexpired patent or
patent application which includes claims that would be infringed by or
otherwise adversely affect the MacGregor Dental Centers business. To the best
knowledge of Seller and Parents, the conduct of the MacGregor Dental Centers
business does not involve the unauthorized use of any confidential information
or trade secrets of any person, including without limitation any former
employer of any past or present employee. Except as set forth in Section 2.12
of the Disclosure Schedule, none of Seller or any Parent, nor, to the best
knowledge of Seller and Parents, any of their respective employees, has any
agreements or arrangements with any persons other than Seller related to
confidential information or trade secrets of such persons or restricting any
such employee's engagement in business activities of any nature, other than
those relating to patient confidentiality as required by law.
(g) To the best knowledge of Seller and Parents, the computer
software included in the Intellectual Property performs in all material
respects in accordance with the documentation and other written material used
in connection with the Software and is free of material defects in programming.
Seller has and will assign to Buyer and its assigns as part of the Subject
Assets all the databases and computer software used or necessary to conduct
their businesses, except as set forth in Section 2.12(g) of the Disclosure
Schedule.
2.13 Contracts.
(a) Except for contracts, commitments, plans, agreements and
licenses described in Section 2.13 of the Disclosure Schedule (true and
complete copies of which have been delivered to the Buyer), the MacGregor
Dental Centers business and the entities that conduct or have conducted the
same are not a party to or subject to (in each case relating to such business):
(i) any plan or contract providing for bonuses,
pensions, options, stock purchases, deferred compensation, retirement
payments, profit sharing, collective bargaining or the like, or any
contract or agreement with any labor union;
(ii) any employment contract, or any contract for
services which requires the payment of more than $100,000 annually or
which is not terminable within 30 days without liability for any penalty
or severance payment;
(iii) any contract or agreement for the purchase of any
commodity, material, equipment or service except purchase orders in the
ordinary course for less than $5,000 each, such orders not exceeding
$50,000 in the aggregate;
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(iv) any other contracts or agreements creating an
obligation of $50,000 or more with respect to any such contract;
(v) any contract or agreement providing for the
purchase of all or substantially all of its requirements of a particular
product from a supplier;
(vi) any contract or agreement which by its terms does
not terminate or is not terminable without penalty within one year after
the date hereof;
(vii) any contract or agreement for the sale or lease of
its products not made in the ordinary course of business;
(viii) any contract with any sales agent or distributor;
(ix) any contract containing covenants limiting its
freedom to compete in any line of business or with any person or entity;
(x) any contract or agreement for the purchase of any
fixed asset for a price in excess of $50,000 whether or not such
purchase is in the ordinary course of business;
(xi) any license agreement (as licensor or licensee)
other than routine software licenses to end users entered into in the
ordinary course of business for a total consideration not exceeding
$50,000 for any one such license);
(xii) any agreement involving a lease or license of real
property or any "capitalized" or "financing" lease;
(xiii) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment for the borrowing
of money and any related security agreement;
(xiv) any contract or agreement with any officer,
employee, director, or stockholder or with any persons or organizations
controlled by or affiliated with any of them;
(xv) any contract or agreement with any governmental
authority, insurance company, third-party fiscal intermediary or carrier
administering any Medicaid program of any state, the Medicare program,
any clinic or other in-patient health care facility, dental or health
maintenance organization, preferred provider organization, self-insured
employer or other third-party payor of any kind or nature;
(xvi) any power of attorney; or
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(xvii) any judgment, decree or order affecting the
MacGregor Dental Centers business.
(b) All contracts, agreements, leases and instruments
constituting Subject Assets are valid and are in full force and effect and
constitute legal, valid and binding obligations of Seller and, to the best
knowledge of Seller and Parents, the other parties thereto, enforceable in
accordance with their respective terms. Neither Seller nor, to the best
knowledge of Seller and Parents, any other party to any contract, agreement,
lease or instrument constituting Subject Assets or any judgment, decree or
order applicable to the MacGregor Dental Centers business is in default in
complying with any provisions thereof, and no condition or event or facts exist
which, with notice, lapse of time or both would constitute a default thereof on
the part of Seller or, to the best knowledge of Seller and Parents, on the part
of any other party thereto in any such case that could have a material adverse
effect on the business, operations, results of operations, assets, condition
(financial or other) or prospects of the MacGregor Dental Centers business
taken as a whole. Except as disclosed in Section 2.13 of the Disclosure
Schedule, Seller is not subject to or bound by any agreement, judgment, decree
or order which materially and adversely affects the business, operations,
results of operations, assets, condition (financial or other) or prospects of
the MacGregor Dental Centers business taken as a whole.
(c) Except as disclosed in Section 2.13(c) of the Disclosure
Schedule, there are no contracts, agreements, arrangements or understandings
(each, an "HCP Agreement") with any dentist, dental assistant, nurse,
technician, or other health care provider (each a "Health Care Provider") in
connection with the MacGregor Dental Centers business or pursuant to which
Seller or any Parent receives revenues regarding the provision of dental
services to patients in connection with such business.
2.14 Litigation. Section 2.14 of the Disclosure Schedule lists all
currently pending litigation and governmental or administrative proceedings or
investigations to which Seller or any Parent is a party. Except for matters
described in Section 2.14 of the Disclosure Schedule, there is no litigation or
governmental or administrative proceeding or investigation pending or, to the
best knowledge of Seller and Parents, threatened relating to the MacGregor
Dental Centers business which may have any material adverse effect on the
business, operations, results of operations, assets, condition (financial or
other) or prospects of the MacGregor Dental Centers business taken as a whole
or which could prevent or hinder the consummation of the transactions
contemplated by this Agreement. Each of the matters disclosed in Schedule 2.14
is covered by insurance of Seller as in effect on the date hereof and Seller
has obtained endorsements under such policies covering Buyer and its
affiliates.
Without limitation of the foregoing, except as set forth on Schedule
2.14, there are no pending or, to the best knowledge of Seller and Parents,
threatened malpractice claims, Texas Regulatory Board investigations, suits,
notices of intent to institute, arbitrations or proceedings, either
administrative or judicial, involving the MacGregor Dental Centers business
including any of the Health Care Providers.
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2.15 Permits; Compliance with Laws; Licensing and Credentialing;
Health Care Providers.
(a) General Compliance. Except as set forth in Section
2.15(a) of the Disclosure Schedule, the MacGregor Dental Centers business has
all material franchises, authorizations, approvals, orders, consents, licenses,
certificates, permits, registrations, qualifications or other rights and
privileges (collectively "Permits") in connection with the ownership of
respective properties involved therein and the conduct of such business as the
same is presently conducted, a listing of such Permits is set forth in Section
2.15(a) of the Disclosure Schedule, and all such Permits are valid and in full
force and effect except to the extent the absence or potential invalidation or
effect of any such Permit would not have material adverse effect on the
business, operations, results of operations, assets, condition (financial or
other) or prospects of the MacGregor Dental Centers business taken as a whole.
Except as set forth in Section 2.15(a) of the Disclosure Schedule, no Permit is
subject to termination as a result of the performance of the Agreement or
consummation of the transactions contemplated hereby, provided that no
representation is made concerning Buyer's right to obtain Permits for the
conduct of its business subsequent to Closing. Except as set forth in Section
2.15(a) of the Disclosure Schedule, the MacGregor Dental Centers business is
now and has heretofore been in compliance with all applicable statutes,
ordinances, orders, rules and regulations (including without limitation OSHA
and regulations thereunder and all applicable environmental laws and
regulations) promulgated by any federal, state, municipal or other governmental
authority which apply to the conduct of its business, except for any such
non-compliance or violation that, individually or in the aggregate, would not
have a material adverse effect on the business, operations, results of
operations, assets, condition (financial or other) or prospects of the
MacGregor Dental Centers business taken as whole. Since January 1, 1993,
neither Seller nor any Parent has ever entered into or been subject to any
judgment, consent decree, compliance order or administrative order with respect
to any insurance, consumer protection, environmental or health and safety law
or received any request for information, notice, demand letter, administrative
inquiry or formal or informal complaint or claim directed to Seller or any
Parent with respect to any environmental or health and safety matter or the
enforcement of any such law.
