1
EXHIBIT 10.4
================================================================================
STOCK REDEMPTION AGREEMENT
by and between
MONARCH DENTAL CORPORATION
and
Xxxxxx X. Xxxxxxx, D.D.S.
As of February 5, 1996
================================================================================
2
STOCK REDEMPTION AGREEMENT
INDEX
Page
----
ARTICLE 1. STOCK REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Stock Redemption . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Time and Place of Closing . . . . . . . . . . . . . . . . . . . 2
1.3 Certain Closing Deliveries . . . . . . . . . . . . . . . . . . . 2
1.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Non-Competition Agreement . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF XXXXXXX. . . . . . . . . . . . 3
2.1 Making of Representations and Warranties . . . . . . . . . . . . 3
2.2 Organization and Qualification; Capital Stock . . . . . . . . . 3
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Authority; Noncontravention . . . . . . . . . . . . . . . . . . 4
2.5 Status of Property . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Financial Statements; Undisclosed Liabilities . . . . . . . . . 8
2.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 Collectibility of Accounts Receivable . . . . . . . . . . . . . 10
2.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . 10
2.10 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . 13
2.11 Banking Relations . . . . . . . . . . . . . . . . . . . . . . . 13
2.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . 13
2.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.15 Permits; Compliance with Laws; Licensing and Credentialing;
Health Care Providers . . . . . . . . . . . . . . . . . . . . . 17
2.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.17 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.18 Transactions with Interested Persons . . . . . . . . . . . . . . 20
2.19 Employee Benefit Programs . . . . . . . . . . . . . . . . . . . 20
2.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 22
2.21 List of Certain Employees and Suppliers . . . . . . . . . . . . 23
2.22 Employees; Labor Matters . . . . . . . . . . . . . . . . . . . . 24
2.23 Material Relationships; Government Contracts . . . . . . . . . . 25
2.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.25 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . 25
2.26 Corporate Records . . . . . . . . . . . . . . . . . . . . . . . 25
2.27 List of Directors and Officers . . . . . . . . . . . . . . . . . 25
2.28 Transfer of Equity Interests . . . . . . . . . . . . . . . . . . 26
2.29 Equity Interest Repurchase . . . . . . . . . . . . . . . . . . . 26
2.30 Additional Financial Representations . . . . . . . . . . . . . . 26
(i)
3
Page
----
2.31 Investment Representations . . . . . . . . . . . . . . . . . . . 26
ARTICLE 3. COVENANTS OF XXXXXXX . . . . . . . . . . . . . . . . . . . . . . 27
3.1 Making of Covenants and Agreements . . . . . . . . . . . . . . . 27
3.2 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4. COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . 28
4.1 Making of Covenants and Agreements . . . . . . . . . . . . . . . 28
4.2 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.3 Availability of Records . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 5. SURVIVAL OF REPRESENTATIONS, WARRANTIES, ARRANGEMENTS, COVENANTS
AND OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 Indemnification by Xxxxxxx . . . . . . . . . . . . . . . . . . . 28
6.2 Limitations on Indemnification by Xxxxxxx . . . . . . . . . . . 29
6.3 Indemnification by Company . . . . . . . . . . . . . . . . . . . 30
6.4 Limitations on Indemnification by the Company . . . . . . . . . 31
6.5 Notice; Defense of Claims . . . . . . . . . . . . . . . . . . . 32
6.6 Satisfaction of Indemnification Obligations . . . . . . . . . . 33
ARTICLE 7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1 Fees, Expenses and Certain Taxes . . . . . . . . . . . . . . . . 33
7.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 35
7.5 Assignability; Binding Effect . . . . . . . . . . . . . . . . . 35
7.6 Captions and Gender . . . . . . . . . . . . . . . . . . . . . . 35
7.7 Execution in Counterparts . . . . . . . . . . . . . . . . . . . 35
7.8 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.9 Consent to Jurisdiction; Certain Remedies . . . . . . . . . . . 35
7.10 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . 36
Schedules
Schedule 1.6 - Non-Competition Agreement
Schedule 2.4(a) - Stockholders' Agreement
Schedule 2.4(b) - Employment Agreement
Schedule 2.6 - Financial Statements
(ii)
4
STOCK REDEMPTION AGREEMENT
STOCK REDEMPTION AGREEMENT entered into as of February 5, 1996 by and
among Monarch Dental Corporation, a Delaware corporation ("Company") and Xxxxxx
X. Xxxxxxx, D.D.S. ("Xxxxxxx").
W I T N E S S E T H
WHEREAS, immediately prior hereto Xxxxxxx owns beneficially and of
record all of the outstanding shares of capital stock of the Company,
consisting of 56,080,447 shares of common stock, par value $.01 per share (the
"Common Stock");
WHEREAS, subject to the terms and conditions hereof the Company wishes
to redeem and Xxxxxxx wishes to have redeemed a portion of the shares of Common
Stock owned beneficially and of record by Xxxxxxx;
WHEREAS, on the date hereof the Company has entered into (i) an Asset
Contribution Agreement (the "MacGregor Asset Contribution Agreement") by and
between the Company, Shears Vanguard, Ltd., Shears Vanguard, Inc., Shears
Vanguard General, Inc., Shears Vanguard SMI, Inc., MDC Dental, Inc. and Xx.
Xxxxxxx X. Xxxxxx pursuant to which in exchange for shares of Common Stock and
cash and the assumption of specified liabilities the Sellers thereunder will
contribute the assets comprising the MacGregor Dental Centers business in a
transaction (together with the transactions contemplated by the TA Purchase
Agreement and the Xxxxxxx/Xxxxx Asset Contribution Agreement (each as defined
below)) intended to qualify as an exchange under Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code"); (ii) the Stock Purchase
Agreement dated as of February 5, 1996, by and between the Company and the
purchasers named therein (the "TA Purchase Agreement"); (iii) the Loan
Agreement dated as of February 5, 1996 among Monarch Dental Associates, L.P.,
MacGregor Dental Associates, L.P., NationsBank of Texas, N.A., as Agent,
NationsBank of Texas, N.A. and the other entities designated therein as Lenders
and related documents entered in connection therewith (the "Bank Financing");
and (iv) an Asset Contribution Agreement (the "Xxxxxxx/Xxxxx Asset Contribution
Agreement") by and among the Company, Xxxxxxx and Xxx X. Xxxxx, III, D.D.S.
("Xxxxx") dated as of February 5, 1996, pursuant to which (A) in exchange for
shares of Common Stock and cash, each of Xxxxxxx and Xxxxx will contribute
certain assets comprising their interest in the dental practice conducted in
Mesquite, Texas and (B) in exchange for shares of Common Stock and cash Xxxxxxx
will contribute certain additional assets in each case in a transaction
(together with the transactions contemplated by the TA Purchase Agreement and
the MacGregor Asset Contribution Agreement) intended to qualify as an exchange
under Section 351 of the Code (all such assets so contributed as provided in
the Xxxxxxx/Xxxxx Asset Contribution Agreement, collectively, the "Subject
Assets"); and
WHEREAS, the closing of the transaction contemplated by this Agreement
shall occur immediately prior to the closings contemplated by each of the
MacGregor Asset Contribution Agreement and the Xxxxxxx/Xxxxx Asset Contribution
Agreement.
5
NOW, THEREFORE, in order to consummate said stock redemption and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
ARTICLE 1. STOCK REDEMPTION.
1.1 Stock Redemption. Subject to and in reliance upon the terms,
provisions and conditions of this Agreement, at the Closing (as defined in
Section 1.2 hereof), the Company shall redeem 53,068,927 shares of Common Stock
(the "Redeemed Shares") from Xxxxxxx for a purchase price of $.125965539 per
share or $6,684,856 in the aggregate (the "Aggregate Redemption Price"). At
the Closing Xxxxxxx shall surrender to the Company a certificate or
certificates, together with duly executed stock transfer powers, representing
the Redeemed Shares and the Company shall pay Xxxxxxx cash in the amount of the
Aggregate Redemption Price, with such amount to be paid by wire transfer in
immediately available funds to such account as Xxxxxxx shall have indicated in
writing to the Company.
1.2 Time and Place of Closing. The closing of the transactions
provided for in this Agreement (herein called the "Closing") shall be held at
the offices of Xxxxxxx, Procter & Xxxx at Exchange Place, Boston, Massachusetts
as of the date hereof (such date being herein called the "Closing Date").
1.3 Certain Closing Deliveries.
(a) Consideration Price. At the Closing, the Company shall
deliver to Xxxxxxx the Aggregate Redemption Price.
(b) Surrender of Redeemed Shares. At the Closing, Xxxxxxx
shall surrender to the Company a certificate or certificates representing the
Redeemed Shares, together with stock transfer powers duly endorsed in blank
transferring to the Company good title to the Redeemed Shares free and clear of
all liens, restrictions and encumbrances.
1.4 Further Assurances. Xxxxxxx from time to time after the Closing
at the request of the Company and without further consideration shall execute
and deliver such further instruments of transfer and assignment and take such
other action as the Company may reasonably require to more effectively transfer
and assign to, and vest in, the Company the Redeemed Shares.
1.5 Transfer Taxes. All transfer taxes, fees and duties under
applicable law incurred in connection with the transfer of the Redeemed Shares
under this Agreement will be borne and paid by Xxxxxxx, and Xxxxxxx hereby
covenants to promptly reimburse the Company for any such tax, fee or duty which
either the Company or Xxxxxxx is required to pay under applicable law.
2
6
1.6 Non-Competition Agreement. As a material inducement to and a
condition precedent of the Company's redemption of the Redeemed Shares, Xxxxxxx
is executing and delivering at the Closing a Non-Competition Agreement in the
form of Schedule 1.6 attached hereto (the "Non-Competition Agreement").
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF XXXXXXX.
2.1 Making of Representations and Warranties. As a material
inducement to the Company to enter into this Agreement and to consummate the
transactions contemplated hereby, Xxxxxxx hereby makes to the Company the
representations and warranties contained in this Section 2. For the purposes
of this Agreement, references to "knowledge" or "best knowledge" of Xxxxxxx or
"known" by Xxxxxxx or words of similar import, shall be deemed to include such
knowledge as Xxxxxxx or any executive officer or manager of the Company or any
entity (individually, an "Entity," collectively, the "Entities") listed in
Section 2.1 of the Disclosure Schedule (as hereinafter defined) actually has or
reasonably ought to have in the ordinary course of performing their duties.
For purposes of this Agreement, references to the "Disclosure Schedule" shall
mean the Disclosure Schedule delivered by Xxxxxxx to the Company on the date
hereof. For the purposes of this Article 2, the Company is deemed to have
knowledge of each of the MacGregor Asset Contribution Agreement, the TA
Purchase Agreement, the Bank Financing, the Xxxxxxx/Xxxxx Asset Contribution
Agreement and each other document entered into in connection therewith and the
transactions contemplated thereby.
2.2 Organization and Qualification; Capital Stock. The Company and
each Entity is a corporation or partnership duly organized, validly existing
and in good standing under the laws of the state of its organization as listed
in Section 2.2(i) of the Disclosure Schedule with full corporate or partnership
power and authority to own or lease its properties and to conduct its business
in the manner and in the places where such properties are owned or leased or
such business is currently conducted. The copies of the charter documents of
the Company and each Entity as amended to date and certified by the Secretary
of State of each relevant jurisdiction, and of the partnership agreement or
by-laws of the Company and each Entity, as amended to date, certified by its
Secretary or general partner, and heretofore delivered to Xxxxxxx, Procter &
Xxxx, are complete and correct, no amendments thereto are pending, and neither
the Company nor any Entity is in violation thereof.
