AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
by and between
Wisdom Holdings, Inc.
(A DELAWARE CORPORATION),
Wisdom Holdings Acquisition Corp. I,
(A DELAWARE CORPORATION),
Wisdom Holdings Acquisition Corp. II,
(A DELAWARE CORPORATION),
Gentle Dental Service Corporation,
(A WASHINGTON CORPORATION),
and
Dental Care Alliance, Inc.,
(A DELAWARE CORPORATION)
OCTOBER 15, 1998
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER............................................................................ 1
1.1. The Merger............................................................................ 3
1.2. ParentCo Merger Committee............................................................. 3
1.3. Effective Date and Effective Time..................................................... 3
1.4. Time and Place of Closing............................................................. 3
1.5. Stockholders' Agreements.............................................................. 3
1.6. Combined Operations................................................................... 3
ARTICLE II MERGER CONSIDERATION; MANNER OF CONVERTING SHARES..................................... 4
2.1. Merger Consideration.................................................................. 4
2.2. Dissenting Stockholders............................................................... 4
2.3. Rights as Stockholders; Stock Transfers............................................... 4
2.4. Fractional Shares..................................................................... 4
2.5. Anti-Dilution Provisions.............................................................. 5
2.6. Conversion of Rights.................................................................. 5
ARTICLE III EXCHANGE OF SHARES.................................................................... 6
3.1. Exchange Procedures................................................................... 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF GDSC................................................ 7
4.1. Organization, Standing and Authority.................................................. 8
4.2. Subsidiaries.......................................................................... 8
4.3. GDSC Capital Stock.................................................................... 8
4.4. Corporate Power....................................................................... 9
4.5. Corporate Authority................................................................... 9
4.6. Consents and Approvals; No Defaults................................................... 9
4.7. Financial Reports and Regulatory Documents............................................ 9
4.8. Legal Proceedings..................................................................... 10
4.9. Regulatory Matters.................................................................... 10
4.10. Compliance with Laws.................................................................. 11
4.11. Material Contracts; Defaults.......................................................... 11
4.12. No Brokers............................................................................ 11
4.13. Employee Benefit Plans................................................................ 11
4.14. Labor Matters......................................................................... 13
4.15. Year 2000 Compliance.................................................................. 13
4.16. Environmental Matters................................................................. 13
4.17. Tax Matters........................................................................... 14
4.18. Books and Records..................................................................... 14
4.19. Insurance............................................................................. 14
4.20. Accounting Treatment.................................................................. 14
4.21. Assets................................................................................ 15
4.22. Statements True and Correct........................................................... 15
4.23. Accounting, Tax and Regulatory........................................................ 15
4.24. No Undisclosed Liabilities............................................................ 15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF DCA................................................. 15
5.1. Organization, Standing and Authority.................................................. 16
5.2. Subsidiaries.......................................................................... 16
5.3. DCA Common Stock...................................................................... 16
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TABLE OF CONTENTS (CONTINUED)
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5.4. Corporate Power....................................................................... 17
5.5. Corporate Authority................................................................... 17
5.6. Consents and Approvals; No Defaults................................................... 17
5.7. Financial Reports and Regulatory Documents............................................ 17
5.8. Legal Proceedings..................................................................... 18
5.9. Regulatory Matters.................................................................... 18
5.10. Compliance with Laws.................................................................. 18
5.11. Material Contracts; Defaults.......................................................... 19
5.12. No Brokers............................................................................ 19
5.13. Employee Benefit Plans................................................................ 19
5.14. Labor Matters......................................................................... 20
5.15. Year 2000 Compliance.................................................................. 20
5.16. Environmental Matters................................................................. 21
5.17. Tax Matters........................................................................... 21
5.18. Books and Records..................................................................... 21
5.19. Insurance............................................................................. 21
5.20. Accounting Treatment.................................................................. 22
5.21. Assets................................................................................ 22
5.22. Statements True and Correct........................................................... 22
5.23. Accounting, Tax and Regulatory........................................................ 22
5.24. No Undisclosed Liabilities............................................................ 22
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENTCO, GDSC MERGER SUB AND DCA MERGER SUB........ 23
6.1. Organization, Standing and Authority of ParentCo...................................... 23
6.2. ParentCo Capital Stock................................................................ 23
6.3. ParentCo Corporate Power.............................................................. 23
6.4. ParentCo Corporate Authority.......................................................... 23
6.5. Organization, Standing and Authority of GDSC Merger Sub............................... 23
6.6. GDSC Merger Sub Capital Stock......................................................... 23
6.7. GDSC Merger Sub Corporate Power....................................................... 23
6.8. GDSC Merger Sub Corporate Authority................................................... 23
6.9. Organization, Standing and Authority of DCA Merger Sub................................ 23
6.10. DCA Merger Sub Common Stock........................................................... 24
6.11. DCA Merger Sub Corporate Power........................................................ 24
6.12. DCA Merger Sub Corporate Authority.................................................... 24
6.13. Continuity of Business Enterprise..................................................... 24
ARTICLE VII CONDUCT OF BUSINESS................................................................... 24
7.1. Forbearances of GDSC and DCA.......................................................... 24
ARTICLE VIII ADDITIONAL COVENANTS.................................................................. 26
8.1. Reasonable Best Efforts............................................................... 26
8.2. Stockholder Approval.................................................................. 26
8.3. Registration Statement................................................................ 26
8.4. Press Releases........................................................................ 27
8.5. Access; Information................................................................... 27
8.6. Acquisition Proposals................................................................. 27
8.7. Affiliate Agreements.................................................................. 28
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TABLE OF CONTENTS (CONTINUED)
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8.8. Nasdaq Listing........................................................................ 28
8.9. Regulatory Applications............................................................... 28
8.10. Benefit Plan.......................................................................... 28
8.11. Accountants' Letters.................................................................. 29
8.12. Notification of Certain Matters....................................................... 29
8.13. Stockholder Agreements................................................................ 29
8.14. ParentCo Capitalization; Reservation of Shares........................................ 29
8.15. Stock Plans........................................................................... 29
8.16. Office Locations...................................................................... 30
8.17. Transfer of GDSC Subordinated Notes................................................... 30
ARTICLE IX CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER.................................... 30
9.1. Conditions to Each Party's Obligation to Effect the Merger............................ 30
9.2. Conditions to Obligation of GDSC...................................................... 31
9.3. Conditions to Obligation of DCA....................................................... 32
ARTICLE X CLOSING DELIVERIES.................................................................... 33
10.1. Deliveries of GDSC.................................................................... 33
10.2. Deliveries of DCA..................................................................... 34
10.3. Deliveries of ParentCo, GDSC Merger Sub and DCA Merger Sub............................ 35
ARTICLE XI TERMINATION........................................................................... 36
11.1. Termination........................................................................... 36
11.2. Effect of Termination and Abandonment................................................. 37
11.3. Termination Fee....................................................................... 37
ARTICLE XII MISCELLANEOUS......................................................................... 37
12.1. Survival.............................................................................. 37
12.2. Waiver; Amendment..................................................................... 37
12.3. Counterparts.......................................................................... 37
12.4. Governing Law; Waiver of Jury Trial................................................... 37
12.5. Expenses.............................................................................. 37
12.6. Notices............................................................................... 38
12.7. Entire Understanding; No Third Party Beneficiaries.................................... 38
12.8. Interpretation; Effect................................................................ 38
ARTICLE XIII CERTAIN DEFINITIONS................................................................... 39
13.1. Certain Definitions................................................................... 39
EXHIBITS
Exhibit A -- Form of Stockholders' Agreement
Exhibit B -- Form of Affiliate Representation Letter
Exhibit C -- Memorandum of Terms
SCHEDULES
Schedule 9.1(g) -- List of Certain GDSC and DCA Officers
Schedule 9.2(i) -- DCA Analyst Expectations
Schedule 9.3(i) -- GDSC Analyst Expectations
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER, dated as of October
15, 1998 (this "AGREEMENT"), by and among Wisdom Holdings, Inc., a Delaware
corporation ("PARENTCO"), Wisdom Holdings Acquisition Corp. I, a Delaware
corporation and wholly owned subsidiary of ParentCo ("GDSC MERGER SUB"), Wisdom
Holdings Acquisition Corp. II, a Delaware corporation and wholly owned
subsidiary of ParentCo ("DCA MERGER SUB"), Gentle Dental Service Corporation, a
Washington corporation ("GDSC"), and Dental Care Alliance, Inc., a Delaware
corporation ("DCA").