(b) Licensing and Credential Information.
Neither Seller nor any Parent (other than ▇▇. ▇▇▇▇▇▇) is required to be,
and each Health Care Provider is, duly licensed under the laws of the State of
Texas and each Health Care Provider has complied in all material respects with
all laws, rules and regulations relating to the rendering of services including
without limitation OSHA. To the best knowledge of Seller and Parents,
including knowledge obtained through the credentialing process used by the
business, except as previously disclosed to Buyer in writing, no Health Care
Provider since January 1, 1990: (i) has had his or her professional license,
Drug Enforcement Agency number, Medicare or Medicaid provider status, or staff
privileges at any hospital or dental facility suspended, relinquished,
terminated or revoked, (ii) has been reprimanded, sanctioned or disciplined by
any licensing board or any federal, state or local society, agency, regulatory
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body, governmental authority, hospital, third party payor or specialty board;
or (iii) has had a final judgment or settlement entered against him or her in
connection with a malpractice or similar action. The names of the Health Care
Providers who provide services in connection with the MacGregor Dental Centers
business have been previously disclosed to Buyer. To the best of Seller's and
Parents' knowledge, all of the employed and engaged Health Care Providers are
in good physical and mental health and do not suffer from any illnesses or
disabilities which could prevent any of them from fulfilling their
responsibilities under the respective contracts, agreements or understandings
with Seller or any relevant Parent. To the best of Seller's and Parents'
knowledge, none of the employed and engaged Health Care Providers use or abuse
any controlled substances at any time or is under the influence of alcohol or
are affected by the use of alcohol during the time period required to perform
his or her duties and obligations under any contracts, agreements or
understandings with Seller or any relevant Parent.
(c) Medicare/Medicaid. The MacGregor Dental Centers business
does not involve and has never involved patients covered by or arrangements
with Medicare or Medicaid.
(d) Other. To the best knowledge of Seller and Parents, (i)
neither Seller nor any Parent is required to make filings under any insurance
holding company or similar state statute, or is required to be licensed or
authorized as an insurance holding company in any jurisdiction in order to
conduct their respective businesses as presently conducted, (ii) the dental
plan services and related products offered and provided by the MacGregor Dental
Centers business have been and are offered and provided in compliance with the
requirements of all relevant laws and regulations, in each case, with such
exceptions, individually or in the aggregate, as would not have a material
adverse effect on the business, operations, assets, condition (financial or
other) or prospects of such business; and (iii) neither Seller nor any Parent
has received any notification from any governmental regulatory authority to the
effect that any Permit from such regulatory authority is needed to be obtained
by it in order to conducts its business.
Seller and Parents are not aware of any legislation, rule
or regulation which shall either (i) have been proposed and be in their
reasonable judgment reasonably likely to be adopted in Texas in the foreseeable
future, or (ii) have been adopted in Texas in either case that, individually or
in the aggregate, has a material adverse effect or could reasonably be
anticipated to have a material adverse effect on the business, operations,
results of operations, assets, (financial or otherwise) or prospects of the
MacGregor Dental Centers business taken as a whole.
2.16 Insurance. The physical properties and assets constituting
Subject Assets are insured to the extent disclosed in Section 2.16 of the
Disclosure Schedule and all insurance policies and arrangements relating to the
MacGregor Dental Centers business are disclosed in said Schedule. To the best
knowledge of Seller and Parents, said insurance policies and arrangements are
in full force and effect, all premiums with respect thereto are currently paid,
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and Seller and any relevant Parent are in compliance in all material respects
with the terms thereof. Seller and Parents believe that said insurance is
adequate and customary for the MacGregor Dental Centers business and is
sufficient for compliance with all requirements of law and all agreements and
leases to which such business is subject.
2.17 Finder's Fees. Neither Seller nor any Parent has incurred or
become liable for any broker's commission or finder's fee relating to or in
connection with the transactions contemplated by this Agreement, except a fee
to Wellington Associates, Inc. as previously disclosed.
2.18 Transactions with Interested Persons. Except as set forth in
Section 2.18 of the Disclosure Schedule, no present or to the best knowledge of
Seller and Parents former supervisory employee, officer, director, stockholder
or independent contractor (including any dentist or professional corporation)
and no affiliate (as defined in Section 8.11(a) of any such person), is
currently a party to any transaction with Seller or any Parent, including,
without limitation, any contract, agreement or other arrangement providing for
the employment of, loan to or from, furnishing of services by or to, rental of
real or personal property to or from or otherwise requiring payments to any
such person, and to the best knowledge of Seller and Parents no such person
owns directly or indirectly on an individual or joint basis any material
interest in, or serves as an officer or director or in another similar capacity
of, any competitor or supplier Seller or any Parent, or any organization which
has a contract or arrangement with Seller or any Parent, provided that no
representation shall be deemed made with respect to the provision of dental
services by any former employee or independent contractor. Except as set forth
in Section 2.18 of the Disclosure Statement, there are no commitments to, and
no income reflected in the financial statements referred to in Section 2.6 has
been derived from, any affiliate of Seller or any Parent, and following the
Closing Buyer shall not have any obligation of any kind or description to any
such affiliate.
2.19 Employee Benefit Programs.
(a) Section 2.19 of the Disclosure Schedule sets forth a list
of every Employee Program (as defined below) that has been maintained (as such
term is further defined below) in connection with the MacGregor Dental Centers
business at any time during the three-year period ending on the Closing.
(b) Each Employee Program which has ever been maintained by
Seller or any Parent (or predecessor) and which has at any time been intended
to qualify under Section 401(a) or 501(c)(9) of the Code has received a
favorable determination or approval letter from the Internal Revenue Service
("IRS") regarding its qualification under such section and to the best
knowledge of Seller and Parents has, in fact, been continuously qualified under
the applicable section of the Code since the effective date of such Employee
Program. No event or omission has occurred which would cause any such Employee
Program to lose its qualification under the applicable Code section.
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(c) Seller and Parents do not know, and none has any reason to
know, of any failure of any party to comply with any laws applicable to the
Employee Programs that have been maintained in connection with the MacGregor
Dental Centers business. With respect to any Employee Program ever maintained
in connection with the MacGregor Dental Centers business, there has occurred no
"prohibited transaction," as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code,
or breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly (including, without
limitation, through any obligation of indemnification or contribution), in any
taxes, penalties or other liability to Buyer or any of its affiliates. No
litigation, arbitration, or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or, to the best knowledge of Seller and Parents,
threatened with respect to any such Employee Program.
(d) None of Seller nor any Parent or any Affiliate (as defined
below) (i) has ever maintained any Employee Program which has been subject to
Title IV of ERISA or Section 412 of the Code (including, but not limited to,
any Multiemployer Plan (as defined below)) or (ii) has ever provided health
care or any other non-pension benefits to any employees after their employment
is terminated (other than as required by part 6 of subtitle B of title I of
ERISA) or has ever promised to provide such post-termination benefits.
