EXHIBIT 10.45
AGREEMENT AND PLAN OF MERGER
Dated as of December 8, 1997
By and Among
Castle Dental Centers of Texas, Inc.
as Purchaser,
▇▇▇▇▇ ▇. ▇▇▇▇, D.D.S., Inc.
as the Company
and
▇▇▇▇▇ ▇. ▇▇▇▇, D.D.S.
as Shareholder
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS..............................................................................................1
1.1 Definitions.....................................................................................1
ARTICLE II
THE TRANSACTION..........................................................................................4
2.1 Merger..........................................................................................4
2.2 Articles of Incorporation; Bylaws...............................................................5
2.3 Directors; Officers.............................................................................5
2.4 Conversion of Company Common Stock..............................................................5
2.5 Exchange of Stock Certificates..................................................................5
2.6 Subsequent Actions..............................................................................6
2.7 Closing.........................................................................................6
ARTICLE III
PAYMENT OF PURCHASE PRICE................................................................................6
3.1 Amount; Allocation; Delivery....................................................................6
3.2 Additional Contingent Purchase Price Consideration..............................................6
3.3 Agency Relationship.............................................................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANYAND THE SHAREHOLDER.........................................8
4.1 Representations and Warranties of the Company and the Shareholder. ............................8
4.2 Existence and Good Standing.....................................................................8
4.3 Authorization and Validity of Agreement.........................................................8
4.4 Capital Stock...................................................................................9
4.5 Consents and Approvals; No Violations...........................................................9
4.6 Subsidiaries and Affiliates.....................................................................9
4.7 Financial Statements; No Material Adverse Change...............................................10
4.8 Books and Records..............................................................................10
4.9 Title to Properties; Encumbrances; Condition...................................................10
4.10 Real Property..................................................................................11
4.11 Leases.........................................................................................11
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4.12 Material Contracts.............................................................................11
4.13 Permits........................................................................................12
4.14 Litigation.....................................................................................12
4.15 Taxes..........................................................................................12
4.16 Insurance......................................................................................13
4.17 Intellectual Properties........................................................................13
4.18 Compliance with Laws...........................................................................13
4.19 Employment Relations...........................................................................13
4.20 Employee Benefit Plans.........................................................................14
4.21 Environmental Laws and Regulations.............................................................14
4.22 Interests in Customers, Suppliers, Etc.........................................................14
4.23 Compensation of Employees......................................................................15
4.24 Payors. ......................................................................................15
4.25 Accounts Receivable; Accounts Payable..........................................................15
4.26 Investments....................................................................................15
4.27 Broker's or Finder's Fees......................................................................15
4.28 Copies of Documents............................................................................15
4.29 Investment Representations.....................................................................15
4.30 Due Diligence..................................................................................16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER.............................................................16
5.1 Representations and Warranties of Purchaser....................................................16
5.2 Existence and Good Standing of Purchaser; Power and Authority..................................17
5.3 No Violations..................................................................................17
5.4 Capital Stock..................................................................................17
5.5 Litigation.....................................................................................18
5.6 Financial Statements...........................................................................18
5.7 Broker's or Finder's Fees......................................................................18
5.8 Business Information...........................................................................18
5.9 SEC Filings....................................................................................18
5.10 Absence of Certain Changes.....................................................................19
5.11 Compliance with Laws...........................................................................19
5.12 Environmental Laws and Regulations.............................................................19
5.13 Taxes..........................................................................................19
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ARTICLE VI
CONDITIONS TO THE SHAREHOLDER'S OBLIGATIONS.............................................................20
6.1 Truth of Representations and Warranties........................................................20
6.2 Performance of Agreements......................................................................20
6.3 No Litigation Threatened.......................................................................21
6.4 Consideration..................................................................................21
6.5 Governmental Approvals.........................................................................21
6.6 Proceedings....................................................................................21
6.7 Good Standing Certificates.....................................................................21
6.8 Employment Agreement...........................................................................21
6.9 Registration Rights Agreement..................................................................21
6.10 No Material Adverse Change.....................................................................21
6.11 Resolutions....................................................................................21
6.12 Legal Opinion..................................................................................22
ARTICLE VII
CONDITIONS TO PURCHASER'S OBLIGATIONS...................................................................22
7.1 Truth of Representations and Warranties........................................................22
7.2 Performance of Agreements......................................................................22
7.3 Documents of Conveyance........................................................................22
7.4 No Litigation Threatened.......................................................................22
7.5 Governmental Approvals.........................................................................22
7.6 Consents.......................................................................................22
7.7 Legal Opinion..................................................................................23
7.8 Proceedings....................................................................................23
7.9 Castle PC......................................................................................23
7.10 Good Standing Certificates.....................................................................23
ARTICLE VIII
COVENANTS OF THE COMPANY AND THE SHAREHOLDER............................................................23
8.1 Cooperation by the Company and the Shareholder.................................................23
8.2 Amendment of Schedules.........................................................................24
8.3 Conduct of Business............................................................................24
8.4 Exclusive Dealing..............................................................................24
8.5 Review of the Assets...........................................................................24
8.6 Further Assurances.............................................................................24
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ARTICLE IX
COVENANTS OF PURCHASER..................................................................................25
9.1 Cooperation by Purchaser.......................................................................25
9.2 Amendment of Schedules.........................................................................25
9.3 Further Assurances.............................................................................25
9.4 Indemnification and Insurance..................................................................25
ARTICLE X
TERMINATION.............................................................................................26
10.1 Termination....................................................................................26
10.2 Effect on Obligations..........................................................................26
ARTICLE XI
SURVIVAL AND INDEMNIFICATION............................................................................27
11.1 Indemnification of the Company and the Shareholder.............................................27
11.2 Indemnification of the Purchaser...............................................................27
11.3 Demands........................................................................................27
11.4 Right to Contest and Defend....................................................................28
11.5 Cooperation....................................................................................28
11.6 Right to Participate...........................................................................29
11.7 Payment of Damages.............................................................................29
11.8 Right of Setoff................................................................................29
11.9 Dispute as to Right of Indemnification.........................................................29
11.10 Indemnification Deductible.....................................................................29
11.11 Indemnification Cap............................................................................29
11.12 Survival of Representations and Warranties.....................................................30
ARTICLE XII
MISCELLANEOUS...........................................................................................30
12.1 Shareholder Guarantees.........................................................................30
12.2 Entire Agreement...............................................................................30
12.3 Successors and Assigns.........................................................................30
12.4 Counterparts...................................................................................30
12.5 Headings.......................................................................................30
12.6 Modification and Waiver........................................................................30
12.7 No Third Party Beneficiary Rights..............................................................31
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12.8 Sales and Transfer Taxes.......................................................................31
12.9 Expenses.......................................................................................31
12.10 Notice.........................................................................................31
12.11 Governing Law..................................................................................32
12.12 Confidentiality; Publicity.....................................................................32
12.13 Attorneys' Fees................................................................................32
12.14 Consent to Jurisdiction........................................................................32
12.15 Severability...................................................................................32
12.16 Enforcement....................................................................................33
SCHEDULES
Schedule 4.5 Consents
Schedule 4.6 Interests in Other Entities
Schedule 4.7 Material Adverse Change
Schedule 4.9 Encumbrances
Schedule 4.10 Real Property
Schedule 4.11 Leased Personal Property
Schedule 4.12 Material Contracts and Proposals
Schedule 4.13 Permits
Schedule 4.14 Litigation
Schedule 4.15 Taxes
Schedule 4.16 Insurance Policies
Schedule 4.17 Intellectual Property
Schedule 4.21 Environmental Matters
Schedule 4.22 Other Business Relationships
Schedule 4.23 Employee Compensation
Schedule 4.24 Payors
Schedule 4.25 Accounts Receivable
Schedule 5.6 Purchaser Financial Statement
Schedule 5.8 Business Information
Schedule 5.10 Certain Changes
Schedule 5.11 Compliance with Laws
Schedule 5.12 Environmental Matters
Schedule 5.13 Taxes
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EXHIBITS
Exhibit A-1 Form of Promissory Note
Exhibit A-2 Form of Promissory Note
Exhibit B Purchaser Suitability Questionnaire
Exhibit C Employment Agreement
Exhibit D Registration Rights Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 8, 1997 by and among
Castle Dental Centers of Texas, Inc., a Texas corporation ("Purchaser"), ▇▇▇▇▇
▇. ▇▇▇▇, D.D.S., Inc., a Texas professional corporation (the "Company") and
▇▇▇▇▇ ▇. ▇▇▇▇ the sole shareholder of the Company (the "Shareholder").
W I T N E S S E T H:
WHEREAS, Company is engaged in the Business and Purchaser is engaged in
the Business of managing certain non-dentistry aspects of dental practices;
WHEREAS, it is intended for federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as a reorganization
within the meaning of Section 368(a) of the Code;
NOW, THEREFORE, for the mutual covenants and other consideration
described herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto covenant and
agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used herein, the following terms have the meanings
set forth below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"ACCOUNTS PAYABLE": the payables of the Company to trade account and
other creditors.
"ACCOUNTS RECEIVABLE": all notes and accounts receivable of the
Company.
"AFFILIATE": with respect to any Person, any other Person directly or
indirectly controlling (including but not limited to all directors and officers
of such Person), controlled by, or under direct or indirect common control with
such Person.
"AGREEMENT": this Agreement and Plan of Merger.
"BUSINESS": the practice management of dentistry and periodontics and
all other management and related activities currently conducted by the Company.
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"BUSINESS DAY": a day other than a Saturday, Sunday or a legal holiday
on which commercial banks are required or authorized to close in the State of
Texas.
"CASTLE PC": ▇▇▇▇ ▇. ▇▇▇▇▇▇, D.D.S., P.C., a Texas professional
corporation.
"CLOSING": as defined in Section 2.7 hereof.
"CLOSING BALANCE SHEET DATE": November 30, 1997.
"CLOSING DATE": as defined in Section 2.7 hereof.