The Company and each such Entity are duly qualified to do business as a
corporation or foreign limited partnership in the states or the jurisdictions
listed in Section 2.2(ii) of the Disclosure Schedule, and are not required to
be licensed or qualified to conduct their businesses or own their properties in
any other jurisdiction in which the failure to be so qualified would have a
material adverse effect on the business, operations, results of operations,
assets, condition (financial or other) or prospects of the Company and the
Entities taken as a whole. Immediately prior to the Closing, all of the issued
and outstanding capital stock, partnership interests or other equity interests
of the Company and each Entity is owned beneficially and of record as set forth
in Section 2.2(iii) of the Disclosure Schedule, free and
3
7
clear of any lien, restrictions or encumbrances and there are no outstanding
options, warrants, rights, commitments, pre-emptive rights or agreements of any
kind for the issuance or sale of, or outstanding securities convertible into,
any additional shares of capital stock of any class, partnership interests or
other equity interests of the Company or any such Entity.
At the Closing, and after giving effect to each of the transactions
contemplated by (i) this Agreement, (ii) the MacGregor Asset Contribution
Agreement, (iii) the TA Purchase Agreement, (iv) the Bank Financing and (v) the
Xxxxxxx/Xxxxx Asset Contribution Agreement, all of the issued and outstanding
capital stock, partnership interests or other equity interests of the Company
and each Entity will be owned beneficially and of record as set forth in
Section 2.2(iv) of the Disclosure Schedule, will be free and clear of any lien,
restrictions or encumbrances (other than those, if any, required by the Bank
Financing) and there will be no outstanding options, warrants, rights,
commitments, pre-emptive rights or agreements of any kind for the issuance or
sale of, or outstanding securities convertible into, any additional shares of
capital stock of any class, partnership interests or any other equity interest
of the Company or any Entity.
2.3 Subsidiaries. Neither the Company nor any Entity has any
subsidiaries (as defined in Section 7.10(d)) or owns any securities issued by
any other business organization or governmental authority or has any direct or
indirect interest in or control over any corporation, partnership, joint
venture or entity of any kind relating to the business conducted by the Company
and the Entities (such business, the "Monarch Dental Centers business"), except
as listed in Section 2.3 of the Disclosure Schedule.
2.4 Authority; Noncontravention. Xxxxxxx, the Company and each
Entity have full corporate or partnership power and authority or capacity, as
applicable to enter into this Agreement, each agreement, document and
instrument to be executed and delivered by it or them pursuant to or
contemplated by this Agreement, the Stockholders' Agreement dated as of
February 5, 1996 attached hereto as Schedule 2.4(a) (the "Stockholders'
Agreement"), the Employment Agreement dated as of February 5, 1996 attached
hereto as Schedule 2.4(b) (the "Employment Agreement") and the Non-Competition
Agreement and to carry out the transactions contemplated hereby and thereby.
The execution, delivery and performance by Xxxxxxx, the Company and each Entity
of this Agreement and each such other agreement, document and instrument have
been duly authorized by all necessary action of Xxxxxxx, the Company and each
Entity including any required action of their respective owners and no other
action on the part of Xxxxxxx, the Company and each Entity or its owners is
required in connection therewith. This Agreement and each such agreement,
document and instrument executed and delivered by Xxxxxxx, the Company and each
Entity pursuant to this Agreement constitute valid and binding obligations of
Xxxxxxx, the Company and each Entity enforceable in accordance with their
respective terms.
The execution, delivery and performance by Xxxxxxx, the Company and each
Entity of this Agreement and each such agreement, document and instrument
contemplated by this Agreement to which it is a party:
4
8
(i) do not and will not violate any provision of the
charter, by-laws or equivalent constituent documents of Xxxxxxx, the
Company or any Entity;
(ii) do not and will not violate in any material respect
any laws of the United States or any state or other jurisdiction
applicable to Xxxxxxx, the Company or any Entity or require Xxxxxxx, the
Company or any Entity except as set forth in Section 2.4 of the
Disclosure Schedule to obtain any approval, consent or waiver of, or
make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made; and
(iii) do not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award, whether written or oral, to which
Xxxxxxx, the Company or any Entity is a party or by which the property
of Xxxxxxx, the Company or any Entity is bound or affected, or result in
the creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any of the Subject Assets,
except to the extent that any of the foregoing would not have a material
adverse effect on the business, operations, results of operations,
assets, condition (financial or other) or prospects of the Monarch
Dental Centers business taken as a whole.
2.5 Status of Property.
(a) Real Property. Neither the Company nor any Entity owns
any real estate.
(b) Leased Real Property. All of the real property leased in
connection with the Monarch Dental Centers business is identified in Section
2.5(b) of the Disclosure Schedule (collectively referred to herein as the
"Leased Real Property"). Further:
(i) Leases. All of the leases of any of the Leased
Real Property (collectively, the "Leases") are listed in Section
2.5(b)(i) of the Disclosure Schedule. The copies of the Leases
heretofore delivered or furnished to Xxxxxxx, Procter & Xxxx are
complete, accurate, true and correct copies of each of the Leases,
except as set forth in Section 2.5(b)(i) of the Disclosure Schedule.
With respect to each of the Leases, except as set forth in Section
2.5(b)(i) of the Disclosure Schedule:
(A) each of the Leases is in full force and effect on
the terms set forth therein and has not been modified, amended,
or altered, in writing or otherwise;
(B) all material obligations of the landlord or lessor
under the Leases which have accrued have been performed, and to
the best of the knowledge of Xxxxxxx, no landlord or lessor is in
default under or in arrears in the payment
5
9
of any sum or in the performance of any obligation required of it
under any Lease, and no circumstance presently exists which, with
notice or the passage of time, or both, would give rise to a
default by the landlord or lessor under any Lease, except for any
default which would not have a material adverse effect on the
business, operations, results of operations, assets, condition
(financial or other) or prospects of the Monarch Dental Centers
business taken as a whole;
(C) all material obligations of the tenant or lessee
under the Leases which have accrued have been performed, and none
of Xxxxxxx, the Company or any Entity is in default under or in
arrears in the payment of any sum or in the performance of any
material obligation required of it under any Lease, and no
circumstance presently exists which, with notice or the passage
of time, or both, would give rise to a default by Xxxxxxx, the
Company or any Entity; and
(D) Xxxxxxx, the Company and each Entity have obtained
the consent of each landlord or lessor under any Leases whose
consent is required in connection with the transactions
contemplated by this Agreement and each other transaction
referred to herein or the collateral assignment of any Lease by
the Company or any Entity or its assignees, except as set forth
in Section 2.5(b)(i)(D) of the Disclosure Schedule.
(ii) Title and Description. The Company or the relevant
Entity, as applicable, holds a good, clear, marketable (if applicable),
valid and enforceable leasehold interest in the Leased Real Property
leased by it pursuant to the Leases, subject only to the right of
reversion of the landlords or lessors under such Leases, in all cases,
to the best knowledge of Xxxxxxx, free and clear of all other prior or
subordinate interests, including, without limitation, mortgages, deeds
of trust, ground leases, leases, subleases, security interests or
similar encumbrances, liens, assessments, tenancies, licenses, claims,
rights of first refusal, options, covenants, conditions, restrictions,
rights of way, easements, judgments or other encumbrances or matters
affecting title, and free of encroachments onto or off of the Leased
Real Property, except for those matters set forth in Section 2.5(b)(ii)
of the Disclosure Schedule (collectively, the "Title Exceptions").
(iii) Compliance with Law; Government Approvals. None of
Xxxxxxx, the Company or any Entity has received notice from any
municipal, state, federal or other governmental authority of any
violation of any zoning, building, fire, water, use, health, or other
law, ordinance, code, regulation, license, permit or authorization
issued in respect of any of the Leased Real Property that has not been
heretofore corrected, and to the best knowledge of Xxxxxxx, no such
violation or violations now exist which would have a material adverse
effect on the conduct of the Monarch Dental Centers business taken as a
whole. Improvements located on or constituting a part of the Leased
Real Property and the construction, installation, use and operation
thereof (including, without limitation, the construction, installation,
use and operation of any signs located thereon) were completed and
installed and to the
6
10
best knowledge of Xxxxxxx are now in compliance, in all material
respects, with all applicable municipal, state, federal or other
governmental laws, ordinances, codes, regulations, licenses, permits and
authorizations, including, without limitation, applicable zoning,
building, fire, water, use or health laws, ordinances, codes,
regulations, licenses, permits and authorizations except as set forth in
Section 2.5(b)(iii) of the Disclosure Schedule, and there are presently
in effect all certificates of occupancy, licenses, permits and
authorizations required by law, ordinance, code or regulation or by any
governmental or private authority having jurisdiction over any of the
Leased Real Property or any portion thereof, or the occupancy thereof or
any present use thereof (collectively, "Governmental Approvals"), which
are necessary or otherwise material to the conduct of the Monarch Dental
Centers business, except as set forth in Section 2.5(b)(iii) of the
Disclosure Schedule. To the best knowledge of Xxxxxxx, the Leased Real
Property has at least the minimum access required by applicable
subdivision or similar law.
(iv) Real Property Taxes. Except as set forth in
Section 2.5(b)(iv) of the Disclosure Schedule, none of Xxxxxxx, the
Company or any Entity has received notice of any pending or threatened
reassessment of all or any portion of any of the Leased Real Property,
and, to the best knowledge of Xxxxxxx, the consummation of the
transactions contemplated by this Agreement or referred to herein will
not result in any such reassessment.
(c) Personal Property. Except as specifically disclosed in
Section 2.5(c) of the Disclosure Schedule or in the Base Balance Sheet (as
defined in Section 2.6(a)(ii)) the Company or the relevant Entity, as
applicable, owns and has good, valid and (if applicable) marketable title to
all of the personal property used in connection with the conduct of the Monarch
Dental Centers business and none of such personal property or assets is subject
to any mortgage, pledge, lien, conditional sale agreement, restriction on
transfer, stockholder or similar agreement, security title, encumbrance or
other charge except as specifically disclosed in said Schedule or in the Base
Balance Sheet. The Base Balance Sheet reflects all personal property used in
connection with the conduct of the Monarch Dental Centers business, subject to
dispositions and additions in the ordinary course of business and consistent
with this Agreement. Except as otherwise specified in Section 2.5(c) of the
Disclosure Schedule, all of the tangible personal property of the Company and
the Entities are in generally good operating condition and repair, normal wear
and tear excepted, have been well maintained, and conform in all material
respects with all applicable ordinances, regulations and other laws.
(d) Transfer of Title. At the Closing the Company will
receive good, valid and (if applicable) marketable title to the Redeemed Shares
and all of the Subject Assets, free and clear of all liens, encumbrances,
charges, restrictions on transfer, stockholder or similar agreements, equities
and other claims of every kind, including the right and ability to transfer the
Subject Assets to its subsidiaries.