RECITALS
A. GDSC is a Washington corporation, having its principal place of business
in El Segundo, California. GDSC provides dental practice management and related
services to dental practices in the States of California, Florida, Hawaii,
Idaho, Oregon and Washington.
B. DCA is a Delaware corporation, having its principal place of business in
Sarasota, Florida. DCA provides dental practice management and related services
to dental practices in the States of Florida, Georgia, Indiana and Michigan.
C. Each of ParentCo, GDSC Merger Sub and DCA Merger Sub is a newly formed
Delaware corporation created to accomplish the business combinations by and
between GDSC and DCA as described in this Agreement. At the Effective Time of
the Merger (as each of those terms is defined below), the outstanding shares of
capital stock of GDSC and DCA, respectively, shall be converted into the right
to receive shares of capital stock of ParentCo (as provided herein). As a
result, the stockholders of GDSC and DCA, respectively, shall become the
stockholders of ParentCo and both GDSC and DCA shall become and continue to
conduct their respective businesses and operations as wholly owned subsidiaries
of ParentCo. The transactions described in this Agreement are subject to the
approval of the stockholders of GDSC and DCA, respectively, and the satisfaction
of certain other conditions described in this Agreement.
D. It is the intention of the parties to this Agreement that the business
combinations contemplated hereby be accounted for under the
"pooling-of-interests" accounting method and be treated as (i) "reorganizations"
under Section 368 of the Internal Revenue Code of 1986, as amended (the "CODE")
or (ii) a transfer to a controlled corporation qualifying under Section 351 of
the Code.
E. The respective Boards of Directors of each of GDSC and DCA have
determined that it is in the best interests of their respective companies and
their stockholders to consummate the strategic business combination transaction
provided for herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties agree as follows. Capitalized terms used herein and not previously
defined shall have the meanings set forth in ARTICLE XIII.
ARTICLE I
THE MERGER
1.1. THE MERGER.
(a) GENERAL. Subject to the terms and conditions of this Agreement and
at the Effective Time, each of GDSC Merger Sub and DCA Merger Sub shall
merge with and into each of GDSC and DCA, respectively (collectively, the
"MERGER"), the separate corporate existence of each of GDSC Merger Sub and
DCA Merger Sub shall cease and GDSC and DCA shall survive and continue to
exist as a Washington corporation and Delaware corporation, respectively
(GDSC and DCA, as the surviving
1
corporations in the Merger, sometimes being referred to collectively as the
"SURVIVING CORPORATIONS"). Subject to the satisfaction or waiver of the
conditions set forth in ARTICLE IX, the Merger shall become effective upon
the occurrence of the filing in the offices of the Washington Secretary and
the Delaware Secretary of an agreement of merger in accordance with the
WBCA and the DGCL or such later date and time as may be set forth
in such agreement. The Merger shall have the effects prescribed in the
WBCA and the DGCL.
(b) ARTICLES OF INCORPORATION AND BYLAWS. The articles and certificate
of incorporation and bylaws of GDSC and DCA, respectively, immediately after
the Merger including, without limitation, the name of GDSC and DCA,
respectively, shall be those of GDSC and DCA, respectively, as in effect
immediately prior to the Effective Time; except that the number of
authorized shares of capital stock of GDSC and DCA may, in the discretion of
ParentCo, be reduced.
(c) DIRECTORS AND OFFICERS. At and as of the Effective Time, the
officers and directors of ParentCo and the Surviving Corporations shall be
as follows:
(i) PARENTCO: The directors of ParentCo shall be:
▇▇▇▇▇▇ ▇▇▇▇▇(1)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇(2)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
The directors of ParentCo shall serve for staggered terms as set forth in the
ParentCo Certificate of Incorporation, as amended, and as designated by the
Merger Committee.
The officers of ParentCo shall be:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Co-Chairman and Chief Executive
Officer
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S. Co-Chairman, President and Chief
Dental Officer
L. ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ Chief Development Officer/Executive
Vice President and Secretary
▇▇▇▇▇ ▇▇▇▇▇▇ Vice President/Development
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Chief Financial Officer and Treasurer
▇▇▇▇▇ ▇▇▇▇▇ Chief Operating Officer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Vice President of Finance/East
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Vice President of Operations/East
▇▇▇▇▇ ▇▇▇▇ Vice President of
Operations/Northwest
▇▇▇▇▇▇ ▇▇▇▇▇▇ Vice President of Operations/Northern
California
▇▇▇▇▇▇▇ ▇▇▇▇▇ Vice President of
Operations/Southwest
(ii) GDSC. The officers and directors of GDSC immediately prior to
the Merger shall continue to be the officers and directors of GDSC.
------------------------
(1) There is no designated by ParentCo Series C Preferred Stock. ▇▇. ▇▇▇▇▇ is a
designee of Sprout Group.
(2) Director to be designated by ParentCo Series A Stock.
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(iii) DCA. The officers and directors of DCA immediately prior to
the Merger shall continue to be the officers and directors of DCA.
(iv) GDSC MERGER SUB AND DCA MERGER SUB. The initial directors of
GDSC Merger Sub and DCA Merger Sub shall be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, D.D.S.
1.2. PARENTCO MERGER COMMITTEE. Effective as of the date of this
Agreement, the directors of ParentCo shall have designated the following four
individuals to serve as the members of the ParentCo Merger Committee ("PARENTCO
MERGER COMMITTEE"):
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
ParentCo Merger Committee shall be empowered to take all action on behalf of
ParentCo from the date of the execution of this Agreement through and including
the Effective Time, subject to the affirmative vote of seventy-five percent
(75%) of the members of the ParentCo Merger Committee. Following the Effective
Time, the duties and powers of the ParentCo Merger Committee shall be limited to
taking all actions on behalf of ParentCo with respect to its obligations under
Article III hereof. The ParentCo Merger Committee shall terminate as of the
earlier to occur of either (i) a termination of this Agreement pursuant to
Article XI or (ii) expiration of a six (6) month period following the Effective
Time, unless otherwise extended by the ParentCo Board. Prior to the earlier of
the Effective Time or termination of this Agreement, no action shall be taken by
ParentCo unless approved by the affirmative vote of seventy-five percent (75%)
of the members of the ParentCo Merger Committee.
1.3. EFFECTIVE DATE AND EFFECTIVE TIME. As soon as practicable following,
but not later than ten days after the last to occur of, (i) the expiration of
all applicable waiting periods in connection with approvals of Governmental
Authorities and the receipt of all approvals of Governmental Authorities, and
(ii) satisfaction or waiver of all conditions to the consummation of the Merger,
or on such earlier or later date as may be agreed in writing by the parties, an
agreement and plan of merger shall be executed in accordance with all
appropriate legal requirements and shall be filed in the offices of the Delaware
Secretary and the Washington Secretary as required by law, and the Merger
provided for herein shall become effective upon such filing or on such date as
may be specified in each such agreement and plan of merger. The date of such
filing or such later effective date is herein called the "EFFECTIVE DATE." The
"EFFECTIVE TIME" of the Merger shall be the time of such filing or as set forth
in each such agreement and plan of merger.