"CLOSING DATE BALANCE SHEET": the Balance Sheet dated as of the Closing
Balance Sheet Date.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and rulings issued thereunder. Section
references to the Code are to the Code as in effect at the date of this
Agreement and any subsequent provisions of the Code amendatory thereof,
supplemental thereto or substituted therefor.
"COMPANY": as defined in the preamble of the Agreement.
"EMPLOYMENT AGREEMENT": the employment agreement executed pursuant
hereto substantially in the form of Exhibit B attached hereto.
"ENCUMBRANCES": liens, security interests, options, rights of first
refusal, easements, mortgages, charges, debentures, indentures, deeds of trust,
rights-of-way, restrictions, agreements, encroachments, licenses, leases,
permits, security agreements, or any other encumbrances and other restrictions
or limitations on use of real or personal property or irregularities in title
thereto that would have a Material Adverse Effect.
"ENVIRONMENTAL CLAIM": any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violations, investigations or proceedings relating in any way
to any Environmental Law (for purposes of this definition, "Claims"), including
without limitation (i) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, remedial or other actions of
damages pursuant to any applicable Environmental Law and (ii) any and all Claims
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to health, safety or the
environment.
"ENVIRONMENTAL LAW": any federal, state or local statute, law, rule,
regulation, ordinance, code, policy or rule of common law now in effect and in
each case as amended and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree
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or judgment, relating to Hazardous Materials, the environment or health relating
to or arising from environmental conditions, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended 42 U.S.C. ss. 9601 ET SEQ.; the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. ss. 1801 ET SEQ.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. ss. 6901 ET SEQ.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. ss. 1251 ET SEQ.; the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 ET SEQ.; the Clean Air Act, 42 U.S.C.
ss. 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. ss. 3808 ET SEQ.; the
Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 ET SEQ.; and relevant state and
local laws.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA as in effect at the date of
this Agreement and any subsequent provisions of ERISA amendatory thereof,
supplemental thereto or substituted therefor.
"FINANCIAL STATEMENTS": as defined in Section 4.7 hereof.
"GAAP": generally accepted accounting principles consistently applied
in the United States of America.
"HAZARDOUS MATERIALS": (i) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(ii) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants" or "pollutants," or words of similar import
under any applicable Environmental Law; and (iii) any other chemical, material
or substance, exposure to which is prohibited, limited or regulated by an
governmental authority.
"INTELLECTUAL PROPERTY": domestic and foreign patents, patent
applications, registered and unregistered trademarks, service marks, trade names
and logos, registered and unregistered copyrights, computer programs, data
bases, trade secrets and proprietary information relating to the conduct of the
Business.
"KNOWLEDGE": actual knowledge.
"MATERIAL ADVERSE EFFECT": material adverse effect on the assets,
liabilities, business, financial condition, results of operations, of a Person,
taken as a whole.
"PERMITS": as defined in Section 4.13 hereof.
"PERMITTED ENCUMBRANCES": as defined in Section 4.9 hereof.
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"PERSON": any individual, partnership, joint venture, corporation,
trust, unincorporated organization, government or other department or agency
thereof or other entity.
"PLANS": as defined in Section 4.20 hereof.
"PRE-CLOSING PERIODS": as defined in Section 4.15(a) hereof.
"PRICE ALLOCATION": as defined in Section 3.1 hereof.
"PURCHASE PRICE": as defined in Section 3.1 hereof.
"PURCHASER": as defined in the preamble of this Agreement.
"RETURNS": as defined in Section 4.15(a) hereof.
"RELEASE": disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like,
into or upon any land or water or air, or otherwise entering into the
environment.
"STOCK": as defined in Section 4.4 hereof.
"TAX": any net income, alternative or add-on minimum tax, advance,
corporation, gross income, gross receipts, sales, use, AD VALOREM, franchise,
profits, license, value added, withholding, payroll, employment, excise, stamp
or occupation tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any penalty imposed by any
governmental authority with respect thereto, and any liability for such amounts
as a result either of being a member of an affiliated group or of a contractual
obligation to indemnify any other entity.
ARTICLE II
THE TRANSACTION
2.1 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into Purchaser
(or its designated affiliate, in which case, the references herein to Purchaser
shall be to such designated affiliate and its shares of common stock) in
accordance with this Agreement and the separate corporate existence of the
Company shall thereupon cease ("Merger"). Purchaser shall be the surviving
corporation in the Merger ("Surviving Corporation") and shall continue to be
governed by the laws of the State of Texas and the separate corporate existence
of Purchaser with all rights, privileges, powers, immunities and purposes shall
continue unaffected by the Merger. The Merger shall have the effects specified
in the Texas Business Corporation Act. If all the conditions to the Merger set
forth herein
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shall have been fulfilled or waived in accordance herewith and this Agreement
shall not have been terminated in accordance herewith, the parties hereto shall
cause to be properly executed and filed on the Closing Date Articles of Merger
for the Company meeting the applicable legal requirements. The Merger shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto have
agreed upon and designated in such merger filings.
2.2 ARTICLES OF INCORPORATION; BYLAWS. The Articles of Incorporation
and Bylaws of Purchaser shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation until duly amended in accordance with their terms.
2.3 DIRECTORS; OFFICERS. The persons who are directors of Purchaser
immediately prior to the effective date of the Merger shall be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
Bylaws. The persons who are officers of Purchaser immediately prior to the
effective date of the Merger shall be the officers of the Surviving Corporation
and shall hold their respective offices until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
2.4 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and the holder of a certificate representing shares of
Company common stock shall thereafter cease to have any rights with respect to
such shares except the right to receive the consideration set forth in Article
III as the Purchase Price (the "Merger Consideration"). Each share of common
stock of the Company held in treasury at the effective date of the Merger shall
cease to be outstanding and shall be cancelled and retired without payment of
any consideration therefor. On the effective date of the Merger, each share of
Purchaser common stock issued and outstanding shall, by virtue of the Merger,
and without any action on the part of the holder thereof, continue unchanged and
remain outstanding as a share of validly issued, fully paid and nonassessable
Surviving Corporation common stock.
2.5 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Shareholder, as the holder of a certificate or certificates
representing all outstanding shares of Company common stock, shall, upon
surrender of such certificate or certificates, receive the Merger Consideration.
All shares of Common Stock issuable to the Shareholder in the Merger shall be
deemed for all purposes to have been issued on the Closing Date. The Shareholder
shall deliver to Purchaser at Closing the certificate or certificates
representing the Company common stock owned by him, duly endorsed in blank by
the Shareholder, or accompanied by a duly executed blank stock power, and with
all necessary transfer tax and other revenue stamps, acquired at the
Shareholder's expense, affixed and cancelled.
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2.6 SUBSEQUENT ACTIONS. If, at any time after the Closing Date,
Purchaser shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Purchaser its
right, title or interest in, or under any of the Company's assets or otherwise
to carry out this Agreement, in return for the consideration set forth in this
Agreement, the Company and Shareholder shall execute and deliver all such deeds,
bills of sale, assignments and assurances and take and do all such other actions
and things as may be reasonably necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under the Company's
assets in Purchaser or otherwise to carry out this Agreement.
2.7 CLOSING. Subject to the satisfaction of the conditions to closing
set forth herein, the closing (the "Closing") of the transactions contemplated
hereby shall be held at the offices of Bracewell & ▇▇▇▇▇▇▇▇▇, L.L.P., Houston,
Texas, on or before December 12, 1997, or such other place, date and time as may
be mutually agreed upon by the parties. Such time and date are referred to
herein as the "Closing Date."
ARTICLE III
PAYMENT OF PURCHASE PRICE
3.1 AMOUNT; ALLOCATION; DELIVERY. At the Closing, Purchaser shall pay
to Shareholder the following (the "Purchase Price"):
(a) One Million, Four Hundred Forty-Eight Thousand, Eight
Hundred Twelve Dollars and 50/100 ($1,448,812.50) (the "Cash Amount")
in cash on January 2, 1998. The Cash Amount shall be evidenced by an
interest-free promissory note in substantially the form attached hereto
as Exhibit A-1.
(b) A number of shares of Common Stock, $.001 par value, of
Castle Dental Centers, Inc. ("Castle Dental" or "Parent"), equal to One
Hundred Sixty-Five Thousand (165,000 shares). Such shares (the "Castle
Dental Shares") shall be issued in the name of ▇▇▇▇▇ ▇. ▇▇▇▇, D.D.S. in
his individual capacity.
3.2 ADDITIONAL CONTINGENT PURCHASE PRICE CONSIDERATION. Shareholder
shall be eligible to receive additional consideration for the Merger as follows:
(a) In the event that the earnings attributable to the
Business operations of the Company before interest, taxes, depreciation
and amortization, excluding any general corporate overhead allocation
or charges with respect to general and administrative expenses of
Castle Dental or Purchaser, but including a cost of capital charge for
the interest expense associated with the outstanding indebtedness of
the Company as of the Closing Date and the
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build-out and equipment pursuant to the Company's planned expansion
into the new dental center in North Richland Hills, Texas ("EBITDA")
for the period commencing January 1, 1998, and ending as of the close
of business on December 31, 1998 (the "1998 Fiscal Year") exceeds
$750,000 (the "Excess Amount"), Shareholder shall be entitled to
receive, as an addition to the Purchase Price and not as compensation,
an amount equal to the product determined by multiplying the Excess
Amount by 4.25 (the "Earnout Amount"); provided, however, that in no
event shall the Earnout Amount exceed $500,000. At the option of
Purchaser, to be determined by Purchaser prior to the end of the 1998
Fiscal Year, the Earnout Amount shall be payable in cash or by the
delivery by Purchaser to Shareholder of a note in the form of Exhibit
A-2 attached hereto (the "Note"). The Earnout Amount shall be due and
payable to Shareholder on or before, but not later than, March 31,
1999.