7
11
2.6 Financial Statements; Undisclosed Liabilities.
(a) Xxxxxxx has delivered to Xxxxxxx, Procter & Xxxx the
following financial statements, copies of which are attached hereto as Schedule
2.6:
(i) Unaudited pro forma combined balance sheets for the
Monarch Dental Centers business for the fiscal years ended December 31,
1994 and 1993 and related statements of income, retained earnings and
cash flows for the years then ended, certified by the Company; and
(ii) An unaudited pro forma combined balance sheet for
the Monarch Dental Centers business as of December 31, 1995 (herein the
"Base Balance Sheet") and an unaudited statement of income, retained
earnings and cash flows for the twelve-month period then ended for the
Monarch Dental Centers business.
Said financial statements have been prepared by the Company from the books and
records of the Monarch Dental Centers business, present fairly in all material
respects the pro forma combined financial condition of the Monarch Dental
Center business, at the dates of said statements and the results of their
operations for the periods covered thereby.
(b) As of the date of the Base Balance Sheet, there were no
liabilities or obligations of any nature, whether accrued, absolute, contingent
or otherwise, asserted or unasserted, known or unknown, relating to the Monarch
Dental Centers business, except liabilities (i) stated or adequately reserved
against on the Base Balance Sheet or the notes thereto, (ii) specifically
disclosed in Schedule 2.6 furnished to Xxxxxxx, Procter & Xxxx hereunder on the
date hereof and attached hereto, or (iii) incurred in the ordinary course of
business consistent with the terms of this Agreement subsequent to the date of
the Base Balance Sheet.
(c) As of the date hereof, there are no liabilities or
obligations of any nature, whether accrued, absolute, contingent or otherwise,
asserted or unasserted, known or unknown, relating to the Monarch Dental
Centers business, except liabilities (i) stated or adequately reserved against
on the Base Balance Sheet or the notes thereto, (ii) specifically disclosed in
Schedule 2.6 furnished to Xxxxxxx, Procter & Xxxx hereunder on the date hereof
and attached hereto, or (iii) incurred in the ordinary course of business
consistent with the terms of this Agreement subsequent to the date of the Base
Balance Sheet.
2.7 Taxes.
(a) The Company, each of the Entities and their predecessors
have paid or caused to be paid all federal, state, local, foreign, and other
taxes, including, without limitation, income taxes, estimated taxes,
alternative minimum taxes, excise taxes, sales taxes, use taxes, value-added
taxes, gross receipts taxes, franchise taxes, capital stock taxes, employment
and payroll-related taxes, withholding taxes, stamp taxes, transfer taxes,
windfall profit taxes, environmental taxes and property taxes, whether or not
measured in whole or in
8
12
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties owed by it (collectively, "Taxes"), shown to be due on all
tax returns required to be filed through the date hereof, whether disputed or
not.
(b) The Company, each of the Entities and their predecessors
have in accordance with applicable law filed all federal, state, local and
foreign tax returns required to be filed through the date hereof. Complete and
correct copies of all federal, state, local and foreign income tax returns
filed with respect to the Company, each of the Entities and their predecessors
for taxable periods ended on or after December 31, 1989 have been previously
provided to Coopers & Xxxxxxx, together with any examination reports and
statements of deficiencies assessed against or agreed to with respect to said
returns and all such returns are true, correct and complete in all material
respects.
(c) Neither the Internal Revenue Service nor any other
governmental authority is now asserting or, to the best knowledge of Xxxxxxx,
threatening to assert against the Company, each of the Entities or their
predecessors any deficiency or claim for additional Taxes. No claim has ever
been made by an authority in a jurisdiction where the Company, any of the
Entities and their predecessors do not file reports and returns that the
Company, any of the Entities or their predecessors are or may be subject to
taxation by that jurisdiction. There are no security interests on any of the
assets of the Company or any Entity that arose in connection with any failure
(or alleged failure) to pay any Tax. The Company, each of the Entities and
their predecessors have not entered into a closing agreement pursuant to
Section 7121 of the Code.
(d) Except as set forth in Section 2.7 of the Disclosure
Schedule, there has not been during the past five years any audit of any tax
return filed by the Company, any Entity or their predecessors, no audit of any
tax return of the Company, any Entity or their predecessors is in progress, and
neither the Company, any Entity nor their predecessors have been notified by
any tax authority that any such audit is contemplated or pending. Except as
set forth in Section 2.7 of the Disclosure Schedule, no extension of time with
respect to any date on which a tax return was or is to be filed by the Company,
any Entity or their predecessors is in force, and no waiver or agreement by the
Company, any Entity or their predecessors is in force for the extension of time
for the assessment or payment of any Taxes.
(e) The Company, each of the Entities and their predecessors
have never been (and have never had any liability for unpaid Taxes because they
once were) a member of an "affiliated group" (as defined in Section 1504(a) of
the Code). Neither the Company, any Entity nor their predecessors have ever
filed, or have ever been required to file, a consolidated, combined or unitary
tax return with any other entity. Neither the Company, any of the Entities nor
their predecessors own or have ever owned a direct or indirect interest in any
trust, partnership, corporation or other entity except as set forth in Section
2.7(e) of the Disclosure Schedule and neither the Subject Assets nor the assets
of the Company or any Entity include an interest in any such entity. Neither
the Company, any Entity nor their predecessors are parties to any tax sharing
agreement.
9
13
(f) Neither the Company, any Entity nor their predecessors is
a "foreign person" within the meaning of Section 1445 of the Code and Treasury
Regulations Section 1.1445-2.
(g) Neither the Company nor any Entity has made any payments,
is obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code.
(h) Each of the Company and Partners Dental Corporation is and
always has been an "S corporation" within the meaning of Section 1361(a)(1) of
the Code.
(i) For purposes of this Agreement, all references to Sections
of the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
(j) Section 2.7 of the Disclosure Schedule sets forth the tax
basis of the Subject Assets for federal income tax purposes.
2.8 Collectibility of Accounts Receivable. All of the accounts
receivable of the Monarch Dental Centers business (subject to contractual
allowances consistent with the past practices of the Monarch Dental Centers
business) as described in Section 2.8 of the Disclosure Schedule are valid and
enforceable claims, and to the best knowledge of Xxxxxxx are not subject to set
off or counterclaim, provided that the foregoing representation is not a
guarantee of collectibility. Section 2.8 of the Disclosure Schedule contains a
complete and accurate summary of the amount of accounts receivable. Except as
disclosed in Section 2.8 of the Disclosure Schedule, the Monarch Dental Centers
business does not have any accounts receivable or loans receivable from any
person, firm or corporation which is affiliated with Xxxxxxx, the Company or
any Entity or from any stockholder, director, officer or employee of the
Company or any Entity or any affiliate thereof.
2.9 Absence of Certain Changes. Except as disclosed in Section 2.9
of the Disclosure Schedule, since the date of the Base Balance Sheet there has
not been:
(a) Any adverse change in the properties, assets, liabilities,
business, operations, condition (financial or other) or prospects of the
Monarch Dental Centers business taken as a whole which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has been material;
(b) Any contingent liability relating to the Monarch Dental
Centers business as guarantor or otherwise with respect to the obligations of
others or any cancellation of any material debt or claim owing to, or waiver of
any material right of, the Monarch Dental Centers business;
10
14
(c) Any mortgage, encumbrance or lien placed on any of the
properties used in the Monarch Dental Centers business which remains in
existence on the date hereof;
(d) Any obligation or liability of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown, incurred by the Company or any Entity other than obligations and
liabilities incurred in the ordinary course of business or the Monarch Dental
Centers and otherwise consistent with the terms of this Agreement;
(e) Any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of the
properties or assets relating to the Monarch Dental Centers business other than
in the ordinary course of business;
(f) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting any of the properties, assets or
business relating to the Monarch Dental Centers business;
(g) Any declaration, setting aside or payment of any dividend
by the Company, Oral Health Concepts, Inc., Partners Dental Corporation or
Xxxxxx X. Xxxxxxx D.D.S., P.C., or the making of any other distribution in
respect of the capital stock or other equity interest of any of the foregoing
of or any direct or indirect redemption, purchase or other acquisition by any
of the foregoing of its own capital stock or other equity interest except as
described in Section 2.9(g) of the Disclosure Schedule;
(h) Any labor trouble or claim of unfair labor practices
involving the Monarch Dental Centers business;
(i) Except as set forth in Section 2.9(i) of the Disclosure
Schedule, any change in the compensation (in the form of salaries, wages,
incentive arrangements or otherwise) payable or to become payable by the
Monarch Dental Centers business to any officers, employees, agents, independent
contractors, dentists or dental professional corporations other than normal
merit increases in accordance with its usual practices, or any bonus payment or
arrangement made to or with any such person or entity; or any entering into any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any such person or entity;
(j) Any change, or the obtaining of information concerning a
prospective change, with respect to any officers, management employees or
dentists (including dental professional corporations) involved in the Monarch
Dental Centers business, any grant of any severance or termination pay to any
officer, employee, agent, independent contractor, dentist or dental
professional corporation involved in the Monarch Dental Centers business or any
increase in benefits payable under any existing severance or termination pay
policies or employment agreement or relationship;
11
15
(k) Any payment or discharge of a material lien or liability
relating to the Monarch Dental Centers business which was not shown on the Base
Balance Sheet or incurred in the ordinary course of business thereafter;
(l) Any payment made or obligation or liability incurred by
the Company or any Entity to, or any other transaction by the Company or any
Entity with, any of its officers, directors, partners, stockholders, employees
or independent contractors (including dentists and dental professional
corporations), or any loans or advances made by the Company or any Entity to
any of its officers, directors, partners, stockholders, employees or
independent contractors (including dentists and dental professional
corporations), except normal compensation and expense allowances consistent
with past practice;
(m) Any change in accounting methods or practices, credit
practices, collection policies or payment policies used by the Company or any
Entity including without limitation any change in the discharge or recording of
payables relative to past practices;
(n) Any cancellation or loss of any material right or asset,
or waiver of any right, of the Monarch Dental Centers business;
(o) Any change in the relationships with suppliers,
distributors, licensees, licensors, customers or others with whom the Monarch
Dental Centers business has business relationships which would have a material
adverse effect on the Monarch Dental Centers business taken as a whole, and
Xxxxxxx does not have knowledge of any fact or contemplated event which may
cause any such material adverse change;
(p) Any alteration or change in the methods of operation
employed by the Monarch Dental Centers business other than in the ordinary
course of business;
(q) Any other transaction relating to the Monarch Dental
Centers business other than transactions in the ordinary course of business; or
(r) Any agreement or understanding whether in writing or
otherwise, by the Company, any Entity or any other person that would result in
any of the transactions or events or require the Company or any Entity to take
any of the actions specified in paragraphs (a) through (q) above.
2.10 Ordinary Course. Since the date of the Base Balance Sheet, the
Monarch Dental Centers business has conducted its business only in the ordinary
course and in a manner consistent with prior practices.
2.11 Banking Relations. All of the accounts with any banking
institution relating to the Monarch Dental Centers business are accurately and
in all material respects described in Section 2.11 of the Disclosure Schedule,
indicating with respect to each of such accounts the type of arrangement
maintained (such as checking account, borrowing, etc.) and the person or
persons authorized in respect thereof.