1.4. TIME AND PLACE OF CLOSING. The Closing will take place on the date
that the Effective Time occurs or at such other time as the parties, acting
through their chief executive officers, may mutually agree. The place of Closing
shall be at the offices of ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or at such other location as the parties may
mutually agree.
1.5. STOCKHOLDERS' AGREEMENTS. A sufficient number of holders of more than
50% of the outstanding capital stock both of GDSC and DCA will execute and
deliver to ParentCo a Stockholders' Agreement, in substantially the form of
EXHIBIT A attached hereto and incorporated herein by this reference
("STOCKHOLDERS' AGREEMENT").
1.6. COMBINED OPERATIONS. Following the Effective Time, ParentCo shall use
its best efforts to publish as promptly as reasonably practicable financial
statements or reports covering at least 30 days of the combined operations of
GDSC and DCA.
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ARTICLE II
MERGER CONSIDERATION; MANNER OF CONVERTING SHARES
2.1. MERGER CONSIDERATION. Subject to the provisions of this Agreement, at
the Effective Time, automatically by virtue of the Merger and without any action
on the part of any Person, the shares of the constituent corporations shall be
converted as follows (collectively, "MERGER CONSIDERATION"):
(a) Each share of GDSC Merger Sub Common Stock issued and outstanding at the
Effective Time shall cease to be outstanding and shall be converted into one
share of GDSC Common Stock.
(b) Each share of DCA Merger Sub Common Stock issued and outstanding at the
Effective Time shall cease to be outstanding and shall be converted into one
share of DCA Common Stock.
(c) Each share of GDSC Common Stock (including any and all shares of
restricted GDSC Common Stock, Performance Shares or earnout shares, all of which
are described in the GDSC Disclosure Schedules) issued and outstanding at the
Effective Time shall cease to be outstanding and shall be converted into and
exchanged for one share of ParentCo Common Stock.
(d) Each share of DCA Common Stock issued and outstanding at the Effective
Time shall cease to be outstanding and shall be converted into and exchanged for
1.67 shares of ParentCo Common Stock.
(e) Each share of GDSC Series A Preferred Stock shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
one share of ParentCo Series A Preferred Stock.
(f) Each share of GDSC Series B Preferred Stock shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
one share of ParentCo Series B Preferred Stock.
(g) Each share of GDSC Series C Preferred Stock shall cease to be
outstanding and shall be converted into and exchanged for one share of ParentCo
Series C Preferred Stock.
(h) Each share of GDSC Series D Preferred Stock shall cease to be
outstanding and shall be converted into and exchanged for one share of ParentCo
Series D Preferred Stock.
2.2. DISSENTING STOCKHOLDERS. Any Dissenting Stockholder who shall be
entitled to be paid the "fair value" of his or her Dissenters' Shares shall
not be entitled to the Merger Consideration as set forth in SECTION 2.1 in
respect thereof unless and until such Dissenting Stockholder shall have
failed to perfect or shall have effectively withdrawn or lost such Dissenting
Stockholder's right to dissent from the Merger under the WBCA and shall be
entitled to receive only the payment provided for by Chapter 23B.13 of the
WBCA with respect to such Dissenters' Shares. Upon the payment by the
ParentCo of the "fair value" of any Dissenters' Shares in accordance with
Chapter 23B.13 of the WBCA, such Dissenters' Shares shall be canceled and
retired and shall cease to exist, and no exchange or further payment shall be
made with respect thereto. If any Dissenting Stockholder shall fail to
perfect or shall have effectively withdrawn or lost such right to dissent,
the Dissenters' Shares held by such Dissenting Stockholder shall thereupon be
treated as though such Dissenters' Shares had been converted into the right
to receive the Merger Consideration as set forth in the applicable provision
of SECTION 2.1.
2.3. RIGHTS AS STOCKHOLDERS; STOCK TRANSFERS. At the Effective Time,
holders of GDSC Common Stock and DCA Common Stock shall cease to be, and shall
have no rights as, stockholders of GSDC or DCA, other than to receive any
dividend or other distribution with respect to such GSDC Common Stock or DCA
Common Stock with a record date occurring prior to the Effective Time and the
consideration provided under this ARTICLE II. After the Effective Time, there
shall be no transfers on the stock transfer books of GDSC, DCA or the Surviving
Corporations of shares of GDSC Common Stock or DCA Common Stock outstanding
prior to the Effective Time.
2.4. FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of ParentCo Capital Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will
4
be issued in the Merger; instead, ParentCo shall pay to each holder of either
GDSC Common Stock or DCA Common Stock who would otherwise be entitled to a
fractional share of ParentCo Capital Stock (after taking into account all Old
GDSC Certificates or Old DCA Certificates delivered by such holder) an amount in
cash (without interest) determined by multiplying the fraction of a share by the
average of the closing prices of GDSC reported on Nasdaq for the five
consecutive trading days immediately preceding the date of the Effective Time.
2.5. ANTI-DILUTION PROVISIONS. In the event either GDSC or DCA changes (or
establishes a record date for changing) the number of shares of GDSC Common
Stock or DCA Common Stock issued and outstanding prior to the Effective Date as
a result of a stock split, stock dividend, recapitalization or similar
transaction with respect to the outstanding GDSC Common Stock or DCA Common
Stock and the record date therefor shall be prior to the Effective Date, the
number of shares of ParentCo Capital Stock the holders of GDSC Common Stock and
DCA Common Stock or options exercisable for same shall be entitled to receive
under this Agreement shall be proportionately adjusted.
2.6. CONVERSION OF RIGHTS.
(a) At the Effective Time, each option or other right to purchase shares of
either GDSC Common Stock or DCA Common Stock pursuant to stock options or stock
appreciation rights ("GDSC OPTIONS" or "DCA OPTIONS") granted by GDSC under the
GDSC Stock Plans or DCA under the DCA Stock Plans and outstanding at the
Effective Time, whether or not exercisable, and all other warrants or other
rights to purchase shares of GDSC Common Stock or DCA Common Stock (together
with the GDSC Options or the DCA Options, the "GDSC RIGHTS" or the "DCA
RIGHTS"), shall be converted into and become rights with respect to ParentCo
Common Stock, and ParentCo shall assume each GDSC Right and DCA Right, in
accordance with the terms of the GDSC Stock Plan or the DCA Stock Plan or such
other agreement or arrangement pertaining to such GDSC Rights or DCA Rights (as
applicable), except that from and after the Effective Time, (i) ParentCo and its
Compensation Committee shall be substituted for the GDSC Board and the DCA Board
or the committee of the GDSC Board and the DCA Board administering the GDSC
Stock Plan or the DCA Stock Plan, (ii) each GDSC Right and DCA Right assumed by
ParentCo may be exercised only for shares of ParentCo Common Stock (or cash, in
the case of the stock appreciation rights), (iii) the number of shares of
ParentCo Common Stock subject to GDSC Rights or DCA Rights shall be equal to the
number of shares of GDSC Common Stock or DCA Common Stock subject to the GDSC
Right or the DCA Right immediately prior to the Effective Time multiplied by the
GDSC Exchange Ratio or the DCA Exchange Ratio, as the case may be, and (iv) the
per share exercise price under either the GDSC Right or the DCA Right shall be
adjusted by dividing the per share exercise price under the GDSC Right or the
DCA Right by the GDSC Exchange Ratio or the DCA Exchange Ratio, as the case may
be, and rounding up to the nearest cent. Notwithstanding the provisions of
clause (iii) of the preceding sentence, ParentCo shall not be obligated to issue
any fraction of a share of ParentCo Common Stock upon exercise of a GDSC Right
or a DCA Right. Any fraction of a share of ParentCo Common Stock that otherwise
would be subject to a converted GDSC Right or DCA Right shall represent the
right to receive cash payment upon exercise of such converted GDSC Right or DCA
Right equal to the product of such fraction and the difference between the
market value of one share of ParentCo Common Stock at the time of exercise of
such Right and the per share exercise price of such Right. The term,
exercisability, vesting schedule, status as an "Incentive Stock Option" under
Section 422 of the Code, if applicable, and all other terms and conditions of
the options or warrants, to the extent permitted by law, and otherwise
reasonably practical shall be unchanged; each option which is an Incentive Stock
Option shall be adjusted in accordance with the requirements of Section 424(a)
of the Code so as not to constitute a modification, renewal or extension of the
option within the meaning of Section 424(h) of the Code.