(b) EBITDA, the Excess Amount and the Earnout Amount for the
1998 Fiscal Year shall be calculated by Purchaser's Chief Financial
Officer or Treasurer (the "Purchaser's Accountant"). The operations of
the Company, the books and records, and the accounting systems and
procedures utilized in connection therewith, shall be maintained in a
manner so as to enable EBITDA, the Excess Amount and the Earnout Amount
for the 1998 Fiscal Year to be determined. Within forty-five (45)
calendar days of the close of the 1998 Fiscal Year, Purchaser will
prepare and deliver to Shareholder an income statement as of the close
of the 1998 Fiscal Year (the "1998 Fiscal Year Income Statement")
showing the computation of EBITDA for the 1998 Fiscal Year, computed in
accordance with the provisions set forth herein. The 1998 Fiscal Year
Income Statement will be prepared, and EBITDA as set forth on such
income statement will be determined, in accordance with GAAP (to the
extent applicable to such calculation) applied on a basis consistent
with that theretofore used in, and in accordance with the same
accounting principles theretofore applied on an historical basis in,
the preparation of the Company's financial statements for the period
prior to the Closing Date. The 1998 Fiscal Year Income Statement shall
also set forth the calculations of the Excess Amount and the Earnout
Amount computed in accordance with the provisions set forth herein.
Within fifteen (15) calendar days following receipt of the 1998 Fiscal
Year Income Statement, Shareholder shall notify Purchaser in writing as
to whether Shareholder agrees with the calculations of EBITDA, the
Excess Amount and the Earnout Amount as calculated by Purchaser's
Accountant. In the event Shareholder does not agree with such
calculations, or to the extent Shareholder does not agree with such
calculations, the 1998 Fiscal Year Income Statement shall be reviewed
by Coopers & ▇▇▇▇▇▇▇, L.L.P., or any successor entity thereto (the
"Independent Accountants") who shall determine EBITDA, the Excess
Amount and the Earnout Amount to the extent disputed by Shareholder. If
the Shareholder does not provide the foregoing notice within said
fifteen (15) day period or to the extent Shareholder does not disagree
with any of the calculations made by the Purchaser's Accountant, such
financial statements or calculations, as the case may be, shall be
deemed accepted by the Shareholder. Such 1998 Fiscal Year Income
Statement shall be reviewed by the Independent Accountants and shall
include a schedule prepared by the Independent Accountants showing such
of the computations of EBITDA, the Excess Amount and the
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Earnout Amount disputed by Shareholder. In determining EBITDA, the
Excess Amount and the Earnout Amount for the 1998 Fiscal Year, the 1998
Fiscal Year Income Statement and the accompanying schedules setting
forth EBITDA, the Excess Amount and the Earnout Amount, as prepared by
the Independent Accountants, shall be conclusive on the parties as to
whether any Earnout Amount is payable with respect to the 1998 Fiscal
Year.
(c) Within fifteen (15) calendar days after receipt by
Purchaser and Shareholder of the 1998 Fiscal Year Income Statement
pursuant to which the Earnout Amount is payable, such Earnout Amount
shall be payable to Shareholder either in cash or by delivery of the
Note.
3.3 AGENCY RELATIONSHIP. In the event that, following the Closing Date,
the Shareholder receives any funds, documents or instruments which constitute or
are delivered in respect of the dental operations of the Company, the
Shareholder agrees to hold such funds, documents or instruments in trust for
Purchaser and as Purchaser's agent therefor.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDER
4.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER.
As an inducement to the Purchaser to enter into and perform this Agreement, the
Company and the Shareholder, jointly and severally, hereby represent and warrant
to Purchaser as follows:
4.2 EXISTENCE AND GOOD STANDING. The Company is a professional
corporation duly organized and validly existing under the laws of the State of
Texas. The Company has all requisite corporate power and authority to own, lease
and operate its property and to carry on the Business as now being conducted.
The Company is duly qualified or licensed to do business in each jurisdiction in
which the character or location of the properties owned or leased by the Company
or the nature of the business conducted by the Company makes such qualification
necessary, except where the failure to be so qualified or licensed would not
have a Material Adverse Effect on the Company.
4.3 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has all
requisite corporate power and authority, and the Shareholder has all requisite
power and authority, to execute and deliver this Agreement, to perform their
respective obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by the Company
and the consummation by it of the transactions contemplated hereby, have been
duly authorized and approved by the Board of Directors and the Shareholder of
the Company, and no other action on the part of the Company or its Shareholder
is necessary to authorize the execution, delivery and performance of this
Agreement by the Company and the consummation of the
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transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and the Shareholder and is a valid and binding
obligation of the Company and the Shareholder enforceable against each in
accordance with its terms, except to the extent that its enforceability may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
4.4 CAPITAL STOCK. The authorized capital stock of the Company consists
solely of 1,000 shares of common stock the ("Stock") of which 1,000 shares have
been issued, and are outstanding, all of which are owned by the Shareholder. All
of the shares of common stock of the Company have been duly and validly
authorized and issued, and are fully paid and nonassessable and free of any
liens or encumbrances.
4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth on
Schedule 4.5, the execution, delivery and performance of this Agreement by the
Company and the Shareholder and the consummation by the Company and the
Shareholder of the transactions contemplated hereby will not, with or without
the giving of notice or the lapse of time or both: (a) violate, conflict with,
or result in a breach or default under any provision of the organizational
documents of the Company; (b) to the knowledge of the Company and Shareholder,
violate any statute, ordinance, rule, regulation, order, judgment or decree of
any court or of any governmental or regulatory body, agency or authority
applicable to the Company or the Shareholder or by which any of their respective
properties or assets may be bound; (c) to the knowledge of the Company and
Shareholder, require any filing by the Company or the Shareholder with, or
require the Company or the Shareholder to obtain any permit, consent or approval
of, or require the Company or the Shareholder to give any notice to, any
governmental or regulatory body, agency or authority other than as set forth on
Schedule 4.5 attached hereto, except where the failure to make any such filing,
give any such notice or obtain any such permit, consent or approval would not
have a Material Adverse Effect on the Company; or (d) result in a violation or
breach by the Company or the Shareholder of, conflict with, constitute (with or
without due notice or lapse of time or both) a default by the Company or the
Shareholder (or give rise to any right of termination, cancellation, payment or
acceleration) under or result in the creation of any Encumbrance upon any of the
properties or assets of the Company or the Shareholder under any of the terms,
conditions, or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease franchise agreement or other instrument or
obligation to which the Company or the Shareholder is a party, or by which the
Company or any of its properties or assets may be bound, which would have a
Material Adverse Effect on the Company.
4.6 SUBSIDIARIES AND AFFILIATES. Except as set forth on Schedule 4.6,
the Company has no subsidiaries and has not conducted business under any other
name except its legal name in its articles of incorporation. Except as set forth
on Schedule 4.6, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the
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Company is not, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
4.7 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. The Company has
heretofore furnished Purchaser with the unaudited balance sheet of the Company
as of the Closing Balance Sheet Date (the "Closing Date Balance Sheet") and the
unaudited statements of operations and cash flows for the period then ended
described on Schedule 4.7 (together with the Closing Date Balance Sheet, the
"Company Financial Statements"). The Financial Statements fairly present in all
material respects the financial position of the Company at the date thereof and
the results of operations of the Company and its cash flows for the period
indicated. Except as set forth on Schedule 4.7, since the Closing Balance Sheet
Date there has been no material adverse change in the assets or liabilities, or
in the business or financial condition or in the results of operations of the
Company.
Other than as (i) disclosed on the Financial Statements, (ii) incurred
since the Closing Balance Sheet Date in the ordinary course of business or (iii)
disclosed on Schedule 4.7 or another Schedule hereto, the Company has no direct
or indirect indebtedness, liability, claim, deficiency, obligation or
responsibility, known or unknown, fixed or contingent, liquidated or
unliquidated, accrued, absolute or otherwise.
4.8 BOOKS AND RECORDS. The Company has previously made available to
Purchaser true, correct and complete copies of its articles of incorporation and
bylaws, and all amendments to each. The minute book of the Company, as
previously made available to Purchaser and its representatives, contains
accurate records in all material respects of the meetings of the shareholders
and Board of Directors of the Company.
4.9 TITLE TO PROPERTIES; ENCUMBRANCES; CONDITION. Except as set forth
on Schedule 4.9, and except for properties and assets reflected in the Company
Financial Statements or acquired since the Closing Balance Sheet Date which have
been sold or otherwise disposed of in the ordinary course of business, the
Company has good and valid title to its assets, subject to no Encumbrances
except for (i) Encumbrances consisting of easements, permits and other
restrictions or limitations on the use of real property or irregularities in
title thereto that do not materially detract from the value of, or materially
impair the use of, such property by the Company in the operation of the
Business, (ii) Encumbrances for current taxes, assessments or governmental
charges or levies on property not yet due or delinquent, (iii) Encumbrances
created by Purchaser, or (iv) Encumbrances which would not reasonably be
expected to have a Material Adverse Effect on the Company (Encumbrances of the
type described in clauses (i), (ii), (iii) and (iv) above are hereinafter
sometimes referred to as "Permitted Encumbrances"). The Company has heretofore
furnished Purchaser with a fixed asset ledger which sets forth all fixed assets
owned by the Company as of the Closing Balance Sheet Date. To the knowledge of
the Company and the Shareholder, there are no defects in such assets that would
have a Material Adverse Effect on the ability of Purchaser to use such assets in
the ordinary course of its Business, ordinary wear and tear excepted.
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4.10 REAL PROPERTY. Schedule 4.10 identifies all interests in real
property (the "Property") owned or used by the Company in the Business,
including leases, and includes the name of the record title holder thereof. All
of the buildings, structures and appurtenances situated on the Property owned by
the Company and the premises leased by the Company are in good operating
condition sufficient for their intended use, and in a state of good maintenance
and repair, subject to ordinary wear and tear and except where the failure to be
maintained or the sufficiency of the condition would not have a Material Adverse
Effect on the Company. The Property has adequate rights of ingress and egress
for operation of the Business in the ordinary course. No condemnation or similar
proceeding is pending or, to the knowledge of the Company and the Shareholder,
threatened, which would preclude or impair the use of any such property, except
where such proceeding would not have a Material Adverse Effect on the Company.