(e) With respect to each Employee Program maintained by or on
behalf of a Seller or any Parent within the three years preceding the Closing,
complete and correct copies of the following documents (if applicable to such
Employee Program) have previously been delivered to Buyer: (i) all documents
embodying or governing such Employee Program, and any funding medium for the
Employee Program (including, without limitation, trust agreements) as they may
have been amended to the date hereof; (ii) the most recent IRS determination or
approval letter with respect to such Employee Program under Code Section 401 or
501(c)(9), and any applications for determination or approval subsequently
filed with the IRS; (iii) the three most recently filed IRS Forms 5500, with
all applicable schedules and accountants' opinions attached thereto; (iv) the
summary plan description for such Employee Program (or other descriptions of
such Employee Program provided to employees) and all modifications thereto; (v)
any insurance policy (including any fiduciary liability insurance policy)
related to such Employee Program; (vi) any documents evidencing any loan to an
Employee Program that is a leveraged employee stock ownership plan; and (vii)
all other materials reasonably necessary for Buyer to perform any of its
responsibilities with respect to any Employee Program subsequent to the Closing
(including, without limitation, health care continuation requirements).
(f) Each Employee Program maintained in connection with the
MacGregor Dental Centers business of the date hereof is subject to termination
by the Board of Directors or general partner of the relevant entities without
any further liability or obligation on the part
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of such entity to make further contributions or payments in connection
therewith following such termination.
(g) For purposes of this Section 2.19:
(i) "Employee Program" means (A) all employee benefit
plans within the meaning of ERISA Section 3(3), including, but not
limited to, multiple employer welfare arrangements (within the meaning
of ERISA Section 3(40)), plans to which more than one unaffiliated
employer contributes and employee benefit plans (such as foreign or
excess benefit plans) which are not subject to ERISA; and (B) all stock
or cash option plans, restricted stock plans, bonus or incentive award
plans, severance pay policies or agreements, deferred compensation
agreements, supplemental income arrangements, vacation plans, and all
other employee benefit plans, agreements, and arrangements not described
in (A) above. In the case of an Employee Program funded through an
organization described in Code Section 501(c)(9), each reference to such
Employee Program shall include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation (by
agreement or under applicable law) to contribute to or provide benefits
under such Employee Program, or if such Employee Program provides
benefits to or otherwise covers employees of such entity (or their
spouses, dependents, or beneficiaries).
(iii) An entity is an "Affiliate" of Seller or any Parent
if it would have ever been considered a single employer with Seller or
such Parent under ERISA Section 4001(b) or part of the same "controlled
group" as Seller or any Parent for purposes of ERISA Section
302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or
non-pension) employee benefit plan to which more than one employer
contributes and which is maintained pursuant to one or more collective
bargaining agreements.
2.20 Environmental Matters.
(a) Except as set forth in Section 2.20 of the Disclosure
Schedule and except to the extent that they do not have a material adverse
effect on the business, operations, results of operations, assets, conditions
(financial or other) or prospects of the MacGregor Dental Centers business
taken as a whole, (i) Seller and Parents have never generated, transported,
used, stored, treated, disposed of, or managed any Hazardous Waste (as defined
below) in violation in any material respect of any applicable Environmental
Law; (ii) to the best knowledge of Seller and Parents no Hazardous Material (as
defined below) has ever been or is threatened to be spilled, released, or
disposed of at any site presently or formerly owned, operated, leased, or used
in connection with the MacGregor Dental Centers business, or has
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ever come to be located in the soil or groundwater at any such site in
violation in any material respect of any applicable Environmental Law; (iii) to
the best knowledge of Seller and Parents no Hazardous Material has ever been
transported from any site presently or formerly owned, operated, leased, or
used in connection with the MacGregor Dental Centers business for treatment,
storage, or disposal at any other place in violation in any material respect of
any applicable Environmental Law; (iv) neither Seller nor any Parent presently
owns, operates, leases, or uses, nor has any of them previously owned,
operated, leased, or used any site on which underground storage tanks are or
were located in violation in any material respect of any applicable
Environmental Law; and (v) no lien has ever been imposed by any governmental
agency on any property, facility, machinery, or equipment owned, operated,
leased, or used in connection with the MacGregor Dental Centers business in
connection with the presence of any Hazardous Material.
(b) Except as set forth in Section 2.20 of the Disclosure
Schedule and except to the extent that they do not have a material adverse
effect on the business, operations, results of operations, assets, conditions
(financial or other) or prospects of the MacGregor Dental Centers business
taken as a whole, (i) neither Seller nor any Parent has any liability under,
nor has it ever violated in any material respect, any Environmental Law (as
defined below); (ii) Seller and Parents and each property owned, operated,
leased, or used in connection with the MacGregor Dental Centers business, and
any facilities and operations thereon are presently in compliance in all
material respects with all applicable Environmental Laws; (iii) neither Seller
nor any Parent has ever entered into or been subject to any judgment, consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter or within the last five years
received any request for information, notice, demand letter, administrative
inquiry, or formal or informal complaint or claim directed to Seller or any
Parent with respect to any environmental or health and safety matter or the
enforcement of any Environmental Law; and (iv) neither Seller nor any Parent
has any knowledge or reason to know that any of the items enumerated in clause
(iii) of this paragraph will be forthcoming.
(c) Except as set forth in Section 2.20 of the Disclosure
Schedule, and except to the extent that they do not have a material adverse
effect on the business, operations, results of operations, assets, conditions
(financial or other) or prospects of the MacGregor Dental Centers business
taken as a whole, to the best knowledge of Seller and Parents, no site owned,
operated, leased, or used in connection with the MacGregor Dental Centers
business contains any asbestos or asbestos-containing material, any
polychlorinated biphenyls (PCBs) or equipment containing PCBs, or any urea
formaldehyde foam insulation.
(d) Seller and Parents have provided to Buyer copies of all
documents, records, and information available to them concerning any
environmental or health and safety matter relevant to the Subject Assets,
whether generated in connection with the MacGregor Dental Centers business or
otherwise, including, without limitation, environmental audits, environmental
risk assessments, site assessments, documentation regarding off-site disposal
of Hazardous Materials, spill control plans, and reports, correspondence,
permits, licenses,
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approvals, consents, and other authorizations related to environmental or
health and safety matters issued by any governmental agency.
(e) For purposes of this Section 2.20, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant,
contaminant, or other substance which may pose a threat to the environment or
to human health or safety, as defined or regulated under any Environmental Law;
(ii) "Hazardous Waste" shall mean and include any hazardous waste as defined or
regulated under any Environmental Law; and (iii) "Environmental Law" shall mean
any environmental or Hazardous Material-related law, regulation, rule or
ordinance, at the foreign, federal, state, or local level.
2.21 List of Certain Employees and Suppliers. Section 2.21 of the
Disclosure Schedule contains a list of all managers, employees and consultants
and independent contractors (including dentists and related professional
corporations) of the MacGregor Dental Centers business who, individually, have
received or are scheduled to receive compensation or payments for the fiscal
year ended and ending December 31, 1995 in excess of $100,000. In each case
such Schedule includes the current job title and aggregate annual compensation
of each such individual. Section 2.21 of the Disclosure Schedule sets forth a
list of all suppliers to whom the MacGregor Dental Centers business made
payments aggregating $100,000 or more during the fiscal year ended December 31,
1995 showing, with respect to each, the name, address and dollar volume
involved. To the knowledge of Seller and Parents, no supplier has any plan or
intention to terminate or reduce its business with the MacGregor Dental Centers
business or to materially and adversely modify its relationship therewith.