12
16
2.12 Intellectual Property.
(a) Except and as described in Section 2.12(a) of the
Disclosure Schedule, the Company or the relevant Entity has exclusive
ownership, or exclusive license to use, of all computer software, patent,
copyright, trade secret (including without limitation customer lists,
production processes and inventions), trademark, service xxxx or other
proprietary rights (collectively, "Intellectual Property") used in the Monarch
Dental Centers business as presently conducted. The Company's or the relevant
Entity's rights in all of such Intellectual Property are freely transferable,
provided that no representation or warranty is made as to licensed software
which is generally commercially available and used in the ordinary course of
business, and except as set forth in Section 2.12(a) of the Disclosure Schedule
with respect to Intellectual Property which is not freely assignable at the
date hereof. No proceedings have been instituted, or are pending or to the
best knowledge of Xxxxxxx threatened, which challenge the rights of the Company
or any Entity in respect of any Intellectual Property, and to the best
knowledge of Xxxxxxx, except as set forth in Section 2.12(a) of the Disclosure
Schedule, no other person has or alleges any rights in or to the Intellectual
Property. The Company or the relevant Entity has the right to use, free and
clear of claims or rights of other persons, all customer lists, designs,
manufacturing or other processes, computer software (subject to the first
sentence of this paragraph), systems, data compilations, research results and
other information required for or incident to the conduct of the Monarch Dental
Centers business as presently conducted or contemplated.
(b) All patents, patent applications, trademarks, service
marks, trademark and service xxxx applications and registrations and registered
copyrights which are material to the conduct of the Monarch Dental Center's
business as presently conducted or contemplated to be conducted, are listed in
Section 2.12(b) of the Disclosure Schedule. Such patents, patent applications,
trademark and service xxxx registrations, trademark and service xxxx
applications and registered copyrights have been duly registered in, filed in
or issued by the United States Patent and Trademark Office, the United States
Register of Copyrights, or the corresponding offices of other jurisdictions as
identified on said Schedule, and have been properly maintained and renewed in
accordance with all applicable provisions of law and administrative regulations
in the United States and each such jurisdiction, to the extent, if any, set
forth in Section 2.12(b) of the Disclosure Schedule.
(c) All licenses or other agreements under which the Monarch
Dental Centers business is granted rights in Intellectual Property are listed
in Section 2.12(c) of the Disclosure Schedule. All said licenses or other
agreements are in full force and effect, there is no material default by the
Company or any Entity, or to the best knowledge of Xxxxxxx, any other party
thereto, and, except as set forth in Section 2.12(c) of the Disclosure Schedule
and as provided in Section 2.12(a) above, all rights thereunder are freely
assignable. To the best knowledge of Xxxxxxx, the licensors under said
licenses and other agreements have and had all requisite power and authority to
grant the rights purported to be conferred thereby. True and complete copies
of all such licenses or other agreements, and any amendments thereto, have been
provided to Xxxxxxx, Procter & Xxxx.
13
17
(d) All licenses or other agreements under which the Monarch
Dental Centers business has granted rights to others in Intellectual Property
are listed in Section 2.12(d) of the Disclosure Schedule. All of said licenses
or other agreements are in full force and effect, there is no material default
by the Company or any Entity, or to the best knowledge of Xxxxxxx, any other
party thereto, and, except as set forth in Section 2.12(d) of the Disclosure
Schedule, and as provided in Section 2.12(a) above, all of the Company's or the
relevant Entities' rights thereunder are freely assignable. True and complete
copies of all such licenses or other agreements, and any amendments thereto,
have been provided to Xxxxxxx, Procter & Xxxx.
(e) To the best knowledge of Xxxxxxx, the Monarch Dental
Centers business has taken all steps required in accordance with sound business
practice to establish and preserve its ownership of all material copyright,
trade secret and other proprietary rights. Neither Xxxxxxx, the Company nor
any Entity has any knowledge of any infringement by others of any of its
Intellectual Property rights. No employee or consultant of the Company or any
Entity owns any rights in any products, technology or Intellectual Property of
the Company or any Entity which ownership materially and adversely affects the
conduct of the Monarch Dental Centers business.
(f) To the best knowledge of Xxxxxxx, the conduct of the
Monarch Dental Centers business does not infringe any Intellectual Property of
any other person. No proceeding charging the Company or any Entity with
infringement of any adversely held Intellectual Property has been filed or to
the best knowledge of Xxxxxxx is threatened to be filed. To the best knowledge
of Xxxxxxx, there exists no unexpired patent or patent application which
includes claims that would be infringed by or otherwise adversely affect the
services, activities or business of the Monarch Dental Centers business. To
the best knowledge of Xxxxxxx, the conduct of the Monarch Dental Centers
business does not involve the unauthorized use of any confidential information
or trade secrets of any person, including without limitation any former
employer of any past or present employee. Except as set forth in Section
2.12(f) of the Disclosure Schedule, to the best knowledge of Xxxxxxx, none of
the Company nor any Entity, nor any of their respective employees, has any
agreements or arrangements with any persons other than the Company or an Entity
related to confidential information or trade secrets of such persons or
restricting any such employee's engagement in business activities of any
nature, other than those relating to patient confidentiality as required by
law.
(g) To the best knowledge of Xxxxxxx, the computer software
included in the Intellectual Property performs in all material respects in
accordance with the documentation and other written material used in connection
with the Software and is free of material defects in programming. The Company
and the Entities have all the databases and computer software used or necessary
to conduct their businesses and the Monarch Dental Centers business, except as
set forth in Section 2.12(g) of the Disclosure Schedule.
14
18
2.13 Contracts.
(a) Except for contracts, commitments, plans, agreements and
licenses described in Section 2.13(a) of the Disclosure Schedule (true and
complete copies of which have been delivered to the Xxxxxxx, Procter & Xxxx),
neither the Monarch Dental Centers business nor the Company or any Entity are a
party to or subject to:
(i) any plan or contract providing for bonuses,
pensions, options, stock purchases, deferred compensation, retirement
payments, profit sharing, collective bargaining or the like, or any
contract or agreement with any labor union;
(ii) any employment contract, or any contract for
services which requires the payment of more than $100,000 annually or
which is not terminable within 30 days without liability for any penalty
or severance payment;
(iii) any contract or agreement for the purchase of any
commodity, material, equipment or service except purchase orders in the
ordinary course for less than $5,000 each, such orders not exceeding
$50,000 in the aggregate;
(iv) any other contracts or agreements creating an
obligation of $50,000 or more with respect to any such contract;
(v) any contract or agreement providing for the
purchase of all or substantially all of its requirements of a particular
product from a supplier;
(vi) any contract or agreement which by its terms does
not terminate or is not terminable without penalty within one year after
the date hereof;
(vii) any contract or agreement for the sale or lease of
its products not made in the ordinary course of business;
(viii) any contract with any sales agent or distributor;
(ix) any contract containing covenants limiting its
freedom to compete in any line of business or with any person or entity;
(x) any contract or agreement for the purchase of any
fixed asset for a price in excess of $50,000 whether or not such
purchase is in the ordinary course of business;
(xi) any license agreement (as licensor or licensee)
other than routine software licenses to end users entered into in the
ordinary course of business for a total consideration not exceeding
$50,000 for any one such license);
15
19
(xii) any agreement involving a lease or license of real
property or any "capitalized" or "financing" lease;
(xiii) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment for the borrowing
of money and any related security agreement;
(xiv) any contract or agreement with any officer,
employee, director, or stockholder or with any persons or organizations
controlled by or affiliated with any of them;
(xv) any contract or agreement with any governmental
authority, insurance company, third-party fiscal intermediary or carrier
administering any Medicaid program of any state, the Medicare program,
any clinic or other in-patient health care facility, dental or health
maintenance organization, preferred provider organization, self-insured
employer or other third-party payor of any kind or nature;
(xvi) any power of attorney; or
(xvii) any judgment, decree or order affecting the Monarch
Dental Centers business, the Company or any Entity.
(b) All contracts, agreements, leases and instruments to which
the Company or any Entity is a party and as are set forth in Section 2.13(a) of
the Disclosure Schedule are valid and are in full force and effect and
constitute legal, valid and binding obligations of the Company or the relevant
Entity, as the case may be and, to the best knowledge of Xxxxxxx, the other
parties thereto, enforceable in accordance with their respective terms.
Neither the Company nor any Entity or, to the best knowledge of Xxxxxxx, any
other party to any contract, agreement, lease or instrument to which the
Company or any Entity is a party or any judgment, decree or order applicable to
the Monarch Dental Centers business, the Company or any Entity is in default in
complying with any provisions thereof, and no condition or event or facts exist
which, with notice, lapse of time or both would constitute a default thereof on
the part of the Company or any Entity or, to the best knowledge of Xxxxxxx, on
the part of any other party thereto in any such case that could have a material
adverse effect on the business, operations, results of operations, assets,
condition (financial or other) or prospects of the Monarch Dental Centers
business taken as a whole. Except as disclosed in Section 2.13(b) of the
Disclosure Schedule, neither the Company nor any Entity is subject to or bound
by any agreement, judgment, decree or order which materially and adversely
affects the business, operations, results of operations, assets, condition
(financial or other) or prospects of the Monarch Dental Centers business taken
as a whole.
(c) Except as disclosed in Section 2.13(c) of the Disclosure
Schedule, there are no contracts, agreements, arrangements or understandings
(each, an "HCP Agreement") with any dentist, dental assistant, nurse,
technician, or other health care provider (each a "Health Care Provider") in
connection with the Monarch Dental Centers business or pursuant
16
20
to which Xxxxxxx, the Company or any Entity receives revenues regarding the
provision of dental services to patients in connection with such business.
2.14 Litigation. Section 2.14 of the Disclosure Schedule lists all
currently pending litigation and governmental or administrative proceedings or
investigations to which the Company or any Entity is a party. Except for
matters described in Section 2.14 of the Disclosure Schedule, there is no
litigation or governmental or administrative proceeding or investigation
pending or, to the best knowledge of Xxxxxxx, threatened relating to the
Monarch Dental Centers business which may have any material adverse effect on
the business, operations, results of operations, assets, condition (financial
or other) or prospects of the Monarch Dental Centers business taken as a whole
or which could prevent or hinder the consummation of the transactions
contemplated by this Agreement or any other transaction contemplated by or
referred to herein. With respect to each matter set forth therein, Section
2.14 of the Disclosure Schedule sets forth a description of the forums for the
matter, the parties thereto and the type and amount of relief sought.
Without limitation of the foregoing, except as set forth in Section 2.14
of the Disclosure Schedule, there are no pending or, to the best knowledge of
Xxxxxxx, threatened malpractice claims, Texas Regulatory Board investigations,
suits, notices of intent to institute, arbitrations or proceedings, either
administrative or judicial, involving the Monarch Dental Centers business
including, without limitation, any of the Health Care Providers.
2.15 Permits; Compliance with Laws; Licensing and Credentialing;
Health Care Providers.