4.11 LEASES. Schedule 4.11 contains an accurate and complete list of
all material personal property leases to which the Company is a party (as lessee
or lessor). Copies of each of such leases have been made available to Purchaser.
Each lease set forth on Schedule 4.11 is in full force and effect, and no event
has occurred that with the giving of notice, the passage of time or both would
constitute a default thereunder except for any default which would not have a
Material Adverse Effect on the Company.
4.12 MATERIAL CONTRACTS. Schedule 4.12 contains an accurate and
complete list of all material contracts, commitments and similar agreements to
which the Company is a party or by which it or any of its properties are bound
(including but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land). Except as set forth on
Schedule 4.12, none of such contracts include (a) any agreement, contract or
commitment relating to the employment of any person by the Company, (b) any
agreement, indenture or other instrument which contains restrictions with
respect to payment of profits, dividends or any other distributions, (c) any
agreement, contract or commitment relating to capital expenditures in excess of
$5,000; (d) any loan or advance to, or investment in, any Person or any
agreement, contract or commitment relating to the making of any such loan,
advance or investment, (e) any guarantee or other contingent liability in
respect of any indebtedness or obligation of any Person, (f) any management
service, consulting or any other similar type contract, (g) any agreement,
contract or commitment limiting the freedom of the Company to engage in any line
of business or to compete with any Person, or (h) any agreement, contract or
commitment which involves $5,000 or more and is not cancelable without penalty
within 30 days. Also set forth on such Schedule 4.12 is a list of all proposals
submitted by the Company to any third party that, if accepted by such third
party, would require disclosure on Schedule 4.12. Except where it would not have
a Material Adverse Effect on the Company, each contract or agreement set forth
on Schedule 4.12 is in full force and effect except for any contracts or leases
described thereon which expire by their terms prior to the Closing and there
exists no default or event of default or event, occurrence, condition or act
(including the Merger hereunder) which, with the giving of notice, the lapse of
time or the happening of any other event or condition, would
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become a default or event of default thereunder except for any such default,
event of default, event, occurrence, condition or act which would not have a
Material Adverse Effect on the Company.
4.13 PERMITS. Schedule 4.13 lists all of the material governmental and
other third party permits (including occupancy permits), licenses, consents and
authorizations ("Permits") required, to the knowledge of the Company and the
Shareholder, in connection with the use, operation or ownership of the Company's
assets and the conduct of the Business as currently conducted. The Company or
Shareholder holds all of the Permits listed on Schedule 4.13, and none is
presently subject to revocation or challenge except for those Permits which
expire by their terms prior to the Closing or which if revoked would not have a
Material Adverse Effect on the Company. Except as set forth on Schedule 4.13,
all such Permits will be assignable by the Company to Purchaser or Castle PC
pursuant to Section 7.9 of the Agreement.
4.14 LITIGATION. Except as set forth on Schedule 4.14, there is no
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding by or before (or any investigation by) any governmental or
other instrumentality or agency, pending, or, to the knowledge of the Company
and the Shareholder, threatened, against or affecting the properties, rights or
goodwill of the Company, the Shareholder, or employees of the Company, and the
Company and the Shareholder do not know of any valid basis for any such action,
proceeding or investigation which, if determined adversely to the Company, would
have a Material Adverse Effect on the Company. There are no such suits, actions,
claims, proceedings or investigations pending or to the knowledge of the Company
and the Shareholder threatened, seeking to prevent or challenge the transactions
contemplated by this Agreement. Schedule 4.14 also describes any actions, suits,
disciplinary proceedings and investigations undertaken by the Dental Board of
the State of Texas, or other body regulating the activities of dentists, against
the Company, the Shareholder or any employee of the Company or the Shareholder.
4.15 TAXES. (a) Except as set forth on Schedule 4.15, all returns and
reports for Taxes for all taxable years or periods that end on or before the
Closing Date and, with respect to any taxable year or period beginning before
and ending after the Closing Date the portion of such taxable year or period
ending on and including the Closing Date ("Pre-Closing Periods"), which are
required to be filed by or with respect to the Company (collectively, the
"Returns") have been or will be filed when due in a timely fashion and such
Returns as filed are or will be accurate in all material respect except where
the failure to file any of the Returns in a timely fashion would not have a
Material Adverse Effect on the Company.
(b) Except as set forth on Schedule 4.15, there is no material
action, suit, proceeding, investigation, audit, or claim now pending or, to the
knowledge of the Company or the Shareholder, threatened by any authority
regarding any Taxes relating to the Company for any Pre-Closing Period.
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(c) There are no liens or security interests outstanding on
any of the assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Taxes.
(d) Except as set forth on Schedule 4.15, there are no
agreements for the extension or waiver of the time for assessment of any Taxes
relating to the Company for any Pre-Closing Period and the Company has not been
requested to enter into any such agreement or waiver.
(e) All Taxes relating to the Company which the Company is
required by law to withhold or collect have been duly withheld or collected, and
have been timely paid over to the proper authorities to the extent due and
payable.
(f) The Company is not now nor has ever been a party to any
Tax allocation or sharing agreement that would result in any liability to
Purchaser.
4.16 INSURANCE. Schedule 4.16 sets forth a complete list of insurance
policies that the Company maintains with respect to its Business and properties
or on its employees. Such policies are in full force and effect except for those
policies which by their terms expire prior to the Closing. In the judgment of
the Company, such policies, with respect to their amounts and types of coverage,
are adequate to insure against risks to which the Company and its property and
assets are normally exposed in the operation of the Business, subject to
customary deductibles and policy limits.
4.17 INTELLECTUAL PROPERTIES. Schedule 4.17 sets forth all material
Intellectual Property used in the Business and the owner of such Intellectual
Property. To the knowledge of the Company and the Shareholder, the operation of
the Business as conducted by the Company as of the Closing Date requires no
rights under Intellectual Property other than rights under Intellectual Property
listed on Schedule 4.17 and rights granted to the Company pursuant to agreements
listed on Schedule 4.17 except where the failure to obtain such rights would not
have a Material Adverse Effect on the Company. Except as otherwise set forth on
Schedule 4.17, the Company owns all right, title and interest in the
Intellectual Property listed on Schedule 4.17. No litigation is pending or, to
the knowledge of the Company or the Shareholder, threatened wherein the Company
is accused of infringing or otherwise violating the Intellectual Property rights
of another, or of breaching a contract conveying rights under Intellectual
Property.
4.18 COMPLIANCE WITH LAWS. The Company is in compliance in all material
respects with all applicable laws, regulations, orders, judgments and decrees
applicable to the Business except for non-compliance which would not have a
Material Adverse Effect on the Company.
4.19 EMPLOYMENT RELATIONS. (a) The Company is not now engaging and has
not engaged in any unfair labor practice; (b) to the knowledge of the Company
and the Shareholder, no representation question exists respecting the employees
of the Company; (c) the Company has not been notified of any grievance that
would have a Material Adverse Effect on the Company and no
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arbitration proceeding arising out of or under any collective bargaining
agreement is pending; and (f) no collective bargaining agreement is currently
being negotiated by the Company.
4.20 EMPLOYEE BENEFIT PLANS. The Company has delivered or made
available to Purchaser true and complete copies of all employee benefit plans,
policies, programs and arrangements and all related contracts, agreements and
other descriptions thereof with respect to the employee benefits provided to the
employees of the Business prior to the Closing Date (the "Plans"). Each of the
Plans has, to the knowledge of the Company and the Shareholder, been maintained
in compliance with its terms and the requirements of all applicable laws except
for non-compliance which would not have a Material Adverse Effect on the
Company. None of the Plans are subject to Title IV of ERISA or the minimum
funding obligations of Section 412 of the Code, and the Company and any entity
required to be aggregated therewith pursuant to Section 414(b) or (c) of the
Code have no liability under Title IV of ERISA or under Section 412(f) or 412(n)
of the Code.
4.21 ENVIRONMENTAL LAWS AND REGULATIONS. Except as set forth in
Schedule 4.21, and except where it would not have a Material Adverse Effect on
the Company (a) Hazardous Materials have not been generated, used, treated or
stored on, or transported to or from, any Company Property or any property
adjoining any Company Property by the Company, its employees or, to the
knowledge of the Company and the Shareholder, its authorized agents or its
independent contractors (including suppliers), (b) Hazardous Materials have not
been Released or disposed of by the Company, its employees or, to the knowledge
of the Company and the Shareholder, its authorized agents or its independent
contractors (including suppliers) on any Company Property or any property
adjoining any Company Property except such Releases which do not violate any
Environmental Laws, (c) the Company is, to its and the Shareholder's knowledge,
in compliance with all applicable Environmental Laws and the requirements of any
Permits issued under such Environmental Laws with respect to any Company
Property, (d) there are no pending or, to the knowledge of the Company and the
Shareholder, threatened Environmental Claims against the Company or any Company
Property, (e) there are no facts or circumstances, conditions, pre-existing
conditions or occurrences on any Company Property known to the Company or the
Shareholder that could reasonably be anticipated (A) to form the basis of an
Environmental Claim against the Company or any Company Property, or (B) to cause
such Company Property to be subject to any restrictions on the ownership,
occupancy use or transferability of such Company Property under any
Environmental Law, (f) there are not now, and to the knowledge of the Company
and the Shareholder, there never have been any underground storage tanks located
on any Company Property, and (g) the Company has not in the ordinary course of
business transported or stored Hazardous Materials.
4.22 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except for relationships
with Affiliates or as set forth on Schedule 4.22, the Company does not possess,
directly or indirectly, any financial interest in, and the Shareholder does not
serve as a director, officer or employee of, any corporation, firm, association
or business organization which is a supplier, customer, lessor, lessee, or
competitor of the Company.
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4.23 COMPENSATION OF EMPLOYEES. Set forth on Schedule 4.23 is an
accurate and complete list showing the names of all current employees of the
Company whose compensation from the Company during the current fiscal year
exceeded an annualized rate of $20,000, together with a statement of the full
amount paid or payable to each such person for services rendered during the
current fiscal year to date.