2.22 Employees; Labor Matters. The MacGregor Dental Centers business
employs approximately 120 full-time employees and fewer than three part-time
employees, has contracts with approximately 71 dentists and generally enjoys a
good employer-employee relationship. Neither Seller nor any Parent is
delinquent in payments to any of its employees or dentists for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it to the date hereof or amounts required to be reimbursed to
such employees. Upon termination of the employment of any of said employees or
dentists, no severance or other payments (including without limitation payments
required by the Workers' Adjustment, Detraining, and Notification Act) will
become due. The MacGregor Dental Centers business has no policy, practice,
plan or program of paying severance pay or any form of severance compensation
in connection with the termination of employment or services. Seller and each
Parent are in compliance in all material respects with all applicable laws and
regulations respecting labor, employment, fair employment practices, terms and
conditions of employment, and wages and hours. There are no charges of
employment discrimination or unfair labor practices, nor are there any strikes,
slowdowns, stoppages of work, or any other concerted interference with normal
operations existing, pending or to the best knowledge of Seller and Parents
threatened against or involving the MacGregor Dental Centers business. No
question concerning representation exists respecting the employees of Seller or
any Parent. To the best knowledge of Seller and Parents, there are no
grievances, complaints or charges
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that have been filed under any dispute resolution procedure (including, but not
limited to, any proceedings under any dispute resolution procedure under any
collective bargaining agreement) that might have an adverse effect on the
MacGregor Dental Centers business. No arbitration or similar proceeding is
pending and no claim therefor has been asserted. To the best knowledge of
Seller and Parents, no collective bargaining agreement is in effect or is
currently being or is about to be negotiated by Seller or any Parent. Seller
and Parents are, and at all times since November 6, 1986 have been, in
compliance in all material respects with the requirements of the Immigration
Reform Control Act of 1986. There are no changes of which Seller or any Parent
has knowledge pending or threatened with respect to (including, without
limitation, resignation of) the senior management or key supervisory personnel
or dentists of the MacGregor Dental Centers business nor has Seller or any
Parent received any notice or information concerning any prospective change
with respect to such senior management or key supervisory personnel.
2.23 Material Relationships; Government Contracts.
(a) To the best knowledge of Seller and Parents, the
relationships with the customers, Health Care Providers and the parties to the
contracts referred to in Section 2.13(a)(xvi) of the MacGregor Dental Centers
business are good commercial working relationships. To the best knowledge of
Seller and Parents, no Health Care Provider or DMO with which the MacGregor
Dental Centers business does business has any plan or intention to terminate,
to cancel or otherwise materially and adversely modify its relationship with
such business or to decrease materially or limit its purchase of the services
of such business. Except as set forth in Section 2.23(a) of the Disclosure
Schedule, no DMO relationship or material contract or other material business
relationship of either Seller has been terminated in the past year.
(b) The Subject Assets do not include any contracts or
subcontracts which any government (including any municipal government) or
governmental agency or activity, and none of Seller or any Parent is ineligible
to submit bids to any DMO.
2.24 Disclosure. Except as set forth in Section 2.24 of the
Disclosure Schedule, to the best knowledge of Seller and Parents, the
representations, warranties and statements contained in this Agreement and in
the certificates, exhibits and schedules delivered by Seller and Parents to
Buyer pursuant to this Agreement do not contain any untrue statement of a
material fact, and, when taken together, do not omit to state a material fact
required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made.
2.25 Investment Representations. Seller, in connection with its
acquisition of Common Stock, represents that it is an "accredited investor" as
such term is defined in Rule 501 under the Securities Act of 1933, as amended
(the "Securities Act"). Seller represents to Buyer that it is acquiring such
Common Stock for its own account, for investment only and not with a view to,
or any present intention of, effecting a distribution of such securities or any
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part thereof except pursuant to a registration or an available exemption under
applicable law. Seller acknowledges that the Common Stock of Buyer has not
been registered under the Securities Act or the securities laws of any state or
other jurisdiction and cannot be disposed of unless it is subsequently
registered under the Securities Act and any applicable state laws or exemption
from such registration is available. Seller represents that it has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of the investment contemplated by this
Agreement and making an informed investment decision with respect thereto.
Seller and Parents acknowledge and agree that the following legend shall
be typed on each certificate evidencing shares of Common Stock issued
hereunder:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE
SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY
LAWS.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A
STOCKHOLDERS' AGREEMENT DATED AS OF FEBRUARY 5, 1996, INCLUDING THEREIN CERTAIN
RESTRICTIONS ON TRANSFER, AND VOTING REQUIREMENTS. A COMPLETE AND CORRECT COPY
OF THIS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
ARTICLE 3. COVENANTS OF SELLER AND PARENTS.
3.1 Making of Covenants and Agreements. Seller and Parents jointly
and severally make the covenants and agreements as set forth in this Section 3,
which shall apply with respect to the period from the date hereof to the
Closing and, to the extent contemplated herein, thereafter.
3.2 Payment of Obligations. Both prior to and subsequent to the
Closing, Seller and its affiliates shall pay all of the Excluded Liabilities in
the ordinary course of business as they become due.
3.3 Collection of Assets. Subsequent to the Closing, Buyer and its
assignees shall have the right and authority to collect all receivables and
other items transferred and assigned
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by Seller hereunder and to endorse with the name of Seller or any of its
affiliates any checks received on account of such receivables or other items,
and Seller and each Parent agree that it will promptly transfer or deliver to
Buyer and its assignees from time to time, any cash or other property that it
may receive on or after February 1, 1996 with respect to any claims, contracts,
licenses, leases, commitments, sales orders, purchase orders, receivables of
any character or any other items included in the assets transferred to Buyer
pursuant to this Agreement.
3.4 Availability of Records. After the Closing, Seller and each
Parent shall make available to Buyer as reasonably requested by Buyer in
connection with its business purposes or by any taxing authority, and at
Buyer's expense, any and all information, records or documents relating to the
MacGregor Dental Centers business conducted prior to the Closing Date and
related personnel retained by it, in respect of periods prior to Closing and
shall also make available to Buyer and its assignees, as reasonably requested
by Buyer, personnel responsible for preparing or maintaining information,
records and documents, both in connection with tax matters as well as
litigation. Seller and each Parent shall preserve all such information,
records and documents until the later of six years after the Closing or the
expiration of all statutes of limitations or extensions thereof. Prior to
destroying any records related to the MacGregor Dental Centers business
conducted prior to the Closing Date, Seller and Parents shall notify Buyer of
their intent to destroy such records and will permit the Buyer to retain any
such records if it wishes to do so. Seller and each Parent agrees to hold all
information relating to the MacGregor Dental Centers business in strict
confidence from and after the Closing.
3.5 Use of Name. On or promptly following the date of the Closing,
MDC shall file duly approved amendments to its charter or equivalent documents
changing its corporate or partnership names so as to delete reference to
"MacGregor," "MacGregor Dental Centers," "MacGregor Dental" or any variant
thereof or related acronym and thereafter Seller and Parents shall refrain from
any use of such trade names or any associated logos.
3.6 Net Worth. Seller and Parents agree that Seller, MDCI, SMI, MDC
and Shears General shall maintain a consolidated net worth of not less than
$2.75 million through August 1, 1997; provided, however, that in the event any
claim for indemnification is held over thereafter in accordance with Section
7.2(c), then such net worth shall be maintained after such date in an amount
equal to the lesser of $2.75 or the amount of such claim.
3.7 Real Estate Lease Matters. Seller and Parents hereby jointly and
severally agree that they will guarantee the full and prompt performance by
Buyer or its subsidiary of those real estate leases for which the prior written
consent of the relevant landlord to assignment has not been obtained as of the
date hereof as identified in Section 2.5(b)(i) of the Disclosure Schedule
(excluding the Prudential leases identified thereon) if and to the extent
required to obtain a consent to such assignment and a release or subordination
of the related landlord's lien to liens in favor of NationsBank of Texas, N.A.,
as agent (the "Agent") for the lenders identified in the Loan Agreement dated
as of February 5, 1996 (the "Senior Lien"),
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such guarantee being for the benefit of Buyer and the landlords thereunder.