(a) General Compliance. Except as set forth in Section
2.15(a) of the Disclosure Schedule, the Monarch Dental Centers business has all
franchises, authorizations, approvals, orders, consents, licenses,
certificates, permits, registrations, qualifications or other rights and
privileges (collectively "Permits") necessary to permit the ownership of
respective properties involved therein and the conduct of such business as the
same is presently conducted, a listing of such Permits is set forth in Section
2.15(a) of the Disclosure Schedule, and all such Permits are valid and in full
force and effect except to the extent the absence of any such Permit would not
have material adverse effect on the business, operations, results of
operations, assets, condition (financial or other) or prospects of the Monarch
Dental Centers business taken as a whole. Except as set forth in Section
2.15(a) of the Disclosure Schedule, no Permit is subject to termination as a
result of the performance of the Agreement or consummation of the transactions
contemplated hereby or referred to herein. Except as set forth in Section
2.15(a) of the Disclosure Schedule, the Monarch Dental Centers business is now
and has heretofore been in compliance with all applicable statutes, ordinances,
orders, rules and regulations (including without limitation OSHA and
regulations thereunder and all applicable environmental laws and regulations)
promulgated by any federal, state, municipal or other governmental authority
which apply to the conduct of its business, except for any such non-compliance
or violation that, individually or in the aggregate, would not have a material
adverse effect on the business, operations, results of operations, assets,
condition (financial or other) or prospects of the Monarch Dental Centers
business taken as whole. Since January 1,
17
21
1993, none of Xxxxxxx, the Company nor any Entity has ever entered into or been
subject to any judgment, consent decree, compliance order or administrative
order with respect to any insurance, consumer protection, environmental or
health and safety law or received any request for information, notice, demand
letter, administrative inquiry or formal or informal complaint or claim with
respect to any environmental or health and safety matter or the enforcement of
any such law.
(b) Licensing and Credential Information.
None of the Company or any Entity is required to be, and each Health
Care Provider is, duly licensed under the laws of the State of Texas and, to
the best knowledge of Xxxxxxx, each Health Care Provider has complied in all
material respects with all laws, rules and regulations relating to the
rendering of services including without limitation OSHA. Except as set forth
in Section 2.15(b) of the Disclosure Schedule, to the best knowledge of
Xxxxxxx, including knowledge obtained through the credentialing process used by
the business, no Health Care Provider since January 1, 1990: (i) has had his or
her professional license, Drug Enforcement Agency number, Medicare or Medicaid
provider status, or staff privileges at any hospital or dental facility
suspended, relinquished, terminated or revoked, (ii) has been reprimanded,
sanctioned or disciplined by any licensing board or any federal, state or local
society, agency, regulatory body, governmental authority, hospital, third party
payor or specialty board; or (iii) has had a final judgment or settlement
entered against him or her in connection with a malpractice or similar action.
The names of the Health Care Providers who provide services in connection with
the Monarch Dental Centers business have been previously disclosed to Xxxxxxx,
Procter & Xxxx. To the best of Xxxxxxx'x knowledge, all of the employed and
engaged Health Care Providers are in good physical and mental health and do not
suffer from any illnesses or disabilities which could prevent any of them from
fulfilling their responsibilities under the respective contracts, agreements or
understandings with the Company or any Entity, as applicable. Except as set
forth in Section 2.15(b) of the Disclosure Schedule to the best of Xxxxxxx'x
knowledge, none of the employed and engaged Health Care Providers use or abuse
any controlled substances at any time or is under the influence of alcohol or
are affected by the use of alcohol during the time period required to perform
his or her duties and obligations under any contracts, agreements or
understandings with the Company or any Entity.
(c) Medicare/Medicaid. The Monarch Dental Centers business
does not involve and has never involved patients covered by or arrangements
with Medicare or Medicaid.
(d) Other. To the best knowledge of Xxxxxxx, (i) none of the
Company or any Entity is required to make filings under any insurance holding
company or similar state statute, or is required to be licensed or authorized
as an insurance holding company in any jurisdiction in order to conduct their
respective businesses as presently conducted, (ii) the dental plan services and
related products offered and provided by the Monarch Dental Centers business
have been and are offered and provided in compliance with the requirements of
all relevant laws and regulations, in each case, with such exceptions,
individually or in the
18
22
aggregate, as would not have a material adverse effect on the business,
operations, assets, condition (financial or other) or prospects of such
business; and (iii) none of the Company nor any Entity has received any
notification from any governmental regulatory authority to the effect that any
Permit from such regulatory authority is needed to be obtained by it in order
to conducts its business.
Except as set forth in Section 2.15(d) of the Disclosure Schedule, to
the best knowledge of Xxxxxxx, there exists no legislation, rule or regulation
which shall either (i) have been proposed and be in their reasonable judgment
reasonably likely to be adopted in Texas in the foreseeable future, or (ii)
have been adopted in Texas in either case that, individually or in the
aggregate, has a material adverse effect or could reasonably be anticipated to
have a material adverse effect on the business, operations, results of
operations, assets, (financial or otherwise) or prospects of the Monarch Dental
Centers business taken as a whole.
2.16 Insurance. The physical properties and assets of the Monarch
Dental Centers business are insured to the extent disclosed in Section 2.16 of
the Disclosure Schedule and all insurance policies and arrangements relating to
the Monarch Dental Centers business are disclosed in said Schedule. To the
best knowledge of Xxxxxxx, said insurance policies and arrangements are in full
force and effect, all premiums with respect thereto are currently paid, and the
Company and each Entity are in compliance in all material respects with the
terms thereof. To the best knowledge of Xxxxxxx said insurance is adequate and
customary for the Monarch Dental Centers business and is sufficient for
compliance with all requirements of law and all agreements and leases to which
such business is subject. Except as disclosed in Section 2.16 of the
Disclosure Schedule, all said insurance policies will be in full force and
effect after giving effect to the transactions contemplated by this Agreement
and the transactions referred to herein.
2.17 Finder's Fees. None of Xxxxxxx, the Company nor any Entity has
incurred or become liable for any broker's commission, or finder's fee or
investment banker's fee relating to or in connection with the transactions
contemplated by this Agreement or the transactions referred to herein, except a
fee of $25,000 to Xxxx Xxx.
2.18 Transactions with Interested Persons. Except as set forth in
Section 2.18 of the Disclosure Schedule, to the best knowledge of Xxxxxxx no
present or former supervisory employee, officer, director, stockholder or
independent contractor (including any dentist or professional corporation) and
no affiliate (as defined in Section 7.10(a) of any such person), is currently a
party to any transaction with the Company or any Entity, including, without
limitation, any contract, agreement or other arrangement providing for the
employment of, loan to or from, furnishing of services by or to, rental of real
or personal property to or from or otherwise requiring payments to any such
person, and to the best knowledge of Xxxxxxx no such person owns directly or
indirectly on an individual or joint basis any material interest in, or serves
as an officer or director or in another similar capacity of, any competitor or
supplier of the Company or any Entity, or any organization which has a contract
or arrangement with the Company or any Entity, provided that no representation
shall be deemed made with respect to the provision of dental services by any
former employee or independent contractor. Except
19
23
as set forth in Section 2.18 of the Disclosure Statement, there are no
commitments to, and no income reflected in the financial statements referred to
in Section 2.6 has been derived from, any affiliate of Xxxxxxx, the Company or
any Entity, and, following the Closing, neither the Company nor any Entity
shall have any obligation of any kind or description to any such affiliate.
2.19 Employee Benefit Programs.
(a) Section 2.19 of the Disclosure Schedule sets forth a list
of every Employee Program (as defined below) that has been maintained (as such
term is further defined below) in connection with the Monarch Dental Centers
business at any time during the three-year period ending on the Closing.
(b) Each Employee Program which has ever been maintained by
the Company or any Entity and which has at any time been intended to qualify
under Section 401(a) or 501(c)(9) of the Code has received a favorable
determination or approval letter from the Internal Revenue Service ("IRS")
regarding its qualification under such section and to the best knowledge of
Xxxxxxx has, in fact, been continuously qualified under the applicable section
of the Code since the effective date of such Employee Program. No event or
omission has occurred which would cause any such Employee Program to lose its
qualification under the applicable Code section.
(c) To the best knowledge of Xxxxxxx there is no, and Xxxxxxx
has no reason to know of, any material failure of any person laws applicable to
the Employee Programs that have been maintained in connection with the Monarch
Dental Centers business. With respect to any Employee Program ever maintained
in connection with the Monarch Dental Centers business, there has occurred no
"prohibited transaction," as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
(for which there exists neither a statutory nor regulatory exception), or
material breach of any duty under ERISA or other applicable law (including,
without limitation, any health care continuation requirements or any other tax
law requirements, or conditions to favorable tax treatment, applicable to such
plan or to any person in regard to such plan), which could result, directly or
indirectly (including, without limitation, through any obligation of
indemnification or contribution), in any taxes, penalties or other liability to
the Company, any Entity or any of their affiliates. No litigation,
arbitration, or governmental administrative proceeding (or investigation) or
other proceeding (other than those relating to routine claims for benefits) is
pending or, to the best knowledge of Xxxxxxx, threatened with respect to any
such Employee Program.
(d) None of the Company, any Entity nor any Affiliate (as
defined below) (i) has ever maintained any Employee Program which has been
subject to Title IV of ERISA or Section 412 of the Code (including, but not
limited to, any Multiemployer Plan (as defined below)) or (ii) has ever
provided health care or any other non-pension benefits to any employees after
their employment is terminated (other than as required by part 6 of subtitle B
of Title I of ERISA) or has ever promised to provide such post-termination
benefits.
20
24
(e) With respect to each Employee Program maintained by or on
behalf of the Company or any Entity within the three years preceding the
Closing, complete and correct copies of the following documents (if applicable
to such Employee Program) have previously been delivered to Xxxxxxx, Procter &
Xxxx: (i) all documents embodying or governing such Employee Program, and any
funding medium for the Employee Program (including, without limitation, trust
agreements), as they may have been amended to the date hereof; (ii) the most
recent IRS determination or approval letter with respect to such Employee
Program under Code Section 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any
fiduciary liability insurance policy and any excess loss policy) related to
such Employee Program; (vi) any documents evidencing any loan to an Employee
Program that is a leveraged employee stock ownership plan; and (vii) all other
materials reasonably necessary for the Company or any Entity to perform any of
its responsibilities with respect to any Employee Program subsequent to the
Closing (including, without limitation, health care continuation requirements).
(f) For purposes of this Section 2.19:
(i) "Employee Program" means (A) all employee benefit
plans within the meaning of ERISA Section 3(3), including, but not
limited to, multiple employer welfare arrangements (within the meaning
of ERISA Section 3(40)), plans to which more than one unaffiliated
employer contributes and employee benefit plans (such as foreign or
excess benefit plans) which are not subject to ERISA; and (B) all stock
or cash option plans, restricted stock plans, bonus or incentive award
plans, severance pay policies or agreements, deferred compensation
agreements, supplemental income arrangements, vacation plans, and all
other employee benefit plans, agreements, and arrangements not described
in (A) above. In the case of an Employee Program funded through an
organization described in Code Section 501(c)(9), each reference to such
Employee Program shall include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation (by
agreement or under applicable law) to contribute to or provide benefits
under such Employee Program, or if such Employee Program provides
benefits to or otherwise covers employees of such entity (or their
spouses, dependents, or beneficiaries).
(iii) An entity is an "Affiliate" of the Company or any
Entity if it would have ever been considered a single employer with the
Company or any Entity under ERISA Section 4001(b) or part of the same
"controlled group" as the Company or any Entity for purposes of ERISA
Section 302(d)(8)(C).
21
25
(iv) "Multiemployer Plan" means a (pension or
non-pension) employee benefit plan to which more than one employer
contributes and which is maintained pursuant to one or more collective
bargaining agreements.