4.24 PAYORS. Schedule 4.24 sets forth the eight largest payors of the
Company for the most recently completed fiscal year. The relationship of the
Company with each of such payors as of the date of this Agreement is a good
commercial working relationship, and except as set forth on Schedule 4.24 no
significant payor has canceled or otherwise terminated or, to the knowledge of
the Company or the Shareholder, threatened to cancel or otherwise terminate its
relationship with the Company within the last three years.
4.25 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. Except as set forth on
Schedule 4.25, the Accounts Receivable on the Closing Date Balance Sheet are
collectible in the ordinary course of business, net of the reserves established
with respect thereto. Except as set forth on Schedule 4.25, there has been no
material adverse change since the Closing Balance Sheet Date (other than in the
ordinary course of business) in the amount of the Accounts Receivable or other
fees or debts due to the Company or the allowances with respect thereto, or any
material adverse change in Accounts Payable by the Company, from that reflected
in the Closing Date Balance Sheet.
4.26 INVESTMENTS. The assets of the Company do not include any capital
stock or other equity ownership or proprietary interest in any other
corporation, partnership, association, trust, joint venture or other entity.
4.27 BROKER'S OR FINDER'S FEES. Except for a broker's fee payable by
Shareholder, no agent, broker, Person or firm acting on behalf of the Company
is, or will be, entitled to any fee, commission or broker's or finder's fees
from the Company or Shareholder in connection with this Agreement or any of the
transactions contemplated hereby.
4.28 COPIES OF DOCUMENTS. The Company has caused to be made available
for inspection and copying by Purchaser and its advisers, true, complete and
correct copies of all documents referred to in this Article IV or in any
Schedule attached hereto.
4.29 INVESTMENT REPRESENTATIONS.
(a) Shareholder understands that the Castle Dental Shares have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"). Shareholder also understands that the Castle Dental
Shares are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon his
representations contained in this Agreement.
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(b) Shareholder, in consultation with his accountants,
attorneys and financial advisors has, the requisite experience in
evaluating and investing in private placement transactions of
securities so that he is capable of evaluating the merits and risks of
his investment in Castle Dental and has the capacity to protect his own
interests. Shareholder understands that he must bear the economic risk
of this investment indefinitely unless the Castle Dental Shares are
registered pursuant to the Securities Act, or an exemption from
registration is available. Shareholder also understands that there is
no assurance that any exemption from registration under the Securities
Act will be available and that, even if available, such exemption may
not allow him to transfer all or any portion of the Castle Dental
Shares under the circumstances, in the amounts or at the times it might
propose.
(c) Shareholder is acquiring the Castle Dental Shares for his
own account for investment only, and not with a view towards
distribution.
(d) Shareholder represents that by reason of his business or
financial experience, he has the capacity to protect his own interests
in connection with the transactions contemplated in this Agreement.
(e) Shareholder represents that he is an accredited investor
within the meaning of Regulation D under the Securities Act.
(f) Shareholder has truthfully completed and delivered to
Castle Dental a Purchaser Suitability Questionnaire in the form
attached hereto as Exhibit B.
4.30 DUE DILIGENCE. The Company and Shareholder have had reasonable
access to the records and management of Castle Dental and Purchaser, and have
satisfactorily completed their due diligence review of Castle Dental and
Purchaser and have determined from such review that nothing materially and
adversely affects their appraisal of the business, prospects and financial
condition of Castle Dental.
4.31 DISCLAIMER. No other representations or warranties of the Company
or Shareholder are made or given and all such representations and warranties are
disclaimed.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
5.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to the Shareholder as follows:
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5.2 EXISTENCE AND GOOD STANDING OF PURCHASER; POWER AND AUTHORITY.
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas. Purchaser has full corporate power and
authority to make, execute, deliver and perform this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly authorized and approved by all required corporate
action of Purchaser. This Agreement has been duly executed and delivered by
Purchaser and is a valid and binding obligation of Purchaser enforceable against
Purchaser in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles. Purchaser is
duly qualified and licensed to do business and is in good standing in each
jurisdiction in which the character or location of its properties or the leasing
of its assets or the nature of its business makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not have a Material Adverse Effect on Purchaser. No other action on the
part of Purchaser is necessary to authorize the execution, delivery and
performance of this agreement by Purchaser and the consummation of the
transactions contemplated hereby.
5.3 NO VIOLATIONS. The execution, delivery and performance of this
Agreement by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time or both; (a) violate, conflict with, or result in a breach or default
under any provision of the certificate of incorporation or by-laws of Purchaser;
(b) to the knowledge of Purchaser, violate any statute, ordinance, rule,
regulation, order, judgment or decree of any court or of any governmental or
regulatory body, agency or authority applicable to Purchaser or by which any of
its properties or assets may be bound; (c) to the knowledge of Purchaser,
require any filing by Purchaser with, or require Purchaser to obtain any permit,
consent or approval of, or require Purchaser to give any notice to, any
governmental or regulatory body, agency or authority or any third party; or (d)
result in a violation or breach by Purchaser of, conflict with, constitute (with
or without due notice or lapse of time or both) a default by Purchaser (or give
rise to any right of termination, cancellation, payment or acceleration) under,
or result in the creation of any Encumbrance upon any of the properties or
assets of Purchaser pursuant to, any of the terms, conditions or provision of
any note, bond, mortgage, indenture, license, franchise, permit, agreement,
lease, franchise agreement or other instrument or obligation to which Purchaser
is a party, or by which it or any of its properties or assets may be bound,
except in the case of Subsections 5.3(b), (c), and (d), for such violations,
consents, breaches, defaults, terminations and accelerations which in the
aggregate would not have a Material Adverse Effect.
5.4 CAPITAL STOCK. The authorized capital stock of Castle Dental
consists solely of 30,000,000 shares of Castle Dental Common Stock of which
6,064,239 shares have been issued, and 5,000,000 shares of Castle Dental
Preferred Stock, $.001 par value per share ("Preferred Stock"), of which 119,231
shares have been issued. All of the Castle Dental Shares of Castle Dental
delivered pursuant to Section 3.1 hereof have been duly and validly authorized,
and, upon issuance and
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delivery to Shareholder, will be validly issued, fully paid, nonassessable and
free of any liens or Encumbrances.
5.5 LITIGATION. There is no action, suit, proceeding at law or in
equity, arbitration or administrative or other proceeding by or before (or any
investigation by) any governmental or other instrumentality or agency, pending,
or, to the knowledge of Purchaser, threatened, against or affecting the
properties, rights or goodwill of Castle Dental, Purchaser or their employees,
except where such Proceeding would not have a Material Adverse Effect on the
assets, liabilities, business, condition (financial or otherwise), results of
operations or prospects of Castle Dental or Purchaser, and Purchaser does not
know of any valid basis for any such action, proceeding or investigation. There
are no such Proceedings pending or, to the knowledge of Purchaser, threatened,
seeking to prevent or challenge the transactions contemplated by this Agreement.
5.6 FINANCIAL STATEMENTS. The audited financial statements of Castle
Dental as of December 31, 1996, and the financial statements of Purchaser
described on Schedule 5.6 (collectively, the "Purchaser Financial Statements"),
are complete and correct in all material respects and present fairly in
accordance with generally accepted accounting principles consistently applied,
the respective financial condition of Castle Dental and Purchaser and the
results of their respective operations as of the dates thereof and for the
periods indicated.
5.7 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of Purchaser is, or will be, entitled to any fee, commission or
broker's or finder's fee in connection with this Agreement or any of the
transactions contemplated hereby.
5.8 BUSINESS INFORMATION. Parent has delivered to Shareholder accurate
and complete copies of the information with respect to Parent and Purchaser set
forth on Schedule 5.8 (collectively the "Business Information"). As of the date
hereof, the information contained in the Business Information is true and
correct in all material respects and does not omit any material fact necessary
to be stated therein or required to be stated therein in order to make any
statement contained therein not misleading.
5.9 SEC FILINGS. Parent has timely made all filings with the SEC
pursuant to the provisions of the Securities Act and the Securities Exchange Act
of 1934 (the "Exchange Act") (collectively the "Public Reports"). Each of the
Public Reports complies in all material respects with the Securities Act and the
Exchange Act, including but without limitation, the current public information
requirements set forth in Rule 144 of the Securities Act. None of the Public
Reports, as of their respective dates, contains any untrue statement of any
material fact or omits to state material fact necessary in order to make any
statements made therein, in light of the circumstances under which they were
made, not misleading. Parent has delivered to Shareholder a correct and complete
copy of each Public Report (together with all exhibits and schedules thereto and
as amended to date).
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5.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed on Schedule 5.10,
since the date of the latest of the Purchaser Financial Statements (i) there has
not been any material adverse change in Parent or Purchaser, or any event or
condition that might reasonably be expected to result in any material adverse
change in Parent or Purchaser; (ii) Parent's and Purchaser's business has been
conducted only in the ordinary course consistent with past practice; or (iii)
neither Parent nor Purchaser has suffered any material loss, damage, destruction
or other casualty to any of their respective assets (whether or not covered by
insurance).
5.11 COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.11,
Purchaser has complied in all material respects with all applicable laws
relating to the ownership or operation of its assets and properties or the
operation of its business, except for noncompliance with such applicable laws
which would not have a Material Adverse Effect on Purchaser. Purchaser is not
charged or, to the knowledge of Purchaser, threatened with, or, under
investigation with respect to, any violation of any applicable laws relating to
any aspect of the ownership or operation of its assets or the operation of its
business.