(b) Each of GDSC and DCA agree to take all necessary steps to effectuate the
foregoing provisions of this SECTION 2.6, including using its reasonable efforts
to obtain from each holder of a GDSC Right or DCA Right any consent or agreement
that may be deemed necessary or advisable in order to effectuate
5
the transactions contemplated by this SECTION 2.6. Anything in this Agreement to
the contrary notwithstanding, ParentCo shall have the right, in its sole
discretion, not to deliver the consideration provided in this SECTION 2.6 to a
former holder of a GDSC Right or a DCA Right who has not delivered such consent
or agreement.
ARTICLE III
EXCHANGE OF SHARES
3.1. EXCHANGE PROCEDURES.
(a) At or prior to the Effective Time, ParentCo shall deposit, or shall
cause to be deposited, with such bank, trust company or transfer agent as
ParentCo shall elect (in such capacity, the "EXCHANGE AGENT"), for the benefit
of the holders of certificates formerly representing shares of either GDSC
Common Stock or GDSC Preferred Stock (collectively, "OLD GDSC CERTIFICATES") or
DCA Common Stock ("OLD DCA CERTIFICATES"), for exchange in accordance with
ARTICLE II, certificates representing the shares of ParentCo Capital Stock ("NEW
CERTIFICATES") and an estimated amount of cash (such cash and New Certificates,
together with any dividends or distributions with a record date occurring after
the Effective Date with respect thereto, without any interest on any such cash,
dividends or distributions, being hereinafter referred to as the "EXCHANGE
FUND") to be paid pursuant to ARTICLE II in exchange for outstanding shares of
GDSC Common Stock, GDSC Preferred Stock or DCA Common Stock.
(b) As soon as practicable after the Effective Date, ParentCo shall send or
cause to be sent to each former holder of record of shares of GDSC Common Stock,
GDSC Preferred Stock or DCA Common Stock immediately prior to the Effective Time
transmittal materials for use in exchanging such stockholder's Old GDSC
Certificates or Old DCA Certificates for the consideration set forth in ARTICLE
II, which transmittal materials both GDSC and DCA shall have had the opportunity
to review prior to the Effective Date. ParentCo shall cause the New Certificates
and any check in respect of any fractional share interests or dividends or
distributions which the holder of such shares shall be entitled to receive upon
delivery to the Exchange Agent of Old GDSC Certificates or Old DCA Certificates
representing such shares (or an affidavit of lost certificate and, if required
by the Exchange Agent, indemnity reasonably satisfactory to ParentCo and the
Exchange Agent, if any of such certificates are lost, stolen or destroyed) owned
by such stockholder. No interest will be paid on any such cash to be paid in
lieu of fractional share interests or in respect of dividends or distributions
which any such person shall be entitled to receive pursuant to ARTICLE II upon
such delivery. In the event of a transfer of ownership of any shares of GDSC
Common Stock, GDSC Preferred Stock or DCA Common Stock not registered in the
transfer records of either GDSC or DCA, the exchange described in this SECTION
2.1(b) may nonetheless be effected and a check for the cash to be paid in lieu
of fractional shares may be issued to the transferee if the Old GDSC Certificate
or Old DCA Certificate is presented to the Exchange Agent, accompanied by
documents sufficient, in the discretion of ParentCo and the Exchange Agent, (i)
to evidence and effect such transfer but for the provisions of SECTION 2.3
hereof and (ii) to evidence that all applicable stock transfer taxes have been
paid.
(c) If either Old GDSC Certificates or Old DCA Certificates are not
surrendered or the consideration therefor is not claimed prior to the date on
which such consideration would otherwise escheat to or become the property of
any governmental unit or agency, the unclaimed consideration shall, to the
extent permitted by abandoned property and any other applicable law, become the
property of the Surviving Corporations (and to the extent not in its possession
shall be paid over to the Surviving Corporations), free and clear of all claims
or interest of any person previously entitled to such claims. Notwithstanding
the foregoing, neither the Exchange Agent nor any party hereto shall be liable
to any former holder of either GDSC Common Stock, GDSC Preferred Stock or DCA
Common Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
6
(d) At the election of ParentCo, no dividends or other distributions with
respect to ParentCo Common Stock with a record date occurring after the
Effective Time shall be paid to the holder of any unsurrendered Old GDSC
Certificate or Old DCA Certificate or options for same converted in the Merger
into the right to receive shares of such ParentCo Common Stock until the holder
thereof shall be entitled to receive New Certificates in exchange therefor in
accordance with the procedures set forth in this SECTION 3.1. After becoming so
entitled in accordance with this SECTION 3.1, the record holder thereof also
shall be entitled to receive any such dividends or other distributions, without
any interest thereon, which theretofore had become payable with respect to
shares of ParentCo Capital Stock such holder had the right to receive upon
surrender of the Old GDSC Certificate or Old DCA Certificate.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of either GDSC or DCA for six months after the Effective Time shall
be returned by the Exchange Agent to ParentCo. Any stockholders of GDSC or DCA
who have not theretofore complied with this ARTICLE III shall thereafter look
only to ParentCo for payment of the shares of ParentCo Capital Stock, cash in
lieu of any fractional shares and unpaid dividends and distributions on ParentCo
Capital Stock deliverable hereunder, in each case, without any interest thereon.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GDSC
On or prior to the date hereof, GDSC has delivered to DCA schedules ("GDSC
DISCLOSURE SCHEDULES") setting forth, among other things, items the disclosure
of which is necessary or appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception to one or more
representations or warranties contained in this ARTICLE IV; provided, that (i)
no such item is required to be set forth in the GDSC Disclosure Schedules as an
exception to a representation or warranty if its absence would not be reasonably
likely to result in the related representation or warranty being deemed untrue
or incorrect under the standard established in the subsequent sentence, and (ii)
the mere inclusion of an item in the GDSC Disclosure Schedules as an exception
to a representation or warranty shall not be deemed an admission by a party that
such item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect. No
representation or warranty of GDSC contained in this ARTICLE IV shall be deemed
untrue or incorrect, and no party hereto shall be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact, event
or circumstance unless such fact, circumstance or event, individually or taken
together with all other facts, events or circumstances inconsistent with any
representation or warranty contained in this ARTICLE IV has had or is reasonably
likely to have a Material Adverse Effect on the party making such representation
or warranty. The numbers set forth on the GDSC Disclosure Schedules correspond
to the particular Section number contained in the Agreement. Information or
disclosure provided with reference to one Section may also be responsive to
information or disclosure responsive to another Section. Therefore, if the
information or disclosure set forth in one Section can be reasonably determined
to apply to information or disclosure in another Section, such information or
disclosure shall constitute disclosure for all applicable Sections. GDSC agrees
that with respect to its representations and warranties, GDSC shall have the
right to supplement and amend the GDSC Disclosure Schedules with respect to any
events occurring after the date of this Agreement and prior to the Effective
Time which such new event or information, when scheduled, shall not constitute a
breach hereof. In the event any such supplement or amendment discloses new
events that are reasonably likely to have a Material Adverse Effect on GDSC or
on ParentCo, DCA shall have the right to terminate the Agreement pursuant to
SECTION 11.1(g).