2.20 Environmental Matters.
(a) Except as set forth in Section 2.20 of the Disclosure
Schedule, (i) neither the Company nor any Entity has ever generated,
transported, used, stored, treated, disposed of, or managed any Hazardous Waste
(as defined below); (ii) no Hazardous Material (as defined below) has ever been
or, to the best knowledge of Xxxxxxx, is threatened to be spilled, released, or
disposed of by the Company or any Entity, at any site presently or formerly
owned, operated, leased, or used in connection with the Monarch Dental Centers
business, or has ever come to be located in the soil or groundwater at any such
site; (iii) no Hazardous Material of the Company has ever been transported from
any site presently or formerly owned, operated, leased, or used in connection
with the Monarch Dental Centers business for treatment, storage, or disposal at
any other place; (iv) to the best knowledge of Xxxxxxx, none of the Company nor
any Entity presently owns, operates, leases, or uses, nor has any of them
previously owned, operated, leased, or used any site on which underground
storage tanks are or were located; and (v) no lien has ever been imposed by any
governmental agency on any property, facility, machinery, or equipment owned,
operated, leased, or used in connection with the Monarch Dental Centers
business in connection with the presence of any Hazardous Material and based
upon any action or inaction of the Company or any Entity.
(b) Except as set forth in Section 2.20 of the Disclosure
Schedule, (i) none of the Company nor any Entity has any liability under, nor
has it ever violated in any material respect, any Environmental Law (as defined
below); (ii) the Company, each Entity, any property owned, operated, leased, or
used in connection with the Monarch Dental Centers business, and any facilities
and operations thereon are presently in compliance in all material respects
with all applicable Environmental Laws; (iii) none of the Company nor any
Entity has ever entered into or been subject to any judgment, consent decree,
compliance order, or administrative order with respect to any environmental or
health and safety matter or received any request for information, notice,
demand letter, administrative inquiry, or formal or informal complaint or claim
with respect to any environmental or health and safety matter or the
enforcement of any Environmental Law; and (iv) to the best knowledge of Xxxxxxx
none of the items enumerated in clause (iii) of this paragraph will be
forthcoming.
(c) Except as set forth in Section 2.20 of the Disclosure
Schedule, no site owned, operated, leased, or used in connection with the
Monarch Dental Centers business contains any asbestos or asbestos-containing
material, any polychlorinated biphenyls (PCBs) or equipment containing PCBs, or
any urea formaldehyde foam insulation, except, in each case, as either
individually, or in the aggregate, as would not have a material adverse effect
on the business, operations, assets, condition (financial or other ) or
prospects of the Monarch Dental Centers business taken as a whole.
22
26
(d) Xxxxxxx, Procter & Xxxx has been provided with copies of
all documents, records, and information available concerning any environmental
or health and safety matter relevant to the Monarch Dental Centers business,
whether generated in connection with the Monarch Dental Centers business or
otherwise, including, without limitation, environmental audits, environmental
risk assessments, site assessments, documentation regarding off-site disposal
of Hazardous Materials, spill control plans, and reports, correspondence,
permits, licenses, approvals, consents, and other authorizations related to
environmental or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 2.20, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant,
contaminant, or other substance which may pose a threat to the environment or
to human health or safety, as defined or regulated under any Environmental Law;
(ii) "Hazardous Waste" shall mean and include any hazardous waste as defined or
regulated under any Environmental Law; (iii) "Environmental Law" shall mean any
environmental or health and safety-related law, regulation, rule, ordinance, or
by-law at the federal, state, or local level, whether existing as of the date
hereof, or subsequently enacted; and (iv) "the Monarch Dental Centers business"
shall include the Company, any Entity and any predecessor to any of the
foregoing.
2.21 List of Certain Employees and Suppliers. Section 2.21 of the
Disclosure Schedule contains a list of all managers, employees and consultants
and independent contractors (including dentists and related professional
corporations) of the Monarch Dental Centers business who, individually, have
received or are scheduled to receive compensation or payments for the fiscal
year ended December 31, 1995 in excess of $100,000. In each case such Schedule
includes the current job title and aggregate annual compensation of each such
individual. Section 2.21 of the Disclosure Schedule sets forth a list of all
suppliers to whom the Monarch Dental Centers business made payments aggregating
$100,000 or more during the fiscal year ended December 31, 1995 showing, with
respect to each, the name, address and dollar volume involved. To the
knowledge of Xxxxxxx, no supplier has any plan or intention to terminate or
reduce its business with the Monarch Dental Centers business or to materially
and adversely modify its relationship therewith.
2.22 Employees; Labor Matters. The Monarch Dental Centers business
employs approximately 140 full-time employees and 5 part-time employees, has
contracts with approximately 34 dentists and to the best of Xxxxxxx'x knowledge
generally enjoys a good employer-employee relationship. None of the Company or
any Entity is delinquent in payments to any of its employees or dentists for
any wages, salaries, commissions, bonuses or other direct compensation for any
services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Upon termination of the employment of any of
said employees or dentists, no severance or other payments (including without
limitation payments required by the Workers' Adjustment, Retraining, and
Notification Act) will become due. Except as set forth in Section 2.22 of the
Disclosure Schedule, the Monarch Dental Centers business has no policy,
practice, plan or program of paying severance pay or any form of severance
compensation in connection with the termination of employment or services. The
23
27
Company and each Entity are in compliance in all material respects with all
applicable laws and regulations respecting labor, employment, fair employment
practices, terms and conditions of employment, and wages and hours. Except as
set forth in Section 2.22 of the Disclosure Schedule, there are no written, or
to the best knowledge of Xxxxxxx, otherwise alleged charges of employment
discrimination or unfair labor practices, nor are there any strikes, slowdowns,
stoppages of work, or any other concerted interference with normal operations
existing, pending or to the best knowledge of Xxxxxxx threatened against or
involving the Monarch Dental Centers business. No question concerning
representation exists respecting the employees of the Company or any Entity.
To the best knowledge of Xxxxxxx, there are no grievances, complaints or
charges that have been filed under any dispute resolution procedure (including,
but not limited to, any proceedings under any dispute resolution procedure
under any collective bargaining agreement) that might have an adverse effect on
the Monarch Dental Centers business. No arbitration or similar proceeding is
pending and no claim therefor has been asserted. To the best knowledge of
Xxxxxxx, no collective bargaining agreement is in effect or is currently being
or is about to be negotiated by the Company or any Entity. Each of the Company
and each Entity is, and at all times since November 6, 1986 has been, in
compliance in all material respects with the requirements of the Immigration
Reform Control Act of 1986. Except as set forth in Section 2.22 of the
Disclosure Schedule, there are no changes pending, or of which Xxxxxxx has
knowledge threatened with respect to (including, without limitation,
resignation of) the senior management or key supervisory personnel or dentists
of the Monarch Dental Centers business nor has Xxxxxxx, the Company or any
Entity received any notice or information concerning any prospective change
with respect to such senior management or key supervisory personnel.
2.23 Material Relationships; Government Contracts.
(a) Except as set forth in Section 2.23(a) of the Disclosure
Schedule, to the best knowledge of Xxxxxxx, the relationships of the Monarch
Dental Centers business with its customers, Health Care Providers and the
parties to the contracts referred to in Section 2.13(a)(xv) are good commercial
working relationships. To the best knowledge of Xxxxxxx, no Health Care
Provider or DMO with which the Monarch Dental Centers business does business
has any plan or intention to terminate, to cancel or otherwise materially and
adversely modify its relationship with such business or to decrease materially
or limit its purchase of the services of such business. Except as set forth in
Section 2.23(a) of the Disclosure Schedule, no DMO relationship or material
contract or other material business relationship of either the Company or any
Entity has been terminated in the past year.
(b) Neither the Company nor any Entity has any contracts or
subcontracts with any government (including any municipal government) or
governmental agency or activity, and none of the Company or any Entity is
ineligible to submit bids to any DMO.
2.24 Disclosure. To the best knowledge of Xxxxxxx, the
representations, warranties and statements contained in this Agreement and in
the certificates, exhibits and schedules delivered by Xxxxxxx, the Company and
any Entity pursuant to this Agreement, together with all materials provided by
Xxxxxxx, the Company and any Entity or their agents with respect
24
28
to the Monarch Dental Centers business, do not contain any untrue statement of
a material fact, and, when taken together, do not omit to state a material fact
required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made. To the best knowledge of Xxxxxxx,
there are no facts known to Xxxxxxx which presently or may in the future have a
material adverse effect on the business, operations, results of operations,
assets, condition (financial or other) or prospects of the Monarch Dental
Centers business which has not been specifically disclosed herein or in a
Schedule furnished herewith.
2.25 Powers of Attorney. Neither the Company, nor any Entity has any
outstanding power of attorney.
2.26 Corporate Records. The corporate or, in the case of a
partnership, equivalent record books of the Company and of each Entity
accurately record all corporate or partnership action taken by their respective
stockholders, partners, board of directors, governing bodies and committees.
The copies of the corporate records of the Company and of each Entity provided
to Xxxxxxx, Procter & Xxxx for review, are true and complete copies of the
originals of such documents.
2.27 List of Directors and Officers. Section 2.27 of the Disclosure
Schedule hereto contains a true and complete list of all current directors and
officers of the Company and each Entity.
2.28 Transfer of Equity Interests. No holder of stock, partnership
interests, or other equity interest of the Company or any Entity has at any
time transferred any of such instruments to any employee or professional
independent contractor of the Company or any Entity, which transfer constituted
or could be viewed as compensation for services rendered to the Company or any
Entity by said employee or professional independent contractor.
2.29 Equity Interest Repurchase. Neither the Company nor any Entity
has redeemed or repurchased any of its capital stock, partnership interests or
any other equity interest, as applicable.
2.30 Additional Financial Representations.
(a) Cash on Hand. As of and immediately prior to the Closing,
the Company and the Entities have cash on hand of not less than $350,000 in the
aggregate.
(b) Bank Debt. As of and immediately prior to the Closing,
the aggregate outstanding bank debt and similar debt obligations of the Company
and the Entities together with the amount of any bank debt and similar debt
obligations the payment of which has been guaranteed by the Company or any of
the Entities is not in excess of $1,393,000 plus any additional amount
permitted by Section 2.30(c).
25
29
(c) Additional Bank Debt. As of and immediately prior to the
Closing, the aggregate outstanding bank debt and similar debt obligations
incurred after November 2, 1995 solely for the purpose of funding new office
construction and/or expansion of the existing offices, in each case after such
date and incurred to relieve Xxxxxxx of personal guarantees, shall not exceed
$425,000.
2.31 Investment Representations. Xxxxxxx, in connection with his
acquisition of Common Stock, represents that he is an "accredited investor" as
such term is defined in Rule 501 under the Securities Act of 1933, as amended
(the "Securities Act"). Xxxxxxx represents to the Company that he is acquiring
such Common Stock for his own account, for investment only and not with a view
to, or any present intention of, effecting a distribution of such securities or
any part thereof except pursuant to a registration or an available exemption
under applicable law. Xxxxxxx acknowledges that the Common Stock of the
Company has not been registered under the Securities Act or the securities laws
of any state or other jurisdiction and cannot be disposed of unless it is
subsequently registered under the Securities Act and any applicable state laws
or exemption from such registration is available. Xxxxxxx represents that he
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the investment contemplated by
this Agreement and the transactions contemplated hereby and the transactions
referred to herein and making an informed investment decision with respect
thereto.