5.12 ENVIRONMENTAL LAWS AND REGULATIONS. Except as set forth on
Schedule 5.12, and except where it would not have a Material Adverse Effect on
the Purchaser (a) Hazardous Materials have not been generated, used, treated or
stored on, or transported to or from, any Purchaser property or any property
adjoining any Purchaser property by the Purchaser, its employees or, to the
knowledge of the Purchaser, its authorized agents or its independent contractors
(including suppliers), (b) Hazardous Materials have not been Released or
disposed of by the Purchaser, its authorized agents or its independent
contractors (including suppliers) on any Purchaser property or any property
adjoining any Purchaser property except such Releases which do not violate any
Environmental Laws, (c) the Purchaser is, to its knowledge, in compliance with
all applicable Environmental Laws and the requirements of any Permits issued
under such Environmental Laws with respect to any Purchaser property, (d) there
are no pending or, to the knowledge of the Purchaser, threatened Environmental
Claims against the Purchaser or any Purchaser property, (e) there are no facts
or circumstances, conditions, pre-existing conditions or occurrences on any
Purchaser property known to the Purchaser that could reasonably be anticipated
(A) to form the basis of an Environmental Claim against the Purchaser or any
Purchaser property, or (B) to cause such Purchaser property to be subject to any
restrictions on the ownership, occupancy use or transferability of such
Purchaser property under any Environmental Law, (f) there are not now and there
never have been any underground storage tanks located on any Purchaser property,
and (g) the Purchaser has not in the ordinary course of business transported or
stored Hazardous Materials.
5.13 TAXES. (a) Except as set forth on Schedule 5.13, all returns and
reports for Taxes for all Pre-Closing Periods, which are required to be filed by
or with respect to the Purchaser and Parent (collectively, the "Purchaser
Returns") have been or will be filed when due in a timely fashion and such
Purchaser Returns as filed are or will be accurate in all material respect
except where the failure to file any of the Purchaser Returns in a timely
fashion would not have a Material Adverse Effect on the Parent or Purchaser.
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(b) Except as set forth on Schedule 5.13, there is no material
action, suit, proceeding, investigation, audit, or claim now pending or, to the
knowledge of the Purchaser, threatened by any authority regarding any Taxes
relating to the Purchaser or Parent for any Pre-Closing Period.
(c) There are no liens or security interests outstanding on
any of the assets of the Purchaser or Parent that arose in connection with any
failure (or alleged failure) to pay any Taxes.
(d) Except as set forth on Schedule 5.13, there are no
agreements for the extension or waiver of the time for assessment of any Taxes
relating to the Purchaser or Parent for any Pre-Closing Period and neither the
Purchaser nor Parent has been requested to enter into any such agreement or
waiver.
(e) All Taxes relating to the Purchaser or Parent which the
Purchaser or Parent is required by law to withhold or collect have been duly
withheld or collected, and have been timely paid over to the proper authorities
to the extent due and payable.
(f) Neither Purchaser nor Parent is now or has ever been a
party to any Tax allocation or sharing agreement that would result in any
liability to Purchaser or Parent.
5.14 DISCLAIMER. No other representations or warranties of the
Purchaser are made or given and all such representations and warranties are
disclaimed.
ARTICLE VI
CONDITIONS TO THE SHAREHOLDER'S OBLIGATIONS
The obligations of the Shareholder under this Agreement to consummate
the Merger and the other transactions contemplated hereby shall be subject to
the satisfaction (or waiver by the party entitled to performance) on or prior to
the Closing Date of all of the following conditions:
6.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of the
Closing Date, and Purchaser shall have delivered to the Shareholder on the
Closing Date a certificate of an authorized officer of Purchaser, dated the
Closing Date, to such effect.
6.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements and
covenants of Purchaser to be performed on or before the Closing Date pursuant to
the terms hereof shall have been duly performed in all material respects, and
Purchaser shall have delivered to the Shareholder a certificate of an authorized
officer of Purchaser, dated the Closing Date, to such effect.
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6.3 NO LITIGATION THREATENED. No action or proceedings shall have been
instituted before a court or other governmental body or by any public authority
to restrain or prohibit any of the transactions contemplated hereby, and
Purchaser shall have delivered to the Shareholder a certificate of an authorized
officer of Purchaser, dated the Closing Date, to such effect to the knowledge of
such officer.
6.4 CONSIDERATION. The Shareholder shall have received the Purchase
Price described in Section 3.1.
6.5 GOVERNMENTAL APPROVALS. All governmental consents and approvals, if
any, necessary to permit the consummation of the transactions contemplated by
this Agreement shall have been received.
6.6 PROCEEDINGS. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Shareholder and
his counsel, and the Shareholder shall have received copies of all such
documents and other evidence as his or his counsel may reasonably request in
order to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
6.7 GOOD STANDING CERTIFICATES. The Shareholder shall have received
good standing and corporate existence certificates respecting Purchaser and
Castle Dental.
6.8 EMPLOYMENT AGREEMENT. Shareholder and Castle PC shall have entered
into an Employment Agreement, substantially in the form of Exhibit C (the
"Employment Agreement").
6.9 REGISTRATION RIGHTS AGREEMENT. Shareholder and Castle Dental shall
have entered into the Registration Rights Agreement, substantially in the form
of Exhibit D (the "Registration Rights Agreement").
6.10 NO MATERIAL ADVERSE CHANGE. Except as disclosed in this Agreement
or in any of the schedules to the Parent Disclosure Letter, since the latest of
the Purchaser Financial Statements, there shall be no event, circumstance or
condition which, individually or in the aggregate, could have a Material Adverse
Effect on either Parent or Purchaser.
6.11 RESOLUTIONS. Shareholder shall have received copies of the
resolutions of the boards of directors of Parent and Purchaser authorizing the
execution, delivery and performance by Purchaser of this Agreement, the other
agreements to be executed in connection with this Agreement and the transactions
contemplated hereby, certified by the secretary or an assistant secretary of
Parent and Purchaser.
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6.12 LEGAL OPINION. Purchaser shall have delivered to Shareholder the
opinion of its counsel, such opinion to be in form and substance satisfactory to
Shareholder's counsel.
ARTICLE VII
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser under this Agreement to consummate the
Merger and the other transactions contemplated hereby shall be subject to the
satisfaction (or waiver by Purchaser) on or prior to the Closing Date of all of
the following conditions:
7.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and the Shareholder contained herein shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date, except that any such representations and warranties which
expressly relate only to an earlier date shall be true and correct on the
Closing Date as of such earlier date; and the Company and the Shareholder shall
have delivered to Purchaser on the Closing Date a certificate of an authorized
representative of the Company and the Shareholder, dated the Closing Date, to
such effect.
7.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements and
covenants of the Company to be performed on or before the Closing Date pursuant
to the terms hereof shall have been duly performed in all material respects, and
the Company shall have delivered to Purchaser a certificate of an authorized
representative of the Company, dated the Closing Date, to such effect.
7.3 DOCUMENTS OF CONVEYANCE. Purchaser shall have received from
Shareholder the Stock duly endorsed or accompanied by a blank stock power, duly
endorsed and otherwise in form sufficient to transfer the Stock to Purchaser.
7.4 NO LITIGATION THREATENED. No action or proceedings shall have been
instituted before a court or other governmental body or by any public authority
to restrain or prohibit any of the transactions contemplated hereby, and the
Company shall have delivered to Purchaser a certificate of an authorized
representative of the Company, dated the Closing Date, to such effect to the
knowledge of such officer.
7.5 GOVERNMENTAL APPROVALS. All governmental consents and approvals, if
any, necessary to permit the consummation of the transactions contemplated by
this Agreement shall have been received.
7.6 CONSENTS. Each of the consents referred to in Schedule 4.5 attached
hereto shall have been obtained, and Purchaser shall have also received the
consent of all other parties, including its senior lender, whose consent is
required to permit Purchaser to perform its obligations hereunder.
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7.7 LEGAL OPINION. The Company and Shareholder shall have delivered to
Purchaser the opinion of their counsel, such opinion to be in form and substance
satisfactory to Purchaser's counsel.
7.8 PROCEEDINGS. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Purchaser and its
counsel, and Purchaser shall have received copies of all such documents and
other evidence as it or its counsel may reasonably request in order to establish
the consummation of such transactions and the taking of all proceedings in
connection therewith.
7.9 CASTLE PC. Castle PC shall have entered into the Employment
Agreement and the Company shall have duly and validly assigned to Castle PC all
reimbursement contracts with third party insurance companies, managed care
companies and other reimbursement sources. The Company shall also have delivered
to Castle PC all patient records and shall have duly and validly assigned to
Castle PC all Permits and such other of the assets of the Company as are
required for Castle PC to perform its obligations under the Management Services
Agreement with Purchaser. In addition, the Company shall have duly and validly
transferred to Castle PC all other assets the ownership and operation of which
requires a valid license to practice dentistry.
7.10 GOOD STANDING CERTIFICATES. Purchaser shall have received good
standing and corporate existence certificates respecting the Company.
ARTICLE VIII
COVENANTS OF THE COMPANY AND THE SHAREHOLDER
The Company and the Shareholder hereby covenant and agree with
Purchaser as follows:
8.1 COOPERATION BY THE COMPANY AND THE SHAREHOLDER. Pending the
Closing, the Company and the Shareholder shall use their reasonable best efforts
to cooperate with Purchaser to secure all necessary consents, approvals,
authorizations, exemptions and waivers from third parties as shall be required
in order to enable the Company and the Shareholder to effect the transactions
contemplated on its or his part hereby, and the Company and the Shareholder
shall otherwise use their reasonable best efforts to cause the consummation of
such transactions in accordance with the terms and conditions hereof and to
cause all conditions contained in this Agreement over which it has control to be
satisfied. The Company and the Shareholder further agree to deliver to Purchaser
prompt written notice of any event or condition which if it existed on the date
of this Agreement, would result in any of the representations and warranties of
the Company or the Shareholder contained herein being untrue in any material
respect.
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8.2 AMENDMENT OF SCHEDULES. Company and Shareholder agree that, with
respect to the representations and warranties of Company and Shareholder
contained in this Agreement, Company and Shareholder shall have the continuing
obligation until the Closing to supplement or amend promptly any schedules
attached hereto with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in any schedules attached hereto;
provided, however, that any supplement or amendment to any schedules attached
hereto shall not cure any breach of any representations or warranties hereunder.