Subject to the preceding paragraph and except as Previously Disclosed in a
paragraph of the GDSC Disclosure Schedules corresponding to the relevant
paragraph below, GDSC hereby represents and warrants to DCA:
7
4.1. ORGANIZATION, STANDING AND AUTHORITY. GDSC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington. GDSC is duly qualified to do business and is in good standing in the
states of the United States and any foreign jurisdictions where its ownership or
leasing of property or assets or the conduct of its business requires it to be
so qualified. The GDSC Board has received the written opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ Inc. to the effect that as of the date hereof the GDSC Exchange Ratio set
forth in SECTION 2.1 is fair to the holders of GDSC Common Stock from a
financial point of view.
4.2. SUBSIDIARIES.
(a) (i) GDSC has Previously Disclosed a list of all of its Subsidiaries
together with the jurisdiction of organization of each such Subsidiary, (ii)
GDSC owns, directly or indirectly, all the issued and outstanding equity
securities of each of its Subsidiaries, (iii) no equity securities of any of its
Subsidiaries are or may become required to be issued (other than to it or its
wholly-owned Subsidiaries) by reason of any Right or otherwise, (iv) there are
no contracts, commitments, understandings or arrangements by which any of such
Subsidiaries is or may be bound to sell or otherwise transfer any equity
securities of any such Subsidiaries (other than to it or its wholly-owned
Subsidiaries), (v) there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such securities,
and (vi) all the equity securities of each Subsidiary held by GDSC or its
Subsidiaries are fully paid and nonassessable and are owned by GDSC or its
Subsidiaries free and clear of any Liens.
(b) GDSC does not own beneficially, directly or indirectly, any equity
securities or similar interests of any Person, or any interest in a partnership
or joint venture of any kind, other than its Subsidiaries.
(c) Each of GDSC's Subsidiaries has been duly organized and is validly
existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified.
4.3. GDSC CAPITAL STOCK. As of the date hereof, the authorized capital
stock of GDSC consists solely of 50,000,000 shares of GDSC Common Stock, of
which 8,973,720 are issued and outstanding and 30,000,000 shares of GDSC
Preferred Stock of which the following series are authorized, issued and
outstanding:
SHARES ISSUED AND
SERIES SHARES AUTHORIZED OUTSTANDING
--------- ----------------- ----------------------------
A 100 100
B 70,000 -0-
C 100 100
D 2,000,000 1,628,663
As of the date hereof, no shares of GDSC Common Stock were held in treasury
by GDSC or otherwise beneficially owned by GDSC or its Subsidiaries. The
outstanding shares of GDSC Common Stock and GDSC Preferred Stock have been duly
authorized and are validly issued and outstanding, fully paid and nonassessable,
subject to no preemptive rights and were not issued in violation of any
preemptive rights. As of the date hereof, there are 1,312,110 shares of GDSC
Common Stock authorized and reserved for issuance pursuant to outstanding
options to purchase shares of GDSC Common Stock or GDSC Preferred Stock, GDSC
does not have any other Rights issued or outstanding with respect to its capital
stock, and GDSC does not have any commitment to authorize, issue or sell any
other shares of its capital stock or any other Rights. Except as Previously
Disclosed, GDSC does not have shares subject to repurchase in the event certain
performance targets have been met (the "GDSC PERFORMANCE SHARES"). Since May 15,
1998, there has been no adjustments of the Conversion Price as set forth in
Article XII, Section 6(c) to the Amendment to the Articles of Incorporation of
GDSC and the representation set forth therein is true and correct as of and on
May 15, 1998.
8
4.4. CORPORATE POWER. GDSC and each of its Subsidiaries has the corporate
power and authority to carry on its business as it is now being conducted and to
own all its properties and assets; and GDSC has the corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby.
4.5. CORPORATE AUTHORITY. Subject in the case of this Agreement to receipt
of the requisite approval of the agreement of merger set forth in this Agreement
by the holders of a majority of the outstanding shares of GDSC Common Stock and
GDSC Preferred Stock entitled to vote thereon, this Agreement and the
transactions contemplated hereby and thereby have been authorized by all
necessary corporate action of GDSC and the GDSC Board on or prior to the date
hereof. This Agreement is a valid and legally binding obligation of GDSC,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
4.6. CONSENTS AND APPROVALS; NO DEFAULTS.
(a) No consents or approvals of, or filings or registrations with, any
Governmental Authority or with any third party are required to be made or
obtained by GDSC or any of its Subsidiaries in connection with the execution,
delivery or performance by GDSC of this Agreement or to consummate the Merger
except for (i) filings of applications, registrations, statements, reports or
notices (and expiration of any applicable notice periods) with the United States
Department of Justice, the Federal Trade Commission, NASD, the SEC and state
securities authorities (collectively the "REGULATORY AGENCIES"), (ii) the
approval of this Agreement by the stockholders of GDSC, and (iii) the filing of
an agreement of merger with the Washington Secretary and Delaware Secretary
pursuant to the DGCL and the Washington Law. As of the date hereof, GDSC is not
aware of any reason why the approvals set forth in SECTION 11.1(d) will not be
received without the imposition of a condition, restriction or requirement of
the type described in SECTION 11.1(d).
(b) Subject to receipt of the approvals referred to in the preceding
paragraph, and the expiration of related waiting periods, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) constitute
a breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of GDSC or of any of its Subsidiaries or to
which GDSC or any of its Subsidiaries or properties is subject or bound, (ii)
constitute a breach or violation of, or a default under, the GDSC Articles or
the GDSC Bylaws, or (iii) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental permit or license,
agreement, indenture or instrument.
4.7. FINANCIAL REPORTS AND REGULATORY DOCUMENTS.
(a) The consolidated balance sheet of GDSC as of December 31, 1997, and the
related statements of operations, cash flow and changes in financial position of
GDSC for the year then ended, audited by KPMG Peat Marwick, LLP, the unaudited
consolidated balance sheet as of June 30, 1998 and the related unaudited
consolidated statements of operations, cash flows and changes in financial
position of GDSC for quarters ended March 31, 1998 and June 30, 1998 (each as
Previously Disclosed), fairly present the financial position of GDSC as of such
dates and the results of the operations of GDSC for the periods then ended, all
in accordance with generally accepted accounting principles ("GAAP")
consistently applied.
(b) GDSC has timely filed all reports, registrations and statements,
together with any amendments required to be made with respect thereto, that they
were required to file since February 13, 1997, the date of GDSC's initial public
offering, with the Regulatory Agencies, and all other material reports and
statements required to be filed by it with any Governmental Authority since
December 31, 1996, including, without limitation, any report or statement
required to be filed pursuant to the laws of the United States or the State of
Washington, and has paid all fees and assessments due and payable in connection
therewith.
9
As of their respective dates, such reports, registrations and statements
complied in all material respects with all the laws, rules and regulations of
the applicable Governmental Authority with which they were filed. The GDSC SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such GDSC SEC Reports or necessary in
order to make the statements in such GDSC SEC Reports, in light of the
circumstances under which they were made, not misleading. None of GDSC
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(c) Since December 31, 1997, GDSC and its Subsidiaries have not incurred any
material liability other than in the ordinary course of business consistent with
past practice.
(d) Since December 31, 1997, (i) GDSC and its Subsidiaries have conducted
their respective businesses in the ordinary and usual course consistent with
past practice (excluding the incurrence of expenses related to this Agreement
and the transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of this ARTICLE IV or
otherwise), is reasonably likely to have a Material Adverse Effect with respect
to GDSC.
4.8. LEGAL PROCEEDINGS. No litigation, claim or other proceeding before
any court or Governmental Authority is pending against GDSC or any of its
Subsidiaries and, to GDSC's knowledge, no such litigation, claim or other
proceeding has been threatened.
4.9. REGULATORY MATTERS.
(a) Neither GDSC nor any of its Subsidiaries or any of their properties is a
party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with or a commitment letter or similar
submission to, or extraordinary supervisory letter from any Governmental
Authority.