Seller and Parents hereby further agree to use their best efforts to obtain any
required consents to lease assignments promptly. Any guarantee delivered
pursuant to this Section 3.7 with respect to a lease shall terminate at such
time as the relevant landlord shall have granted an unconditional consent in
writing, including a subordination to the Senior Lien or release of the related
landlord's lien, unless and to the extent that a continuation of such guarantee
is required to obtain such a consent. Buyer in turn agrees for the benefit of
Seller and Parents to perform its obligations under all leases for which Seller
and/or any Parent executes a guarantee in accordance with their terms.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
4.1 Making of Representations and Warranties. As a material
inducement to Seller and Parents to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer hereby makes the representations
and warranties to Seller and Parents contained in this Section 4.
4.2 Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Delaware with full
corporate power and authority to own or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is conducted by it.
4.3 Authority of Buyer. Buyer has full corporate power and authority
to enter into this Agreement, each agreement, document and instrument to be
executed and delivered by Buyer pursuant to this Agreement, the Stock Purchase
Agreement dated as of February 5, 1996, executed in connection herewith, the
Stockholders' Agreement, the Employment Agreement and the Non-Competition
Agreement, and to carry out the transactions contemplated hereby and thereby.
The execution, delivery and performance by Buyer of this Agreement and each
such agreement, document and instrument have been duly authorized by all
necessary action of Buyer or such subsidiary and no other action on the part of
Buyer or such subsidiary is required in connection therewith. This Agreement
and each such agreement, document and instrument executed and delivered by
Buyer pursuant to this Agreement constitute valid and binding obligations of
Buyer or such subsidiary enforceable in accordance with their terms.
The execution, delivery and performance by Buyer of this Agreement and
each such agreement, document and instrument:
(i) do not and will not violate any provision of the
Amended and Restated Certificate of Incorporation
or by-laws (or the equivalent) of Buyer;
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(ii) do not and will not violate any laws of the United
States or any state or any other jurisdiction
applicable to Buyer or require Buyer to obtain any
approval, consent or waiver of, or make any filing
with, any person or entity (governmental or
otherwise) which has not been obtained or made, and
(iii) do not and will not result in a breach of,
constitute a default under, accelerate any
obligation under, or give rise to a right of
termination of any indenture, loan or credit
agreement, or other agreement mortgage, lease,
permit, order, judgment or decree to which Buyer is
a party or by which the property of Buyer is bound
or affected, except to the same will not have a
material adverse effect of the business of Buyer
and its subsidiaries taken as a whole.
4.4 Litigation. There is no litigation pending or, to the best
knowledge of Buyer, threatened against Buyer which would prevent or hinder the
consummation of the transactions contemplated by this Agreement.
4.5 Finder's Fees. Buyer has not incurred or become liable for any
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
4.6 Common Stock. Upon consummation of the transactions contemplated
hereby, the shares of Common Stock issued to Seller pursuant to Section 1.3
shall be duly authorized, validly issued, fully paid and non-assessable. As of
the date hereof and after giving effect to the transactions contemplated hereby
and certain related transactions, including the filing of a Certificate of
Amendment to Buyer's Amended and Restated Certificate of Incorporation, the
authorized capital stock of Buyer consists of 15,000,000 shares of Common
Stock, 1,000,000 shares of Class A Common Stock, 4,800,000 shares of
Convertible Participating Preferred Stock and 3,840,000 shares of Redeemable
Preferred Stock, of which 5,500,000, zero, 4,800,000 and zero shares,
respectively, are issued and outstanding. In addition, Buyer has authorized
and reserved for issuance upon conversion of the Convertible Participating
Preferred Stock 4,800,000 shares of Common Stock and 3,840,000 shares of
Redeemable Preferred Stock, and has reserved an additional 800,000 shares of
Class A Common Stock for issuance as options or restricted stock awards under
Buyer's 1996 Stock Option and Incentive Plan.
SECTION 5. COVENANTS OF BUYER.
5.1 Making of Covenants and Agreements. Buyer hereby makes the
covenants and agreements set forth in this Section 5.
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5.2 Availability of Records. After the Closing, Buyer shall make
available to Seller and Parents as reasonably requested by them and at their
expense or any taxing authority all information, records or documents relating
to the Subject Assets and related personnel in respect of all periods prior to
Closing and shall preserve all such information, records and documents until
the later of six years after the Closing or the expiration of all statutes of
limitations or extensions thereof, provided that Seller and Parents shall hold
the same in confidence. Buyer shall also make available to Seller and Parents,
as reasonably requested by them and at their expense, personnel responsible for
preparing or maintaining information, records and documents, both in connection
with tax matters as well as litigation. Prior to destroying any records
related to the Subject Assets prior to the Closing, Buyer shall notify Seller
and Parents of its intent to destroy such records, and Buyer will permit Seller
and Parents to retain any such records and at their expense if they wish to do
so.
ARTICLE 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES, ARRANGEMENTS, COVENANTS
AND OBLIGATIONS.
All representations, warranties, agreements, covenants and obligations
herein or in any Schedule, exhibit or certificate delivered by any party to the
other party incident to the transactions contemplated hereby are material,
shall be deemed to have been relied upon by the other party and shall survive
the Closing regardless of any investigation and shall not merge in the
performance of any obligation by either party hereto, subject to the provisions
of Article 7 hereof. Anything contained herein to the contrary
notwithstanding, no party hereto may rely on any representation or warranty
made by another party herein or in any Schedule, exhibit or certificate
delivered pursuant to this Agreement if the party or parties which made the
relevant representation or warranty sustains the burden of demonstrating that
the party seeking recovery had actual knowledge at the date hereof that such
representation or warranty was not true, complete and accurate in all material
respects on and as of the date hereof, and provided such burden is sustained,
no Buyer Indemnified Party or Seller Indemnified Party (as hereinafter defined)
shall have any right to indemnification pursuant to this Article or otherwise
with respect to any such representation or warranty; provided, however, that
nothing in this Article 6 shall limit or in any way affect the rights of Buyer
Indemnified Parties to indemnification or reimbursement provided in Section
7.1(b), (c), (d), (e) or (f) (subject to Section 7.2), and nothing in this
Article 6 shall limit or in any way affect the rights of Seller Indemnified
Parties to indemnification or reimbursement provided in Sections 7.3(b) or (c)
(subject to Section 7.4), which shall be available in accordance with the terms
thereof regardless of any knowledge or investigation of any party hereto.
ARTICLE 7. INDEMNIFICATION.