8.3 CONDUCT OF BUSINESS. Except as Purchaser may otherwise consent to
in writing (which consent will not be unreasonably withheld), between the date
hereof and the Closing Date, the Company shall, (a) conduct the Business only in
the ordinary course, (b) use its reasonable efforts to keep available the
services of its employees and maintain satisfactory relationships with
licensors, suppliers, lessors, distributors, customers, clients and others, (c)
maintain, consistent with past practice and good business judgment, all of the
Company's assets in customary repair, order and condition, ordinary wear and
tear excepted, and insurance upon all of the Company's assets used in the
conduct of the Business in such amounts and of such kinds comparable to that in
effect on the date hereof, to the extent available at current premiums, and (d)
maintain the Company's books and records in the usual, regular and ordinary
manner, on a basis consistent with past practice.
8.4 EXCLUSIVE DEALING. During the period from the date of this
Agreement to the earlier of the Closing Date or the termination of this
Agreement, neither the Company nor the Shareholder shall take any action to,
directly or indirectly, encourage, initiate or engage in discussions or
negotiations with, or provide any information to, any Person other than
Purchaser, concerning the Merger or any material part thereof or a similar
transaction involving the Company or the Shareholder.
8.5 REVIEW OF THE ASSETS. Purchaser may, prior to the Closing Date,
through its representatives, review (a) the assets of the Company, (b) the
complete working papers of the Company's certified public accountants used in
their preparation of financial statements for the Company and (c) the books and
records of the Company and to otherwise review the financial and legal condition
of the Company as Purchaser deems necessary or advisable to familiarize itself
with the Business and related matters; such review shall not, however, affect
the representations and warranties made by the Company and the Shareholder
hereunder or the remedies of Purchaser for breaches of those representations and
warranties. Such review shall occur only during normal business hours upon
reasonable notice by Purchaser. The Company and the Shareholder shall permit
Purchaser and its representatives to have, after the execution of this
Agreement, full access to employees of any Company who can furnish Purchaser
with financial and operating data and other information with respect to the
Business as Purchaser shall from time to time reasonably request.
8.6 FURTHER ASSURANCES. At any time or from time to time after the
Closing Date, the Company and the Shareholder shall, at the reasonable request
of Purchaser and at Purchaser's
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expense, execute and deliver any further instruments or documents and take all
such further action as Purchaser may reasonably request in order to consummate
and make effective the Merger.
ARTICLE IX
COVENANTS OF PURCHASER
Purchaser hereby covenants and agrees with the Company and the
Shareholder as follows:
9.1 COOPERATION BY PURCHASER. Purchaser will use its reasonable best
efforts, and will cooperate with the Company and the Shareholder, to secure all
necessary consents, approvals, authorizations, exemptions and waivers from third
parties as shall be required in order to enable Purchaser to effect the
transactions contemplated on its part hereby, and Purchaser will otherwise use
its reasonable best efforts to cause the consummation of such transactions in
accordance with the terms and conditions hereof and to cause all conditions
contained in this Agreement over which it has control to be satisfied. Purchaser
further agrees to deliver to the Company and the Shareholder prompt written
notice of any event or condition, which if it existed on the date of this
Agreement, would result in any of the representations and warranties of
Purchaser contained herein being untrue in any material respect.
9.2 AMENDMENT OF SCHEDULES. Purchaser agrees that, with respect to the
representations and warranties of Purchaser contained in this Agreement,
Purchaser shall have the continuing obligation until the Closing to supplement
or amend promptly any schedules attached hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in any
schedules attached hereto; provided, however, that any supplement or amendment
to any schedules attached hereto shall not cure any breach of any
representations or warranties hereunder.
9.3 FURTHER ASSURANCES. At any time or from time to time after the
Closing Date, Purchaser shall, at the request of the Company or the Shareholder
and at such Company's expense, execute and deliver any further instruments or
documents and take all such further action as the Company may reasonably request
in order to consummate and make effective the Merger.
9.4 INDEMNIFICATION AND INSURANCE. From and after the Closing, the
Company (or any successor thereto), Purchaser and Parent, and their respective
affiliates, shall at all times fully perform all of their respective obligations
to present and past officers and directors of the Company (collectively the
"Indemnified Parties") under and pursuant to the provisions existing on the date
of Closing set forth in the Articles of Incorporation, Bylaws and any other
indemnification agreements of the Company (collectively, the "Company
Indemnification Obligations"). The Company, Purchaser and Parent each covenant
and agree, jointly and severally, not to take any action or fail to take any
action, the effect or result of which would be to amend, alter, impair, reduce
or eliminate,
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in whole or in part, any of the Company Indemnification Obligations. The
Company, Purchaser and Parent, jointly and severally, covenant and agree to and
with Shareholder to discharge promptly and fully all of the Company
Indemnification Obligations.
ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:
(a) by the mutual written consent of Purchaser, the
Shareholder and the Company; or
(b) by Purchaser or the Shareholder in writing without
liability on the part of the terminating party on account of such
termination (provided the terminating party is not otherwise in default
or in breach of this Agreement), if the Closing shall not have occurred
on or before December 31, 1997; or
(c) by either Purchaser, on the one hand, or the Shareholder
and the Company, on the other hand, in writing, without liability on
the part of the terminating party on account of such termination
(provided the terminating party is not otherwise in default or breach
of this Agreement), if the other party shall (i) fail to perform its or
their covenants or agreements contained herein required to be performed
prior to the Closing Date, or (ii) have breached any of its
representations or warranties contained herein.
10.2 EFFECT ON OBLIGATIONS. Termination of this Agreement pursuant to
this Article shall terminate all obligations of the parties hereunder, except as
set forth in this Section 10.2 or in Sections 12.9 and 12.12 hereof. Upon any
termination of this Agreement each party hereto will redeliver all documents,
work papers and other material of any other party relating to the transactions
contemplated hereby, and all copies of such materials, whether so obtained
before or after the execution hereof, to the party furnishing the same. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies available either at law or in equity, it being the intent of
the parties hereto that if this Agreement is terminated by reason of a default
or breach of this Agreement by the non-terminating party or parties, the
terminating party shall be entitled to recover its damages, costs and expenses
by reason thereof.
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ARTICLE XI
SURVIVAL AND INDEMNIFICATION
11.1 INDEMNIFICATION OF THE COMPANY AND THE SHAREHOLDER. The Purchaser,
from and after the Closing Date, shall indemnify, defend and hold the Company
and the Shareholder and their respective Affiliates (the "Company Indemnitees")
harmless from and against any and all damages (including exemplary damages and
penalties, losses, deficiencies, costs, expenses, obligations, fines,
expenditures, claims and liabilities, including reasonable counsel fees and
reasonable expenses of investigation, defending and prosecuting litigation
(collectively, the "Damages")), suffered by any Company Indemnitee as a result
of, caused by, arising out of, or in any way relating to (a) any
misrepresentation, breach of warranty or breach, nonperformance, nonobservance
or nonfulfillment of any agreement or covenant on the part of the Purchaser
under this Agreement or any misrepresentation in or omission from any list,
schedule, certificate, or other instrument furnished or to be furnished to the
Shareholder by the Purchaser pursuant to the terms of this Agreement or (b) any
liability or obligation (other than those for which Purchaser is being
indemnified by the Company and the Shareholder hereunder) which pertains to the
ownership, operation or conduct of the Business or the Company's assets arising
from any acts, omissions, events, conditions or circumstances occurring on or
after the Closing Date.
11.2 INDEMNIFICATION OF THE PURCHASER. The Company and the Shareholder,
jointly and severally, shall indemnify and hold Purchaser and its Affiliates
(the "Purchaser Indemnitees") harmless from and against any and all Damages
suffered by any Purchaser Indemnitee as a result of, caused by, arising out of,
or in any way relating to (a) any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of the Company or the
Shareholder under this Agreement or any misrepresentation in or omission from
any list, schedule, certificate, or other instrument furnished or to be
furnished to the Purchaser by the Company pursuant to the terms of this
Agreement or (b) any liability or obligation (other than those for which the
Company and the Shareholder are being indemnified by Purchaser hereunder) which
pertains to the ownership, operation or conduct of the Business arising from any
acts, omissions, events, conditions or circumstances occurring before the
Closing Date.
11.3 DEMANDS. Each indemnified party hereunder agrees that promptly
upon its discovery of facts giving rise to a claim for indemnity under the
provisions of this Agreement, including receipt by it of notice of any demand,
assertion, claim, action or proceeding, judicial or otherwise, by any third
party (such third party actions being collectively referred to herein as the
"Claim"), with respect to any matter as to which it claims to be entitled to
indemnity under the provisions of this Agreement, it will give prompt notice
thereof in writing to the indemnifying party, together with a statement of such
information respecting any of the foregoing as it shall have. Such notice shall
include a formal demand for indemnification under this Agreement. The
indemnifying party shall not be obligated to indemnify the indemnified party
with respect to any Claim if the indemnified party knowingly failed to notify
the indemnifying party thereof in accordance with the provisions
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of this Agreement in sufficient time to permit the indemnifying party or its
counsel to defend against such matter and to make a timely response thereto
including, without limitation, any responsive motion or answer to a complaint,
petition, notice or other legal, equitable or administrative process relating to
the Claim, only insofar as such knowing failure to notify the indemnifying party
has actually resulted in prejudice or damage to the indemnifying party.