(b) Neither GDSC nor any of its Subsidiaries has been advised by any
Governmental Authority that such Governmental Authority is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, commitment
letter or similar action.
10
4.10. COMPLIANCE WITH LAWS.
(a) GDSC and each of its Subsidiaries:
(i) is in material compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such
businesses;
(ii) has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses as presently
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to GDSC's knowledge, no
suspension or cancellation of any of them is threatened; and
(iii) has not received, since December 31, 1997, any notification or
communication from any Governmental Authority (a) asserting that GDSC or any
of its Subsidiaries is not in compliance with any of the statutes,
regulations or ordinances which such Governmental Authority enforces or (b)
threatening to revoke any license, franchise, permit or governmental
authorization (nor, to GDSC's knowledge, do any grounds for any of the
foregoing exist).
(b) The terms and conditions set forth in the management agreements between
GDSC or its Subsidiaries and the dental practices managed by such entities
comply in all material respects with applicable laws, rules, regulations and
other applicable authorities relating to such agreements, including but not
limited to laws, rules, regulations and other applicable authorities relating to
the corporate practice of dentistry, fee-splitting, kickbacks and patient
brokering and those relating to such practices.
4.11. MATERIAL CONTRACTS; DEFAULTS. Neither GDSC nor any of its
Subsidiaries is a party to, bound by or subject to any agreement, contract,
arrangement, commitment or understanding (whether written or oral) (i) that is a
"material contract" within the meaning of Item 601(b)(10) of SEC Regulation S-K,
or (ii) that materially restricts the conduct of business by it or any of its
Subsidiaries that has not been filed with or incorporated by reference in
reports filed under either the Securities Act or the Exchange Act. Neither GDSC
nor any of its Subsidiaries is in material default under any material contract,
agreement, commitment, arrangement, lease, insurance policy or other material
instrument to which it is a party, by which its respective assets, business, or
operations may be bound or affected, or under which it or its respective assets,
business, or operations receives benefits, and there has not occurred any event
that, with the lapse of time or the giving of notice or both, would constitute
such a default.
4.12. NO BROKERS. Except for commissions, fees and other like payments due
to ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, no action has been taken by GDSC that would give rise
to any valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment with respect to the transactions contemplated by this
Agreement.
4.13. EMPLOYEE BENEFIT PLANS.
(a) All benefit and compensation plans, contracts, policies or arrangements
covering current employees or former employees of GDSC and its Subsidiaries
(collectively, the "GDSC EMPLOYEES") and current or former directors of GDSC,
including, but not limited to, "employee benefit plans" within the meaning of
Section 3(3) of ERISA, and deferred compensation, stock option, stock purchase,
stock appreciation rights, stock based, incentive and bonus plans (collectively,
the "GDSC BENEFIT PLANS"), are Previously Disclosed. True and complete copies of
all GDSC Benefit Plans, including, but not limited to, any trust instruments and
insurance contracts forming a part of any GDSC Benefit Plans, and all amendments
thereto have been provided or made available to the other parties hereto.
(b) All employee benefit plans, other than "multiemployer plans" within the
meaning of Section 3(37) of ERISA, covering GDSC Employees (the "GDSC PLANS"),
have been administered in all material respects in compliance with their terms
and with all applicable laws, [to the extent subject to
11
ERISA], including without limitation, ERISA and the Code. GDSC is not a party to
any "employee pension benefit plan" within the meaning of Section 3(2) of ERISA
("GDSC PENSION PLAN") and which is a defined benefit plan as defined in Section
3(35) of ERISA. With respect to the employee benefit plan intended to qualify
under Section 401 of the Code, the Internal Revenue Service has issued a
favorable determination letter, a true and correct copy of which has been
provided to DCA, that such plan is, and each such plan in fact is, qualified and
exempt from federal income taxes. There is no pending or, to the knowledge of
GDSC, threatened litigation relating to any GDSC Plan. There are no audits,
inquiries, reviews, proceedings, claims or demands pending with any governmental
or regulatory agency, and there are no facts which could give rise to any
material liability in the event of any such investigation, claim, action, suit,
audit, review or proceeding. Neither GDSC nor any of its Subsidiaries has
engaged in a transaction with respect to any GDSC Plan that, assuming the
taxable period of such transaction expired as of the date hereof, could subject
GDSC or any of its Subsidiaries to a tax or penalty imposed by either Section
4975 of the Code or Section 502(i) of ERISA.
(c) No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by GDSC or any of its Subsidiaries with respect to any
ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any entity which is considered one employer with
GDSC under Section 4001 of ERISA or Section 414 of the Code (a "GDSC ERISA
AFFILIATE"). Neither GDSC, any of its Subsidiaries nor an ERISA Affiliate has
contributed to a "multiemployer plan", within the meaning of Section 3(37) of
ERISA. No notice of a "reportable event", within the meaning of Section 4043 of
ERISA for which the 30-day reporting requirement has not been waived, has been
required to be filed for any GDSC Pension Plan or by any GDSC ERISA Affiliate
within the 12-month period ending on the date hereof or will be required to be
filed in connection with the transactions contemplated by this Agreement.
(d) All contributions required to be made under the terms of any GDSC Plan
have been timely made or have been reflected on the consolidated financial
statements of GDSC included in the Regulatory Documents. Neither any GDSC
Pension Plan nor any single-employer plan of an ERISA Affiliate has an
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA and no ERISA Affiliate has an
outstanding funding waiver. Neither GDSC nor any of its Subsidiaries has
provided, or is required to provide, security to any GDSC Pension Plan or to any
single-employer plan of a GDSC ERISA Affiliate pursuant to Section 401(a)(29) of
the Code.
(e) Under each GDSC Pension Plan which is a single-employer plan, as of the
last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the GDSC Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such GDSC
Plan, and there has been no material change in the financial condition of such
GDSC Plan since the last day of the most recent plan year.
(f) Neither GDSC nor any of its Subsidiaries has any obligations for retiree
health and life benefits under any GDSC Benefit Plan. GDSC or its Subsidiaries
may amend or terminate any such GDSC Benefit Plan at any time without incurring
any liability thereunder.
(g) The consummation of the transactions contemplated by this Agreement will
not (i) entitle any employees of GDSC or any of its Subsidiaries to severance
pay, (ii) accelerate the time of payment or vesting or trigger any payment of
compensation or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the GDSC Benefit Plans or (iii) result
in any breach or violation of, or a default under, any of the GDSC Benefit
Plans. Without limiting the foregoing, as a result of the consummation of the
transactions contemplated by this Agreement, neither GDSC nor any of its
Subsidiaries will be obligated to make a payment to an individual that would be
a "parachute payment" to a "disqualified individual" as those terms are defined
in Section 280G of the Code, without regard to
12
whether such payment is reasonable compensation for personal services performed
or to be performed in the future.
4.14. LABOR MATTERS. Neither GDSC nor any of its Subsidiaries is a party
to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is GDSC
or any of its Subsidiaries the subject of a proceeding asserting that it or any
such Subsidiary has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel GDSC or any such
Subsidiary to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving it or any
of its Subsidiaries pending or, to GDSC's knowledge, threatened, nor is GDSC
aware of any activity involving its or any of its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in other
organizational activity.