7.1 Indemnification by Seller and Parents. Each Seller, MDCI, MDC,
SMI and Shears General and, subject to Section 7.2(d), ▇▇. ▇▇▇▇▇▇, jointly and
severally, agrees to defend, indemnify and hold Buyer, all subsidiaries and
affiliates of Buyer (including without
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limitation stockholders of any of the foregoing other than themselves as to any
matter for which they are responsible hereunder) and persons serving as
officers, directors, partners, employees or agents of Buyer or such
subsidiaries or affiliates thereof other than themselves as to any matter for
which they are responsible hereunder (individually a "Buyer Indemnified Party"
and collectively the "Buyer Indemnified Parties") harmless from and against any
and all Claims (as defined in Section 1.2(vii)), whether or not arising out of
third-party claims and including any liability under any theory of successor
liability, as the same are incurred, and including all amounts paid in
investigation, defense or settlement of the foregoing, of any kind or nature
whatsoever which may be sustained or suffered by any such Buyer Indemnified
Party (a "Loss" or "Losses"), based upon, arising out of, by reason of or
otherwise in respect of or in connection with:
(a) any inaccuracy in or breach of any representation or
warranty made by Seller or any Parent in this Agreement or in any Schedule,
exhibit or certificate delivered by Seller or any Parent as part of or pursuant
to this Agreement;
(b) any breach of any covenant or agreement made by Seller or
any Parent in this Agreement or in any Schedule, exhibit or certificate
delivered by Seller or any Parent as part of or pursuant to this Agreement,
including without limitation any failure of a Seller to perform and discharge
any of the Excluded Liabilities as set forth herein or to convey to Buyer all
of the assets used in the MacGregor Dental Centers business, and any breach of
Section 3.6 or 3.7;
(c) any fees or expenses of Seller or Parents (including legal
fees, accounting fees and investment banking fees) relative to this Agreement
and the transactions contemplated hereto in excess of the amount contemplated
by Section 8.2(a); and
(d) the Disclosed Matters, but only for amounts in excess of
the amounts specified on Schedule 1.2(d);
(e) any failure to obtain the consent of the relevant landlord
to the assignment to Buyer and its subsidiaries by Seller pursuant to this
Agreement of any of the real estate leases identified in Section 2.5(b)(i) of
the Disclosure Schedule (excluding leases with Prudential), including without
limitation any costs associated with moving the related office and any
increased rent;
(f) any matter, liability, obligation or alleged liability or
obligation of any Seller or Parent, or relating to the MacGregor Dental Centers
business as conducted on or prior to the Closing (including without limitation
any unknown or unasserted liability, any and all claims for injury (including
death), claims for damage, direct or consequential, relating to malpractice or
otherwise (including warranty claims) resulting from or connected with products
or services made or provided by or through Seller, any Parent or Health Care
Provider on or prior to the Closing, other personal injury or property damage
claims relating to events occurring on or prior to the Closing, amounts due in
connection with any Employee
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Program maintained or contributed to by Seller or any Parent on or prior to the
Closing, Claims relating to the performance of the Assumed Contracts through
the Closing, any employment related Claim (including any Claim of any Health
Care Provider or related professional association) relating to the period
through the Closing, any Claim relating to or alleging any failure to comply
with applicable laws and/or permitting, licensing or other regulatory
requirements in connection with the MacGregor Dental Centers business through
the Closing, Claims relating to Taxes of Seller or any Parent, and amounts paid
or payable relating to environmental matters including Losses resulting from or
in connection with the use, storage or discharge in to the ground, water or
atmosphere of any Hazardous Waste or Hazardous Materials or any violation of an
Environmental Law which occurred on or prior to the Closing. The rights of
Buyer Indemnified Parties to recover indemnification in respect of any
occurrence referred to in any of clauses (b) through (f) of this Section 7.1
shall not be limited by the fact that such occurrence may not constitute an
inaccuracy in or breach of any representation, warranty or agreement referred
to in clause (a) of this Section 7.1); provided, however, that notwithstanding
anything herein to the contrary, neither Seller nor any Parent shall be
obligated to provide indemnification for, and Buyer shall indemnify Seller and
Parents against, any losses arising from, any of the Liabilities assumed
hereunder.
7.2 Limitations on Indemnification by Seller and Parents.
(a) General Threshold. None of Seller, MDCI, MDC, SMI, Shears
General or ▇▇. ▇▇▇▇▇▇ shall be obligated to indemnify Buyer Indemnified Parties
except to the extent the cumulative amount of all Losses incurred by Buyer
Indemnified Parties exceeds Two Hundred Fifty Thousand Dollars ($250,000),
which excess cumulative amount shall be recoverable in accordance with the
terms hereof; provided, however, that the limitations set forth in this Section
7.2(a) shall not apply to the matters described in Section 7.2(e).
(b) Maximum Indemnification. None of Seller, MDCI, MDC, SMI,
Shears General or ▇▇. ▇▇▇▇▇▇ shall be obligated to indemnify Buyer Indemnified
Parties after the cumulative amount of all Losses incurred by Buyer Indemnified
Parties (including the first $250,000 described in Section 7.2(a)) exceeds
Three Million ($3,000,000) Dollars; provided, however, that the foregoing
limitation shall not apply to the matters described in Section 7.2(e) except as
provided in clause (vi) thereof.
(c) Time Limits for Claims. No claim for indemnification may
be made by any Buyer Indemnified Party unless written notice thereof shall have
been received by Seller, MDCI, MDC, SMI, Shears General and ▇▇. ▇▇▇▇▇▇ on or
prior to August 1, 1997; provided, however, that the limitation set forth in
this Section 7.2(c) shall not apply to the matters described to Section 7.2(e),
indemnification with respect to which shall expire six (6) months after the
termination of the applicable statute of limitations relating to the subject
matter covered by such provisions; and provided further, however, that in each
case if prior to the applicable date of expiration specific facts shall have
become known which are reasonably likely to constitute or give rise to any Loss
as to which indemnity may be payable and a Buyer Indemnified Party shall have
given written notice in good faith of such facts to Seller, MDCI,
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MDC, SMI, Shears General and ▇▇. ▇▇▇▇▇▇ in detail, with an explanation of how
and under which provisions of this Agreement such facts may give rise to a Loss
and providing named persons having knowledge of such facts, and filed suit for
indemnification based upon such facts within one year thereafter, then the
right to indemnification with respect thereto shall remain in effect until such
matter shall have been finally determined and disposed of and any
indemnification due in respect thereof shall have been paid.
(d) Provision of Indemnity. Any indemnification pursuant to
Section 7.1 shall be paid by Seller, MDCI, MDC, SMI and/or Shears General;
provided, however, that such indemnification shall be paid by ▇▇. ▇▇▇▇▇▇
directly only in the event and to the extent such entities for any reason fail
to pay it in full within 30 days after the same becomes due and demand has been
made in writing therefor.
(e) Dollar-for-Dollar Claims. Notwithstanding anything
contained herein to the contrary, but in all cases subject to Section 7.2(d),
Buyer Indemnified Parties shall not be subject to any limitation, whether
pursuant to this Section 7.2 hereof or otherwise, and shall be entitled to
dollar-for-dollar recovery, in seeking indemnification from any Seller or
Parent with respect to the following:
(i) Losses arising from fraud or an intentional
misrepresentation on the part of Seller or any Parent;
(ii) Losses arising from any breach of a covenant by
Seller or any Parent, provided that clause (vi) below shall govern with
respect to the covenant to pay any Excluded Liabilities described
therein with respect to unknown liabilities;
(iii) Losses involving a breach by Seller or any Parent
of the representations and warranties contained in any of Sections
1.1(a) (last paragraph, second sentence only), 2.4 (first paragraph
only), 2.7 or 2.25;
(iv) Any Loss relating to Taxes owed by Seller or any
Parent;
(v) Losses described in Section 7.1(c) or (e); and
(vi) Losses described in Section 7.1(d) or (f),
provided, however, that Claims relating to such Losses shall be subject
to Section 7.2(b) if they (or their possibility) were not disclosed
herein, in the Base Balance Sheet or on the Schedules hereto or known to
Seller or Parents at the date hereof or if they are recoverable under
Section 7.1(d), and in the case of Section 7.1(f) only, indemnification
in respect of such unknown liabilities shall be recoverable after and to
the extent that the amount thereof exceeds $20,000.
(f) Exclusive Remedy. Indemnification pursuant to Section 7.1
is the exclusive remedy of Buyer Indemnified Parties against Seller and Parents
for matters arising
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out of the representations, warranties, covenants and agreements of Seller and
Parents set forth in this Agreement and the Schedules hereto and certificates
delivered in connection herewith after the Closing (without limitation of the
rights of Buyer or any of its affiliates under any other agreement contemplated
hereby as provided in the terms thereof or by applicable law with respect to
any such other agreement, including without limitation the Non-Competition
Agreement).