Xxxxxxx acknowledges and agrees that the following legend shall be typed
on each certificate evidencing shares of Common Stock issued hereunder:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE
SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY
LAWS.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A
STOCKHOLDERS' AGREEMENT DATED AS OF FEBRUARY 5, 1996, INCLUDING THEREIN CERTAIN
RESTRICTIONS ON TRANSFER, AND VOTING REQUIREMENTS. A COMPLETE AND CORRECT COPY
OF THIS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
26
30
ARTICLE 3. COVENANTS OF XXXXXXX.
3.1 Making of Covenants and Agreements. Xxxxxxx hereby makes the
covenants and agreements as set forth in this Article 3 for the period from and
after the Closing.
3.2 Cooperation. Xxxxxxx shall cooperate with all reasonable
requests of the Company, the Entities or any of their representatives and
agents to more effectively consummate the transactions contemplated hereby and
the transactions referred to herein.
3.3 Consents. Xxxxxxx shall assist the Company and each Entity in
obtaining any and all consents, authorizations and approvals necessary in
connection with the consummation of the transactions contemplated hereby or
referred to herein.
3.4 Notice of Default. Promptly upon the occurrence of, or promptly
upon Xxxxxxx becoming aware of the impending or threatened occurrence of, any
event which would cause or constitute a breach or default, or would have caused
or constituted a breach or default had such event occurred or been known to
Xxxxxxx prior to the date hereof, of any of the representations, warranties or
covenants of Xxxxxxx contained in or referred to in this Agreement or in any
Schedule or Exhibit referred to in this Agreement, Xxxxxxx shall give detailed
written notice thereof to the Company and Xxxxxxx shall use his best efforts to
prevent or promptly remedy the same.
SECTION 4. COVENANTS OF THE COMPANY.
4.1 Making of Covenants and Agreements. The Company hereby makes the
covenants and agreements set forth in this Section 4.
4.2 Cooperation. The Company shall cooperate with all reasonable
requests of Xxxxxxx and his representations and agents to more effectively
consummate the transactions contemplated hereby or referred to herein.
4.3 Availability of Records. After the Closing, the Company shall
make available to Xxxxxxx as reasonably requested by him and at his expense or
any taxing authority all information, records or documents relating to the
Monarch Dental Centers business in respect of all periods prior to Closing and
shall preserve all such information, records and documents until the later of
six years after the Closing or the expiration of all statutes of limitations or
extensions thereof, provided that Xxxxxxx shall hold the same in confidence.
The Company shall also make available to Xxxxxxx, as reasonably requested by
him, personnel responsible for preparing or maintaining information, records
and documents, both in connection with tax matters as well as litigation.
27
31
ARTICLE 5. SURVIVAL OF REPRESENTATIONS, WARRANTIES, ARRANGEMENTS, COVENANTS
AND OBLIGATIONS.
All representations, warranties, agreements, covenants and obligations
herein or in any schedule, exhibit or certificate delivered by any party to the
other party incident to the transactions contemplated hereby are material,
shall be deemed to have been relied upon by the other party and shall survive
the Closing regardless of any investigation and shall not merge in the
performance of any obligation by either party hereto, subject to the provisions
of Article 6 hereof.
ARTICLE 6. INDEMNIFICATION.
6.1 Indemnification by Xxxxxxx. Xxxxxxx on behalf of himself and his
successors, executors, administrators, estate, heirs and assigns (collectively,
for the purposes of this Article 6, "Xxxxxxx") agrees to defend, indemnify and
hold the Company, each Entity, all subsidiaries and affiliates of any of the
foregoing (including without limitation stockholders of any of the foregoing
(other than Xxxxxxx) and persons serving as officers, directors, partners,
employees or agents of the Company, each Entity or such subsidiaries or
affiliates thereof (in each case, other than Xxxxxxx) (individually a "Company
Indemnified Party" and collectively the "Company Indemnified Parties") harmless
from and against any and all damages, liabilities, losses, taxes, fines,
penalties, costs, and expenses (including without limitation, reasonable fees
of counsel) of any kind or nature whatsoever ("Claims") (whether or not arising
out of third-party claims and including all amounts paid in investigation,
defense or settlement of the foregoing) which may be sustained or suffered by
any such Company Indemnified Party (a "Loss" or "Losses"), based upon, arising
out of, by reason of or otherwise in respect of or in connection with:
(a) any inaccuracy in or breach of any representation or
warranty made by Xxxxxxx in this Agreement, by Xxxxxxx or Xxxxx in the
Xxxxxxx/Xxxxx Asset Contribution Agreement, or in any Schedule, exhibit or
certificate delivered by or on behalf of Xxxxxxx as part of or pursuant to this
Agreement, or any claim, action or proceeding asserted or instituted or arising
out of any matter or thing covered by such representations or warranties
(collectively, "Warranty Claims");
(b) any breach of any covenant or agreement made by or on
behalf of Xxxxxxx in this Agreement, by Xxxxxxx or Xxxxx in the Xxxxxxx/Xxxxx
Asset Contribution Agreement, or in any Schedule, exhibit or certificate
delivered by or on behalf of Xxxxxxx as part of or pursuant to this Agreement;
or
(c) any liability of the Company or any Entity for Taxes
arising from an event or transaction prior to the Closing or as a result of the
Closing which have not been paid by the Company or an Entity prior to the
Closing, including without limitation, any increase in Taxes due to the
unavailability of any loss or deduction claimed by the Company or an Entity.
28
32
The rights of Company Indemnified Parties to recover indemnification in
respect of any occurrence referred to in either of clauses (b) and (c) of this
Section 6.1 shall not be limited by the fact that such occurrence may not
constitute an inaccuracy in or breach of any representation, warranty or
agreement referred to in clause (a) of this Section 6.1.
6.2 Limitations on Indemnification by Xxxxxxx.
(a) The right of Company Indemnified Parties to
indemnification under Section 6.1 shall be subject to the following provisions:
(i) Indemnification with respect to Warranty Claims
(other than any such claims arising under Section 2.30 hereof) shall
expire eighteen (18) months after the Closing; provided, however, that
the limitation of this clause (i) shall not apply to Warranty Claims
involving fraud, intentional misrepresentation, title to the Subject
Assets or Redeemed Shares or Taxes, for which the period for making such
claims shall expire on the date which is six (6) months after the
termination of the applicable statute of limitations relating thereto.
If prior to the relevant date of expiration a specific state of facts
shall have become known which may constitute or give rise to any
Warranty Claim as to which indemnity may be payable and a Company
Indemnified Party shall have given notice of such facts to Xxxxxxx, then
the right to indemnification with respect thereto shall remain in effect
without regard to when such matter shall have been finally determined
and disposed of, according to the date on which notice of the applicable
claim is given.
(ii) No indemnification shall be payable with respect to
Warranty Claims (not involving fraud, intentional misrepresentation,
title to the Subject Assets or Redeemed Shares, or Taxes or any other
Warranty Claim arising under Section 2.30 hereof) to Company Indemnified
Parties unless the total of all Warranty Claims shall exceed $250,000 in
the aggregate, whereupon the full amount of such claims shall be
recoverable in accordance with the terms hereof.
(iii) Xxxxxxx shall not be obligated to indemnity Company
Indemnified Parties for Warranty Claims (other than any such claims
arising under Section 2.30 hereof and other than any such claims
involving fraud, intentional misrepresentations, title to the Subject
Assets or Redeemed Shares, or Taxes) after the cumulative amount of all
amounts paid by Xxxxxxx to Company Indemnified Parties with respect
thereto exceeds TWO MILLION DOLLARS ($2,000,000).
(vi) The limitations herein with respect to certain
Warranty Claims shall not limit the rights of any Company Indemnified
Party with respect to any other claims arising under provisions of
Section 6.1.
(b) In the event any claim for indemnification hereunder
arises under more than one provision of Section 6.1 and as such may be subject
to limitations pursuant to this Section 6.2 if deemed to arise under a
particular provision but not if deemed to arise under a different
29
33
provision (e.g., a matter constituting both a breach of a representation and a
breach of a covenant), then the claim shall be deemed to arise under the
provision to which no restrictions or the least restrictive provisions apply.
(c) Indemnification pursuant to Section 6.1 is the exclusive
remedy of Company Indemnified Parties against Xxxxxxx for matters arising out
of the representations and warranties of Xxxxxxx set forth in this Agreement
and the Schedules hereto and certificates delivered in connection herewith
after the Closing.
(d) The amount of any Losses suffered, sustained or incurred by
Company Indemnified Parties or required to be paid by Xxxxxxx shall be reduced
by the amount of any insurance proceeds and other amounts paid to such Company
Indemnified Parties by any Person (other than any Entity) not a party to this
Agreement.
6.3 Indemnification by Company. The Company agrees to defend,
indemnify and hold Xxxxxxx and his heirs (individually a "Xxxxxxx Indemnified
Party" and collectively the "Xxxxxxx Indemnified Parties") harmless from and
against any and all Claims, whether or not arising out of third-party claims
and including all amounts paid in respect of Losses (as defined in Section 6.1
hereof) based upon, arising out of, by reason of or otherwise in respect of or
in connection with (a) any inaccuracy in or breach of any representation or
warranty made by the Company in this Agreement, in the Xxxxxxx/Xxxxx Asset
Contribution Agreement, or in any Schedule, exhibit or certificate delivered by
the Company as part of or pursuant to this Agreement, or any claim, action or
proceeding asserted or instituted or arising out of any matter or thing covered
by such representations or warranties (collectively "Xxxxxxx Warranty Claims");
or (b) any breach of any covenant or agreement made by the Company in this
Agreement, in the Xxxxxxx/Xxxxx Asset Contribution Agreement, or in any
Schedule, exhibit or certificate, delivered by the Company as part of or
pursuant to this Agreement (such claims under clauses (a) and (b) being
hereinafter collectively referred to as "Xxxxxxx Indemnifiable Claims"). The
rights of Xxxxxxx Indemnified Parties to recover indemnification in respect of
any occurrence referred to in clause (b) of this Section 6.3 shall not be
limited by the fact that such occurrence may not constitute an inaccuracy in or
breach of any representation or warranty referred to in clause (a) of this
Section 6.3.
6.4 Limitations on Indemnification by the Company.
(a) The right of Xxxxxxx Indemnified Parties to
indemnification under Section 6.3 shall be subject to the following provisions:
(i) Indemnification with respect to Xxxxxxx Warranty
Claims shall expire eighteen (18) months after the Closing; provided,
however, that the limitation of this clause (i) shall not apply to
Xxxxxxx Warranty Claims involving fraud or intentional
misrepresentation, for which the period for making such claims shall
expire on the date which is six (6) months after the termination of the
applicable statute of limitations relating thereto. If prior to the
relevant date of expiration a specific state of facts shall have become
known which may constitute or give rise to any Xxxxxxx
30
34
Warranty Claim as to which indemnity may be payable and a Xxxxxxx
Indemnified Party shall have given notice of such facts to the Company
then the right to indemnification with respect thereto shall remain in
effect without regard to when such matter shall have been finally
determined and disposed of, according to the date on which notice of the
applicable claim is given.