4.15. YEAR 2000 COMPLIANCE. Except as Previously Disclosed, (i) the
computer software and related hardware of GDSC and its Subsidiaries (the "GDSC
COMPUTER SYSTEM") used for the storage and processing of data are or will be
prior to the year 2000 Year 2000 Compliant; (ii) to the actual knowledge of
GDSC, all of the suppliers, customers and third party providers of GDSC are, or
will be prior to year 2000, Year 2000 Compliant; and (iii) GDSC is taking or has
taken, all commercially reasonable and appropriate action to address and remedy
any deficiencies in the GDSC Computer System which would keep it from becoming
Year 2000 Compliant. As used herein and in SECTION 5.15, "YEAR 2000 COMPLIANT"
shall mean the ability of the GDSC Computer System or the DCA Computer System,
as applicable, to provide the following functions, without human intervention,
individually and in combination with other products or systems: (i) consistently
handle, record, store, process and present dates and date-related information
before, during and after January 1, 2000, including but not limited to accepting
date input, performing calculations on dates or portion of dates, and providing
date output; (ii) function accurately in accordance with the published
specifications and without undue interruption, before, during, and after January
1, 2000 (including leap year computations) without any adverse change in
operation associated with the advent of the year 2000; (iii) respond to
two-digit or four-digit dates and date-related input in a way that resolves any
ambiguity as to the year 2000 in a disclosed, defined and predetermined manner,
and store and provide output of dates and date-related information in ways that
are unambiguous as to the year 2000; and (iv) suitably interact with other
software and related hardware in a way which does not compromise its year 2000
compliance capability.
4.16. ENVIRONMENTAL MATTERS.
(a) GDSC and each of its Subsidiaries has complied at all times with
applicable Environmental Laws; (i) no real property (including buildings or
other structures) currently or formerly owned, leased or operated by GDSC or any
of its Subsidiaries, has been contaminated with, or has had any release of, any
Hazardous Substance; (ii) neither GDSC nor any of its Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (iii) neither GDSC nor any of its Subsidiaries has received any
notice, demand letter, claim or request for information alleging any violation
of, or liability under, any Environmental Law; (iv) neither GDSC nor any of its
Subsidiaries is subject to any order, decree, injunction or other agreement with
any Governmental Authority or any third party relating to any Environmental Law;
(v) to the best of GDSC's knowledge, there are no circumstances or conditions
(including the presence of asbestos, underground storage tanks, lead products,
polychlorinated biphenyls, prior manufacturing operations, dry-cleaning, or
automotive services) involving GDSC or any of its Subsidiaries, any currently or
formerly owned or operated property, that could reasonably be expected to result
in any claims, liability or investigations against GDSC or any of its
Subsidiaries or result in any restrictions on the ownership, use, or transfer of
any property pursuant to any Environmental Law; and (vi) GDSC has delivered to
DCA copies of all environmental reports, studies, sampling data, correspondence,
filings and other environmental information in its possession or reasonably
available to it relating to GDSC, any Subsidiary of GDSC and any currently or
formerly owned, leased or operated property.
13
(b) As used herein, the term "ENVIRONMENTAL LAW" means any federal, state or
local law, regulation, order, decree, permit, authorization, opinion, common law
or agency requirement relating to: (i) the protection or restoration of the
environment, health, safety, or natural resources, (ii) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(iii) noise, odor, wetlands, indoor air, pollution, contamination or any injury
or threat of injury to persons or property in connection with any Hazardous
Substance and the term "HAZARDOUS SUBSTANCE" means any substance in any
concentration that is: (i) listed, classified or regulated pursuant to any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (iii) any other substance which is or may be
the subject of regulatory action by any Governmental Authority in connection
with any Environmental Law.
4.17. TAX MATTERS.
(a)(i)All Tax Returns that are required to be filed (taking into account any
extensions of time within which to file) by or with respect to GDSC and its
Subsidiaries have been duly filed, (ii) all Taxes due have been paid in full,
(iii) all deficiencies asserted or assessments made as a result of such
examinations have been paid in full, (iv) no issues that have been raised by the
relevant taxing authority in connection with the examination of any of the Tax
Returns referred to in clause (i) are currently pending, and (v) no waivers of
statutes of limitation have been given by or requested with respect to any Taxes
of GDSC or its Subsidiaries. GDSC has made available to DCA true and correct
copies of the United States federal income Tax Returns filed by GDSC and its
Subsidiaries for each of the three most recent fiscal years ended on or before
December 31, 1997. Neither GDSC nor any of its Subsidiaries has any liability
with respect to income, franchise or similar Taxes that accrued on or before the
end of the most recent period covered by GDSC SEC Reports filed prior to the
date hereof in excess of the amounts accrued with respect thereto that are
reflected in the financial statements included in GDSC SEC Reports filed on or
prior to the date hereof. Neither GDSC nor any of its Subsidiaries is a party to
any Tax allocation or sharing agreement, is or has been a member of an
affiliated group filing consolidated or combined Tax returns (other than a group
the common parent of which is or was GDSC) or otherwise has any liability for
the Taxes of any person (other than GDSC and its Subsidiaries). As of the date
hereof, neither GDSC nor any of its Subsidiaries has any reason to believe that
any conditions exist that might prevent or impede the Merger from qualifying as
reorganizations within the meaning of Section 368 of the Code or Section 351 of
the Code.
(b) No Tax is required to be withheld pursuant to Section 1445 of the Code
as a result of the transfer contemplated by this Agreement.
4.18. BOOKS AND RECORDS. The books and records of GDSC and its
Subsidiaries have been fully, properly and accurately maintained in all material
respects, and there are no material inaccuracies or discrepancies of any kind
contained or reflected therein, and they fairly present the financial position
of GDSC and its Subsidiaries.
4.19. INSURANCE. GDSC has Previously Disclosed all of the insurance
policies, binders, or bonds maintained by GDSC or its Subsidiaries ("INSURANCE
POLICIES"). GDSC and its Subsidiaries are insured with reputable insurers
against such risks and in such amounts as the management of GDSC reasonably has
determined to be prudent for its business, operations, properties and assets.
All the Insurance Policies are in full force and effect; GDSC and its
Subsidiaries are not in material default thereunder; and all claims thereunder
have been filed in due and timely fashion.
4.20. ACCOUNTING TREATMENT. As of the date hereof, GDSC is not aware of
any reason why the Merger will fail to qualify for "pooling-of-interests"
accounting treatment. held under valid contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought),
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and each such contract is in full force and effect. The Assets of GDSC and its
Subsidiaries include all assets required to operate the business of GDSC and its
Subsidiaries as presently conducted.
4.22. STATEMENTS TRUE AND CORRECT. None of the information supplied or to
be supplied by GDSC or any of its Subsidiaries for inclusion in the Registration
Statement to be filed by ParentCo with the SEC will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
GDSC or any of its Subsidiaries for inclusion in the Proxy Statement to be
mailed to GDSC's or DCA's stockholders in connection with the GDSC Meeting or
the DCA Meeting and any other Governmental Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to GDSC's
or DCA's stockholders, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in
the case of the Proxy Statement or any amendment thereof or supplement thereto,
at the time of the GDSC Meeting or the DCA Meeting, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for the GDSC Meeting or the DCA Meeting. All documents
that GDSC or any Subsidiary thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable law.
4.23. ACCOUNTING, TAX AND REGULATORY. Neither GDSC nor any of its
Subsidiaries has taken any action or has any knowledge of any fact or
circumstance that is reasonably likely to (a) prevent the transactions
contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as (i) reorganizations within the
meaning of Section 368(a) of the Code (in which ParentCo, GDSC Merger Sub, DCA
Merger Sub, GDSC and DCA is each a party to the reorganization within the
meaning of Section 368(b) of the Code) or (ii) a transfer to a controlled
corporation qualifying under Section 351 of the Code, or (b) materially impede
or delay receipt of any consents of Governmental Authority referred to in
SECTION 4.6(A) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such Section.