(g) Insurance. The amount of any Losses suffered, sustained,
incurred or required to be paid by any Buyer Indemnified Party shall be reduced
by the amount of any insurance proceeds and other amounts paid to such Buyer
Indemnified Party by any person not a party to this Agreement.
7.3 Indemnification by Buyer. Buyer agrees to defend, indemnify and
hold Seller and Parents and the persons serving as officers, directors,
employees or agents of Seller and Parents (individually a "Seller Indemnified
Party" and collectively the "Seller Indemnified Parties") harmless from and
against any and all Claims, whether or not arising out of third-party claims
and including all amounts paid in respect of Losses (as defined in Section 7.1
hereof) based upon, arising out of, by reason of or otherwise in respect of or
in connection with (a) any inaccuracy in or breach of any representation or
warranty made by Buyer in this Agreement or in any Schedule, exhibit or
certificate delivered by Buyer as part of or pursuant to this Agreement; (b)
any breach of any covenant or agreement made by Buyer in this Agreement, or in
any Schedule, exhibit or certificate, delivered by Buyer as part of or pursuant
to this Agreement, or (c) any failure to discharge the Liabilities. The rights
of Seller Indemnified Parties to recover indemnification in respect of any
occurrence referred to in clause (b) or (c) of this Section 7.3 shall not be
limited by the fact that such occurrence may not constitute an inaccuracy in or
breach of any representation or warranty referred to in clause (a) of this
Section 7.3.
7.4 Limitations on Indemnification by Buyer.
(a) General Threshold. Buyer shall not be obligated to
indemnify Seller Indemnified Parties except to the extent the cumulative amount
of all Losses incurred by Seller Indemnified Parties exceeds Two Hundred Fifty
Thousand Dollars ($250,000) (the "Threshold"), which excess cumulative amount
shall be recoverable in accordance with the terms hereof; provided, however,
that the limitations set forth in this Section 7.4(a) shall not apply to the
matters described in Section 7.4(d).
(b) Maximum Indemnification. Buyer shall not be obligated to
indemnify Seller Indemnified Parties after the cumulative amount of all Losses
incurred by Seller Indemnified Parties exceeds Three Million ($3,000,000)
Dollars; provided, however that the foregoing limitation shall not apply to the
matters described in Section 7.4(d).
(c) Time Limits for Claims. No claim for indemnification may
be made by any Seller Indemnified Party unless written notice thereof shall
have been received by Buyer
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on or prior to August 1, 1997; provided, however, that the limitation set forth
in this Section 7.4(c) shall not apply to the matters described to Section
7.4(d), indemnification with respect to which shall expire six (6) months after
the termination of the applicable statute of limitations relating to the
subject matter covered by such provisions; and provided further, however, that
in each case if prior to the applicable date of expiration specific facts shall
have become known which are reasonably likely to constitute or give rise to any
Loss as to which indemnity may be payable and a Seller Indemnified Party shall
have given written notice in good faith of such facts to Buyer in detail, with
an explanation of how and under which provisions of this Agreement such facts
may give rise to a Loss and providing named persons having knowledge of such
facts, and filed suit for indemnification based upon such facts within one year
thereafter, then the right to indemnification with respect thereto shall remain
in effect until such matter shall have been finally determined and disposed of
and any indemnification due in respect thereof shall have been paid.
(d) Dollar-for-Dollar Claims. Notwithstanding anything
contained herein to the contrary, Seller Indemnified Parties shall not be
subject to any limitation, whether pursuant to this Section 7.4 hereof or
otherwise, and shall be entitled to dollar-for-dollar recovery, in seeking
indemnification from Buyer with respect to the following:
(i) Losses arising from fraud or an intentional
misrepresentation on the part of Buyer;
(ii) Losses arising from any breach of a covenant by
Buyer including without limitation the covenants in Section 8.2(a) and
to assume and discharge the Liabilities; and
(iii) Losses involving a breach by Buyer of the
representations and warranties contained in any of Sections 4.3 (first
paragraph) or 4.6.
(e) Exclusive Remedy. Indemnification pursuant to Section 7.3
is the sole and exclusive remedy of Seller Indemnified Parties against Buyer
for matters arising out of the representations, warranties, covenants and
agreements of the Buyer set forth in this Agreement and the Schedules hereto
and certificates delivered in connection herewith after the Closing (without
limitation of the rights of Seller Indemnified Parties under any other
agreement contemplated hereby as provided in the terms thereof or by applicable
law with respect to any such other agreement).
(f) Insurance. The amount of any Losses suffered, sustained,
incurred or required to be paid by any Seller Indemnified Party shall be
reduced by the amount of any insurance proceeds and other amounts paid to such
Seller Indemnified Party by any person not a party to this Agreement.
7.5 Notice; Defense of Claims. Promptly after receipt by an
indemnified party of notice of any third party or other claim, liability or
expense to which the indemnification
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obligations hereunder would apply, including in connection with any
governmental, employer or malpractice related proceeding, the indemnified party
shall give notice thereof in writing to the indemnifying party or parties, but
the omission to so notify the indemnifying party or parties promptly will not
relieve the indemnifying party or parties from any liability except to the
extent that the indemnifying party or parties shall have been materially
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted.
In the case of any third party claim, if within twenty (20) days after
receiving the notice described in the preceding paragraph, the indemnifying
party or parties (i) give written notice to the indemnified party or parties
stating that they intend to defend in good faith against such claim, liability
or expense at their own cost and expense and (ii) provide assurance reasonably
acceptable to such indemnified party or parties that such indemnification will
be paid fully and promptly if required and such indemnified party or parties
will not incur cost or expense during the proceeding, then counsel for the
defense shall be selected by the indemnifying party or parties (subject to the
consent of such indemnified party or parties which consent shall not be
unreasonably withheld) and such indemnified party or parties shall not be
required to make any payment with respect to such claim, liability or expense
as long as the indemnifying party or parties are conducting a good faith and
diligent defense at their own expense; provided, however, that the assumption
of defense of any such matters by the indemnifying party or parties shall
relate solely to the claim, liability or expense that is subject or potentially
subject to indemnification. If the indemnifying party or parties assume such
defense in accordance with the preceding sentence, they shall have the right,
with the consent of such indemnified party or parties, which consent shall not
be unreasonably withheld, to settle all Indemnifiable matters related to claims
by third parties which are susceptible to being settled provided the
indemnifying party or parties' obligation to indemnify such indemnified party
or parties therefor will be fully satisfied and the settlement includes a
complete release of such indemnified party or parties. The indemnifying party
or parties shall keep the such indemnified party or parties apprised of the
status of the claim, liability or expense and any resulting suit, proceeding or
enforcement action, shall furnish such indemnified party or parties with all
documents and information that such indemnified party or parties shall
reasonably request and shall consult with such indemnified party or parties
prior to acting on major matters, including settlement discussions.
Notwithstanding anything herein stated, such indemnified party or parties shall
at all times have the right to fully participate in such defense at its own
expense directly or through counsel; provided, however, if the named parties to
the action or proceeding include both the indemnifying party or parties and the
indemnified party or parties and representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the expense of separate counsel for such indemnified party or parties
shall be paid by the indemnifying party or parties. If no such notice of
intent to dispute and defend is given by the indemnifying party or parties, or
if such diligent good faith defense is not being or ceases to be conducted,
such indemnified party or parties shall, at the expense of the indemnifying
party or parties, undertake the defense of
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(with counsel selected by such indemnified party or parties), and shall have
the right to compromise or settle, such claim, liability or expense. If such
claim, liability or expense is one that by its nature cannot be defended solely
by the indemnifying party or parties, then such indemnified party or parties
shall make available all information and assistance that the indemnifying party
or parties may reasonably request and shall cooperate with the indemnifying
party or parties in such defense.