11.4 RIGHT TO CONTEST AND DEFEND. The indemnifying party shall be
entitled at its cost and expense to contest and defend by all appropriate legal
proceedings any Claim with respect to which it is called upon to indemnify the
indemnified party under the provisions of this Agreement using counsel
reasonably acceptable to the indemnified party; provided, that notice of the
intention so to contest shall be delivered by the indemnifying party to the
indemnified party within 20 days from the date of receipt by the indemnifying
party of notice by the indemnified party of the assertion of the Claim and if
such notice is not so delivered, the indemnified party shall have the right to
contest, defend and settle such Claim at the expense of the indemnifying party
using counsel of its own choosing. Any such contest may be conducted in the name
and on behalf of the indemnifying party or the indemnified party as may be
appropriate. Such contest shall be conducted by reputable counsel employed by
the indemnifying party, but the indemnified party shall have the right but not
the obligation to participate in such proceedings and to be represented by
counsel of its own choosing at its sole cost and expense. The indemnifying party
shall have full authority to determine all action to be taken with respect
thereto provided it assumes the defense of the Claim; provided, however, that
the indemnifying party will not have the authority to subject the indemnified
party to any obligation whatsoever, other than the performance of purely
ministerial tasks or obligations not involving expense. If the indemnifying
party does not elect to contest any such Claim, the indemnifying party shall be
bound by the result obtained with respect thereto by the indemnified party. At
any time after the commencement of the defense of any Claim, the indemnifying
party may request the indemnified party to agree in writing to the abandonment
of such contest or to the payment or compromise by the indemnified party of the
asserted Claim, whereupon such action shall be taken unless the indemnified
party determines that the contest should be continued, and so notifies the
indemnifying party in writing within 15 days of such request from the
indemnifying party. If the indemnified party determines that the contest should
be continued, the indemnifying party shall be liable hereunder only to the
extent of the amount that the other party to the contested Claim had agreed
unconditionally to accept in payment or compromise as of the time the
indemnifying party made its request therefor to the indemnified party. The
indemnifying party shall not compromise or settle any Claim, in whole or in
part, or incur any costs or expenses or otherwise assume any contractual
obligation, or admit any liability, with respect to any Claim, without the prior
written consent of the indemnified party being first obtained and unless the
indemnified party is given an absolute and unqualified release. Further, the
indemnified party shall not compromise or settle any Claim, in whole or in part,
unless or until the indemnifying party has been given an absolute and
unconditional release of all liability and responsibility with respect to such
Claim.
11.5 COOPERATION. If requested by the indemnifying party, the
indemnified party agrees to cooperate with the indemnifying party and its
counsel in contesting any Claim that the
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indemnifying party elects to contest or, if appropriate, in making any
counterclaim against the person asserting the Claim, or any cross-complaint
against any person, and the indemnifying party will reimburse the indemnified
party for any expenses incurred by it in so cooperating. At no cost or expense
to the indemnified party, the indemnifying party shall cooperate with the
indemnified party and its counsel in contesting any Claim.
11.6 RIGHT TO PARTICIPATE. The indemnified party agrees to afford the
indemnifying party and its counsel the opportunity to be present at, and to
participate in, conferences with all persons, including governmental
authorities, asserting any Claim against the indemnified party or conferences
with representatives of or counsel for such persons.
11.7 PAYMENT OF DAMAGES. The indemnifying party shall pay to the
indemnified party in immediately available funds any amounts to which the
indemnified party may become entitled by reason of the provisions of this
Agreement, such payment to be made within five days after any such amounts are
finally determined either by mutual agreement of the parties hereto or pursuant
to the final unappealable judgment of a court of competent jurisdiction.
11.8 RIGHT OF SETOFF. Purchaser shall have the right to set off any
amounts owed by the Company or Shareholder under this Article XI against any
Earnout Amount Purchaser may owe pursuant to Section 3.2.
11.9 DISPUTE AS TO RIGHT OF INDEMNIFICATION. In the event the question
of the right of indemnification is submitted to a court of competent
jurisdiction, arbitration panel or other tribunal for determination, all
attorneys' fees and other costs and expenses in determining the question of the
right of an indemnified party to indemnification shall be awarded to the
prevailing party and against the party against whom such determination is
rendered.
11.10 INDEMNIFICATION DEDUCTIBLE. No Claim shall be asserted by an
indemnified party pursuant to the provisions of this Article XI unless and until
the amount of such indemnified party's Damages in the aggregate exceed $30,000
(the "Deductible"). An indemnifying party shall be liable for Damages in excess
of the Deductible but limited to the Indemnification Cap (as defined below).
11.11 INDEMNIFICATION CAP. The aggregate amount of Damages recoverable
under this Agreement or in respect hereof (the "Indemnification Cap") by each of
all of the Company Indemnitees and all of the Purchaser Indemnitees shall be
limited to an amount equal to the Cash Amount and the fair market value of the
Castle Dental Shares at the time the Damages are incurred. Shareholder shall
have the right to tender Castle Dental Shares in satisfaction of any Damages for
which he is responsible hereunder and receive credit therefore. Purchaser shall
have the right to have an independent appraiser who is reasonably acceptable to
Shareholder determine the fair market value of Shareholder's shares.
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11.12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by any party hereto to the other pursuant to the terms of
this Agreement shall survive the Closing, and continue in full force and effect
until the second anniversary of the Closing Date (the "Survival Date"). From and
after the Survival Date, no party hereto shall be under any liability whatsoever
pursuant to this Article XI with respect to any matter for which indemnification
may be sought except with respect to matters for which notice has been received
in accordance with the provisions of this Article XI or matters known but not
disclosed.
ARTICLE XII
MISCELLANEOUS
12.1 SHAREHOLDER GUARANTEES. Purchaser agrees to use its commercially
reasonable efforts to remove Shareholder as a personal guarantor or otherwise
from personal liability on any obligation of the Company.
12.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules) set forth the entire understanding of the parties with respect to the
subject matter hereof. Any previous agreements or understandings (whether oral
or written) between the parties regarding the subject matter hereof are merged
into and superseded by this Agreement.
12.3 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors,
permitted assigns, heirs, executors, administrators, receivers, trustees or
legal representatives of the parties hereto; provided that this Agreement,
including the representations and warranties herein, may not be assigned to any
Persons by any party hereto without the prior written consent of the
non-assigning party. Any assignment in violation of this Section 12.2 shall not
be effective to transfer any rights or obligations under this Agreement.
12.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
12.5 HEADINGS. The headings of the Articles, Sections and paragraphs of
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
12.6 MODIFICATION AND WAIVER. No amendment, modification or alteration
of the terms or provisions of this Agreement shall be binding unless the same
shall be in writing and duly executed by the parties hereto, except that any of
the terms or provisions of this Agreement may be waived in writing at any time
by the party which is entitled to the benefits of such waived terms or
provisions. No waiver of any of the provisions of this Agreement shall be deemed
to or shall
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constitute a waiver of any other provision hereof (whether or not similar). No
delay on the part of either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.
12.7 NO THIRD PARTY BENEFICIARY RIGHTS. This Agreement is not intended
to and shall not be construed to give any Person (other than the parties
signatory hereto any interest or rights (including, without limitation, any
third party beneficiary rights) with respect to or in connection with any
agreement or provision contained herein or contemplated hereby.
12.8 SALES AND TRANSFER TAXES. Purchaser shall be responsible for and
pay all applicable sales, stamp, transfer, documentary, use, registration,
filing and other taxes and fees (including any penalties and interest) that may
become due or payable in connection with this Agreement and the transactions
contemplated hereby.
12.9 EXPENSES. Except as otherwise provided in this Agreement, the
Company, the Shareholder and Purchaser shall each pay all costs and expenses
incurred by them or on their behalf in connection with this Agreement and the
transactions contemplated hereby.
12.10 NOTICE. All notices, requests, demands, or other communications
required or permitted to be given or made hereunder by any party hereto shall be
given in writing and shall be deemed to have been duly given or made if
delivered personally, or three Business Days after deposit in the United States
Mail and transmitted by first class registered or certified mail, postage
prepaid, return receipt requested, or when sent by telecopier with confirmed
receipt or when sent by prepaid overnight delivery service to the parties at the
following addresses (or at such other addresses as shall be specified by the
parties) by like notice:
if to Purchaser, to:
▇▇▇▇ ▇. ▇▇▇▇▇
Castle Dental Centers of Texas, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Bracewell & ▇▇▇▇▇▇▇▇▇, L.L.P.
South Tower Pennzoil Place
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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if to the Company or the Shareholder to:
▇▇▇▇▇ ▇. ▇▇▇▇, D.D.S.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
12.11 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas without regards to conflict of
law rules thereof.
12.12 CONFIDENTIALITY; PUBLICITY. The terms and conditions of this
Agreement shall not be disclosed by any party hereto without the prior written
consent of the other parties; provided, however, that Purchaser may disclose
such information as is required to comply with the requirements of its lenders
and investors and to comply with applicable securities laws. No party hereto
shall issue any press release or make any other public statement, in each case
relating to or connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior approval of the other party hereto
to the contents and the manner of presentation and publication thereof.
12.13 ATTORNEYS' FEES. If any action at law or in equity, including any
action for injunctive or declaratory relief, is brought to enforce or interpret
any of the provisions of this Agreement, the prevailing party shall be entitled
to recover reasonable attorneys' fees and expenses from the other party, which
fees and expenses may be set by the court in the trial of such action or may be
enforced in a separate action brought for that purpose and which fees and
expenses shall be in addition to any other relief which may be awarded.
12.14 CONSENT TO JURISDICTION. Any judicial proceeding brought against
any of the parties to this Agreement on any dispute arising out of this
Agreement or any matter related hereto shall be brought in any federal or state
court located in ▇▇▇▇▇▇ County, Texas, and, by execution and delivery of this
Agreement, each of the parties to this Agreement accepts for itself the
exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
12.15 SEVERABILITY. If any provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the
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transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled.
12.16 ENFORCEMENT. The parties hereto agree that the remedy at law for
any breach of this Agreement is inadequate and that should any dispute arise any
of the terms or provisions of this Agreement or any transactions contemplated
hereby, this Agreement shall be enforceable in a court of equity by an
injunction or a decree of specific performance. Such remedies shall, however, be
cumulative and nonexclusive, and shall be in addition to any other remedies
which the parties hereto may have.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
PURCHASER:
CASTLE DENTAL CENTERS OF TEXAS, INC.
____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
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COMPANY:
▇▇▇▇▇ ▇. ▇▇▇▇, D.D.S., INC.
____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇, D.D.S.
President
SHAREHOLDER:
____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇, D.D.S.
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