(ii) No indemnification shall be payable with respect to
Xxxxxxx Warranty Claims (not involving fraud or intentional
misrepresentation) to Xxxxxxx Indemnified Parties unless the total of
all Xxxxxxx Warranty Claims shall exceed $250,000 in the aggregate,
whereupon the full amount of such claims in excess of such amount shall
be recoverable in accordance with the terms hereof.
(iii) The Company shall not be obligated to indemnify
Xxxxxxx Indemnified Parties for Xxxxxxx Warranty claims (other than any
such claims involving fraud or intentional misrepresentation) after the
cumulative amount of all amounts paid by the Company to Xxxxxxx
Indemnified Parties with respect thereto exceeds TWO MILLION DOLLARS
($2,000,000).
(iv) The limitations herein with respect to certain
Xxxxxxx Warranty Claims shall not limit the rights of any Xxxxxxx
Indemnified Party with respect to any other claims arising under clause
(b) of Section 6.3.
(b) Indemnification pursuant to Section 6.3 is the sole and
exclusive remedy of Xxxxxxx Indemnified Parties against the Company for matters
arising out of the representations and warranties of the Company set forth in
this Agreement and the Schedules hereto and certificates delivered in
connection herewith after the Closing.
(c) The amount of any Losses suffered, sustained or incurred
by Xxxxxxx Indemnified Parties or required to be paid by the Company shall be
reduced by the amount of any insurance proceeds and other amounts paid to such
Xxxxxxx Indemnified Parties by any Person not a party to this Agreement.
6.5 Notice; Defense of Claims. Promptly after receipt by an
indemnified party of notice of any third party or other claim, liability or
expense to which the indemnification obligations hereunder would apply,
including in connection with any governmental, employer or malpractice related
proceeding, the indemnified party shall give notice thereof in writing to the
indemnifying party or parties, but the omission to so notify the indemnifying
party or parties promptly will not relieve the indemnifying party or parties
from any liability except to the extent that the indemnifying party or parties
shall have been materially prejudiced as a result of the failure or delay in
giving such notice. Such notice shall state the information then available
regarding the amount and nature of such claim, liability or expense and shall
specify the provision or provisions of this Agreement under which the liability
or obligation is asserted.
31
35
In the case of any third party claim, if within twenty (20) days after
receiving the notice described in the preceding paragraph the indemnifying
party or parties (i) give written notice to the indemnified party or parties
stating that they intend to defend in good faith against such claim, liability
or expense at their own cost and expense and (ii) provide assurance and
security reasonably acceptable to such indemnified party or parties that such
indemnification will be paid fully and promptly if required and such
indemnified party or parties will not incur cost or expense during the
proceeding, then counsel for the defense shall be selected by the indemnifying
party or parties (subject to the consent of such indemnified party or parties
which consent shall not be unreasonably withheld) and such indemnified party or
parties shall not be required to make any payment with respect to such claim,
liability or expense as long as the indemnifying party or parties are
conducting a good faith and diligent defense at their own expense; provided,
however, that the assumption of defense of any such matters by the indemnifying
party or parties shall relate solely to the claim, liability or expense that is
subject or potentially subject to indemnification. If the indemnifying party
or parties assume such defense in accordance with the preceding sentence, they
shall have the right, with the consent of such indemnified party or parties,
which consent shall not be unreasonably withheld, to settle all Indemnifiable
matters related to claims by third parties which are susceptible to being
settled provided the indemnifying party or parties' obligation to indemnify
such indemnified party or parties therefor will be fully satisfied and the
settlement includes a complete release of such indemnified party or parties.
The indemnifying party or parties shall keep the such indemnified party or
parties apprised of the status of the claim, liability or expense and any
resulting suit, proceeding or enforcement action, shall furnish such
indemnified party or parties with all documents and information that such
indemnified party or parties shall reasonably request and shall consult with
such indemnified party or parties prior to acting on major matters, including
settlement discussions. Notwithstanding anything herein stated, such
indemnified party or parties shall at all times have the right to fully
participate in such defense at its own expense directly or through counsel;
provided, however, if the named parties to the action or proceeding include
both the indemnifying party or parties and the indemnified party or parties and
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the expense of separate counsel
for such indemnified party or parties shall be paid by the indemnifying party
or parties. If no such notice of intent to dispute and defend is given by the
indemnifying party or parties, or if such diligent good faith defense is not
being or ceases to be conducted, such indemnified party or parties shall, at
the expense of the indemnifying party or parties, undertake the defense of
(with counsel selected by such indemnified party or parties), and shall have
the right to compromise or settle, such claim, liability or expense. If such
claim, liability or expense is one that by its nature cannot be defended solely
by the indemnifying party or parties, then such indemnified party or parties
shall make available all information and assistance that the indemnifying party
or parties may reasonably request and shall cooperate with the indemnifying
party or parties in such defense.
6.6 Satisfaction of Indemnification Obligations. Any indemnity
payable pursuant to this Section 6 shall be paid within the later of (a) ten
(10) days after the indemnified party's request therefor or (b) ten (10) days
prior to the date on which the Loss upon which the indemnity is based is
required to be satisfied by the indemnified party.
32
36
ARTICLE 7. MISCELLANEOUS.
7.1 Fees, Expenses and Certain Taxes.
(a) The Company will pay its fees and expenses in connection
with this Agreement and the Xxxxxxx/Xxxxx Asset Contribution Agreement and the
transactions contemplated hereby and thereby. The Company will also pay the
legal, accounting and, subject to the representation and warranty in Section
2.17 hereof being true and correct, investment banking fees and expenses of
Xxxxxxx in connection with this Agreement and the Xxxxxxx/Xxxxx Asset
Contribution Agreement and the transactions contemplated hereby and thereby not
to exceed $1,050,000, with Xxxxxxx agreeing to pay any such fees and expenses
in excess of such amount, provided that all fees and expenses of Coopers &
Xxxxxxx will be paid by the Company.
(b) Xxxxxxx will pay all costs (i) incurred, whether at or
subsequent to the Closing, in connection with the transfer of the Redeemed
Shares, and the Subject Assets to the Company as contemplated by this Agreement
and the Xxxxxxx/Xxxxx Asset Contribution Agreement, including without
limitation, all transfer taxes and charges applicable to such transfer, and
(ii) of obtaining all necessary permits, waivers, registrations or consents
with respect to any assets, rights or contracts of the Company or any Entity in
connection with or as a result of transactions contemplated by this Agreement
and the Xxxxxxx/Xxxxx Asset Contribution Agreement and the transactions
referred to herein.
7.2 Governing Law. This Agreement shall be construed under and
governed by the internal laws of the State of Texas without regard to its
conflict of laws provisions.
7.3 Notices. Any notice, request, demand other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon confirmation of
receipt, or if sent by registered or certified mail, upon the sooner of the
expiration of three days after deposit in United States post office facilities
properly addressed with postage prepaid or acknowledgment of receipt. All
notices and payments to a party will be sent to the addresses set forth below
or to such other address or person as such party may designate by notice to
each other party hereunder:
TO THE COMPANY
OR ANY ENTITY: Monarch Dental Corporation
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
33
37
With a copy to: Xxxxxxx, Procter & Xxxx
Exchange Place
Boston, MA 02109
Attn: Xxxx X. XxXxxxxx, P.C.
Fax: (000) 000-0000
TO XXXXXXX: Xxxxxx X. Xxxxxxx, D.D.S.
c/o Monarch Dental Corporation
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
With a copy to: Xxxxxx and Xxxxx, L.L.P.
0000 XxxxxxxXxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
Any notice given hereunder may be given on behalf of any party by his counsel
or other authorized representatives.
7.4 Entire Agreement. This Agreement (together with the
Xxxxxxx/Xxxxx Asset Contribution Agreement), including the Schedules referred
to herein and the other writings specifically identified herein or contemplated
hereby or delivered in connection with the transactions contemplated hereby, is
complete, reflects the entire agreement of the parties with respect to its
subject matter, and supersedes all previous written or oral negotiations,
commitments and writings, including without limitation the letter dated
November 2, 1995.
7.5 Assignability; Binding Effect. This Agreement and any rights
hereunder shall be assignable by the Company to one or more corporations or
partnerships controlling, controlled by or under common control with the
Company, directly or indirectly, provided the Company shall remain liable for
its obligations hereunder in connection with any such assignment, or to any
successor or acquiror of the Company or its affiliates provided such entity
assumes or agrees to be bound by the Company's obligations hereunder, or to any
entity providing financing in connection with the transactions contemplated
hereby or to any successor or assign or such an entity (including without
limitation any such successor or assign in connection with any refinancing,
renewal or extension of such financing), upon written notice to Xxxxxxx. This
Agreement may not be assigned by Xxxxxxx without the prior written consent of
the Company. This Agreement shall be binding upon and enforceable by, and
shall inure to the benefit of, the parties hereto and their respective
successors, heirs and permitted assigns (including without limitation the
estate and heirs of Xxxxxxx in the event of his death).
34
38
7.6 Captions and Gender. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun
in reference to a party hereto shall be deemed to include the feminine or
neuter pronoun, as the context may require.
7.7 Execution in Counterparts. For the convenience of the parties
and to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
7.8 Amendments. This Agreement may not be amended or modified, nor
may compliance with any condition or covenant set forth herein be waived,
except by a writing duly and validly executed by each of the parties hereto or
in the case of a waiver, the party or parties waiving compliance.
7.9 Consent to Jurisdiction; Certain Remedies. Solely for the
purpose of allowing a party to enforce its indemnification and other rights
hereunder, each of the parties hereby consents to personal jurisdiction,
service of process and venue in the federal or state courts of Texas or in the
court in which any claim for which indemnification may be sought hereunder is
brought against an indemnified party. If any party should default in the
performance of its obligations hereunder, the other party or parties, as
applicable, shall, in addition to any other of its rights and remedies
hereunder or otherwise, be entitled to the remedy of specific performance, and
each of the parties hereto expressly waives the defense that a remedy in
damages will be adequate.
7.10 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" of a person shall (i) with respect to a
person, any member of such person's family (including any child, step-child,
parent, step-parent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law); (ii) with respect to an
entity, any officer, director, stockholder, partner or investor in such entity
or of or in any affiliate of such entity; and (iii) with respect to a person or
entity, any person or entity which directly or indirectly controls, is
controlled by, or is under common control with such person or entity.
(b) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise;
(c) "person" means an individual, corporation, partnership,
association, trust or any unincorporated organization; and
(d) "subsidiary" of a person means any corporation more than
50 percent of whose outstanding voting securities, or any partnership, joint
venture or other entity more than 50 percent of whose total equity interest, is
directly or indirectly owned by such person.
35
39
IN WITNESS WHEREOF the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the date set forth above by their
duly authorized representatives.
THE COMPANY:
ATTEST MONARCH DENTAL CORPORATION
By: /s/ XXXXXX X. XXXXXXX
-------------------------------------- -----------------------------------
Secretary Name: Xxxxxx X. Xxxxxxx, D.D.S.
[Corporate Seal] Title: President
SPOUSE'S CONSENT XXXXXXX:
----------------
I acknowledge that I have read the
foregoing Stock Redemption Agreement
and that I understand the contents
thereof.
/s/ XXXXX X. XXXXXXX /s/ XXXXXX X. XXXXXXX
-------------------------------------- --------------------------------------
Xxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx, D.D.S.
36