7.6 Satisfaction of Indemnification Obligations. Any indemnity
payable pursuant to this Section 7 shall be paid within the later of (a) thirty
(30) days after the indemnified party's request therefor or (b) thirty (30)
days prior to the date on which the Loss upon which the indemnity is based is
required to be satisfied by the indemnified party.
ARTICLE 8. MISCELLANEOUS.
8.1 Bulk Sales Law. Buyer waives compliance by Seller and Parents
with the provisions of any applicable bulk sales, fraudulent conveyance or
other law for the protection of creditors, and Seller and Parents jointly and
severally agree to indemnify and hold Buyer and its affiliates harmless from,
and reimburse Buyer and its affiliates for, any loss, cost, expense, liability
or damage (including reasonable counsel fees and disbursements and expenses)
which Buyer or its affiliates may suffer or incur by virtue of the
non-compliance by Seller or any Parent with such laws.
8.2 Fees, Expenses and Certain Taxes.
(a) Buyer will pay its fees and expenses in connection with
this Agreement and the transactions contemplated hereby. Buyer will also pay
the legal, accounting and investment banking fees and expenses of Seller and
Parents in connection with this Agreement and the transactions contemplated
hereby in an amount not to exceed $1,050,000, with Seller and Parents agreeing
to pay any such fees and expenses incurred by them in excess of such amount,
provided that all fees and expenses of Coopers & ▇▇▇▇▇▇▇ L.L.P. will be paid by
Buyer.
(b) (i) Any and all real property taxes of Seller and its
affiliates shall remain an obligation of and be paid by Seller. Personal
property ad valorem taxes relating to the MacGregor Dental Center business for
1996 (due in January 1997) and federal and state unemployment tax relating to
the MacGregor Dental Centers business due in April 1996 will be paid by Buyer
or its subsidiary, the cash payment under Section 1.3(a) having been reduced by
$8,706 in reflection of the portion of such taxes attributable to pre-Closing
periods.
(ii) Seller agrees that payments in respect of workers
compensation insurance for the periods March 1, 1994 to February 28, 1995 and
March 1, 1995 through February 29, 1996 in respect of the MacGregor Dental
Centers business will be paid promptly by it if and to the extent (and when
determined to be) due, provided that Buyer or a subsidiary
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of Buyer will reimburse Seller for one-twelfth (not to exceed $1,667) of any
such payment due in respect of the year ending February 29, 1996, reflecting
February operations. Any such payments in respect of the MacGregor Dental
Centers business for the year beginning March 1, 1996 will be the
responsibility of Buyer.
(iii) Recording fees associated with Buyer's assumption
of leases of Seller and with any UCC filings in connection with the release or
guaranty of security interests shall be paid by Buyer.
8.3 Governing Law. This Agreement shall be construed under and
governed by the internal laws of the State of Texas without regard to its
conflict of laws provisions.
8.4 Notices. Any notice, request, demand other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the expiration of
three days after deposit in United States post office facilities properly
addressed with postage prepaid or acknowledgment of receipt. All notices and
payments to a party will be sent to the addresses set forth below or to such
other address or person as such party may designate by notice to each other
party hereunder:
TO BUYER: Monarch Dental Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
With copies to: ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
and
▇▇▇▇▇▇▇, Procter & ▇▇▇▇
Exchange Place
Boston, MA 02109
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, P.C.
TO SELLER OR
PARENTS: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
MacGregor Dental Centers
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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With a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Any notice given hereunder may be given on behalf of any party by his counsel
or other authorized representatives.
8.5 Entire Agreement. This Agreement, including the Schedules
referred to herein and the other writings specifically identified herein or
delivered in connection with the transactions contemplated hereby, is complete,
reflects the entire agreement of the parties with respect to its subject
matter, and supersedes all previous written or oral negotiations, commitments
and writings, including without limitation the letter dated October 2, 1995.
8.6 Assignability; Binding Effect. Provided the relevant assignee
assumes or agrees to be bound by Buyer's obligations hereunder, this Agreement
and any rights hereunder shall be assignable by Buyer to one or more
corporations or partnerships controlling, controlled by or under common control
with Buyer, directly or indirectly, provided Buyer shall remain liable for its
obligations hereunder in connection with any such assignment, or to any
successor or acquiror of Buyer or its affiliates or to any entity providing
financing in connection with the transactions contemplated hereby or to any
successor or assign or such an entity (including without limitation any such
successor or assign in connection with any refinancing, renewal or extension of
such financing), upon written notice to Seller. This Agreement may not be
assigned by Seller or any Parent without the prior written consent of Buyer.
This Agreement shall be binding upon and enforceable by, and shall inure to the
benefit of, the parties hereto and their respective successors, executors,
administrators, estates, heirs and permitted assigns (including without
limitation the executors, administrators, estates and heirs of an individual
Parent in the event of his or her death).
8.7 Captions and Gender. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun
in reference to a party hereto shall be deemed to include the feminine or
neuter pronoun, as the context may require.
8.8 Execution in Counterparts. For the convenience of the parties
and to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
8.9 Amendments. This Agreement may not be amended or modified, nor
may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by Buyer, and Seller and Parents,
or in the case of a waiver, the party or parties waiving compliance.
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8.10 Consent to Jurisdiction; Certain Remedies. Solely for the
purpose of allowing a party to enforce its indemnification and other rights
hereunder, each of the parties hereby consents to personal jurisdiction,
service of process and venue in the federal or state courts of Texas or in the
court in which any claim for which indemnification may be sought hereunder is
brought against an indemnified party. If any party should default in the
performance of its obligations hereunder, the other party or parties, as
applicable, shall, in addition to any other of its rights and remedies
hereunder or otherwise, be entitled to the remedy of specific performance, and
each of the parties hereto expressly waives the defense that a remedy in
damages will be adequate.
8.11 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" of a person shall (i) with respect to a
person, any member of such person's family (including any child, step-child,
parent, step-parent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law); (ii) with respect to an
entity, any officer, director, stockholder, partner or investor in such entity
or of or in any affiliate of such entity; and (iii) with respect to a person or
entity, any person or entity which directly or indirectly controls, is
controlled by, or is under common control with such person or entity.
(b) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise;
(c) "person" means an individual, corporation, partnership,
association, trust or any unincorporated organization; and
(d) "subsidiary" of a person means any corporation more than
50 percent of whose outstanding voting securities, or any partnership, joint
venture or other entity more than 50 percent of whose total equity interest, is
directly or indirectly owned by such person.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement or
caused this Agreement to be executed by their duly authorized representatives.
BUYER:
ATTEST MONARCH DENTAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------- ------------------------------------
Secretary Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
[Corporate Seal] Title: President
SELLER:
SHEARS VANGUARD LTD.
ATTEST By: Shears Vanguard General, Inc., its
General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------- --------------------------------
Secretary Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
[Seal] Title: President
PARENTS:
ATTEST SHEARS VANGUARD INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------- ------------------------------------
Secretary Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
[Seal] Title: President
ATTEST SHEARS VANGUARD SMI INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------- ------------------------------------
Secretary Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
[Seal] Title: President
52
ATTEST SHEARS VANGUARD GENERAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------- ------------------------------------
Secretary Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
[Seal] Title: President
ATTEST MDC DENTAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------- ------------------------------------
Secretary Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
[Seal] Title: President
---------------------------------------
SPOUSE'S CONSENT ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
I acknowledge that I have read the
foregoing Asset Contribution Agreement
and understand the contents thereof.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------