4.24. NO UNDISCLOSED LIABILITIES. Except as set forth in the financial
statements filed in connection with the GDSC SEC Reports or Previously
Disclosed, GDSC does not have any material liability or obligation accrued,
contingent or otherwise.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DCA
On or prior to the date hereof, DCA has delivered to GDSC schedules ("DCA
DISCLOSURE SCHEDULES") setting forth, among other things, items the disclosure
of which is necessary or appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception to one or more
representations or warranties contained in this ARTICLE V; provided, that (i) no
such item is required to be set forth in the DCA Disclosure Schedules as an
exception to a representation or warranty if its absence would not be reasonably
likely to result in the related representation or warranty being deemed untrue
or incorrect under the standard established in the subsequent sentence, and (ii)
the mere inclusion of an item in the DCA Disclosure Schedules as an exception to
a representation or warranty shall not be deemed an admission by a party that
such item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect. No
representation or warranty of DCA contained in this ARTICLE V shall be deemed
untrue or incorrect, and no party hereto shall be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact, event
or circumstance unless such fact, circumstance or event, individually or taken
together with all other facts, events or circumstances inconsistent with any
representation or warranty contained in this ARTICLE V has had or is reasonably
likely to have a Material Adverse Effect on the party making such representation
or
15
warranty. The numbers set forth on the DCA Disclosure Schedules correspond to
the particular Section number contained in the Agreement. Information or
disclosure provided with reference to one Section may also be responsive to
information or disclosure responsive to another Section. Therefore, if the
information or disclosure set forth in one Section can be reasonably determined
to apply to information or disclosure in another Section, such information or
disclosure shall constitute disclosure for all applicable Sections. DCA agrees
that with respect to its representations and warranties, DCA shall have the
right to supplement and amend the DCA Disclosure Schedules with respect to any
events occurring after the date of this Agreement and prior to the Effective
Time which such new event or information, when scheduled, shall not constitute a
breach hereof. In the event any such supplement or amendment discloses new
events that are reasonably likely to have a Material Adverse Effect on DCA or on
ParentCo, GDSC shall have the right to terminate the Agreement pursuant to
SECTION 11.1(g).
Subject to the preceding paragraph and except as Previously Disclosed in a
paragraph of the DCA Disclosure Schedules corresponding to the relevant
paragraph below, DCA hereby represents and warrants to GDSC:
5.1. ORGANIZATION, STANDING AND AUTHORITY. DCA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. DCA is duly qualified to do business and is in good standing in the
states of the United States and foreign jurisdictions where its ownership or
leasing of property or assets or the conduct of its business requires it to be
so qualified. The DCA Board has received the written opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ &
Associates, Inc. to the effect that as of the date hereof the DCA Exchange Ratio
is fair to the holders of DCA Common Stock from a financial point of view.
5.2. SUBSIDIARIES.
(a) (i) DCA has Previously Disclosed a list of all of its Subsidiaries
together with the jurisdiction of organization of each such Subsidiary, (ii) DCA
owns, directly or indirectly, all the issued and outstanding equity securities
of each of its Subsidiaries, (iii) no equity securities of any of its
Subsidiaries are or may become required to be issued (other than to it or its
wholly-owned Subsidiaries) by reason of any Right or otherwise, (iv) there are
no contracts, commitments, understandings or arrangements by which any of such
Subsidiaries is or may be bound to sell or otherwise transfer any equity
securities of any such Subsidiaries (other than to it or its wholly-owned
Subsidiaries), (v) there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such securities,
and (vi) all the equity securities of each Subsidiary held by DCA or its
Subsidiaries are fully paid and nonassessable and are owned by DCA or its
Subsidiaries free and clear of any Liens.
(b) DCA does not own beneficially, directly or indirectly, any equity
securities or similar interests of any Person, or any interest in a partnership
or joint venture of any kind, other than its Subsidiaries.
(c) Each of DCA's Subsidiaries has been duly organized and is validly
existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified.
5.3. DCA COMMON STOCK. As of the date hereof, the authorized capital stock
of DCA consists solely of 50,000,000 shares of DCA Common Stock of which
7,031,066 are issued and outstanding and 5,000,000 shares of DCA Preferred Stock
of which none are issued and outstanding. As of the date hereof, no shares of
DCA Common Stock were held in treasury by DCA or otherwise beneficially owned by
DCA or its Subsidiaries. The outstanding shares of DCA Common Stock or DCA
Preferred Stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable, subject to no preemptive rights and
were not issued in violation of any preemptive rights. As of the date hereof,
there are 613,014 shares of DCA Common Stock authorized and reserved for
issuance pursuant to outstanding options and warrants to purchase shares of DCA
Common Stock, DCA does not have any other Rights
16
issued or outstanding with respect to its capital stock, and DCA does not have
any commitment to authorize, issue or sell any other shares of its capital stock
or any other Rights.
5.4. CORPORATE POWER. DCA and each of its Subsidiaries has the corporate
power and authority to carry on its business as it is now being conducted and to
own all its properties and assets; and DCA has the corporate power and authority
to execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby.
5.5. CORPORATE AUTHORITY. Subject in the case of this Agreement to receipt
of the requisite approval of the agreement of merger set forth in this Agreement
by the holders of a majority of the outstanding shares of DCA Common Stock
entitled to vote thereon (which is the only stockholder vote required thereon),
this Agreement and the transactions contemplated hereby and thereby have been
authorized by all necessary corporate action of DCA and the DCA Board on or
prior to the date hereof. This Agreement is a valid and legally binding
obligation of DCA, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles).
5.6. CONSENTS AND APPROVALS; NO DEFAULTS.
(a) No consents or approvals of, or filings or registrations with, any
Governmental Authority or with any third party are required to be made or
obtained by DCA or any of its Subsidiaries in connection with the execution,
delivery or performance by DCA of this Agreement or to consummate the Merger
except for (i) filings of applications, registrations, statements, reports or
notices with Regulatory Agencies, (ii) the approval of this Agreement by the
stockholders of DCA, and (iii) the filing of an agreement of merger with the
Delaware Secretary pursuant to the DGCL. As of the date hereof, DCA is not aware
of any reason why the approvals set forth in SECTION 11.1(d) will not be
received without the imposition of a condition, restriction or requirement of
the type described in SECTION 11.1(d).
(b) Subject to receipt of the approvals referred to in the preceding
paragraph, and the expiration of related waiting periods, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) constitute
a breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of DCA or of any of its Subsidiaries or to
which DCA or any of its Subsidiaries or properties is subject or bound, (ii)
constitute a breach or violation of, or a default under, the DCA Certificate of
Incorporation or the DCA Bylaws, or (iii) require any consent or approval under
any such law, rule, regulation, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument.
5.7. FINANCIAL REPORTS AND REGULATORY DOCUMENTS.
(a) The balance sheet of DCA as of December 31, 1997, and the related
statements of income, cash flow and changes in financial position of DCA for the
year then ended, audited by PricewaterhouseCoopers, the unaudited balance sheet
as of June 30, 1998, and the related unaudited statements of income, cash flows
and changes in financial position of DCA for quarters ended March 31, 1998, and
June 30, 1998, fairly present the financial position of DCA as of such dates and
the results of the operations of DCA for the periods then ended, all in
accordance with GAAP consistently applied.
(b) DCA has timely filed all reports, registrations and statements, together
with any amendments required to be made with respect thereto, that they were
required to file since November 4, 1997, the date of DCA's initial public
offering, with the Regulatory Agencies, and all other material reports and
statements required to be filed by it with any Governmental Authority since
December 31, 1996, including, without limitation, any report or statement
required to be filed pursuant to the laws of the United States or the State of
Delaware, and has paid all fees and assessments due and payable in connection
therewith. As
17
of their respective dates, such reports, registrations and statements complied
in all material respects with all the laws, rules and regulations of the
applicable Governmental Authority with which they were filed. The DCA SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such DCA SEC Reports or necessary in
order to make the statements in such DCA SEC Reports, in light of the
circumstances under which they were made, not misleading. None of DCA
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(c) Since December 31, 1997, DCA and its Subsidiaries have not incurred any
material liability other than in the ordinary course of business consistent with
past practice.
(d) Since December 31, 1997, (i) DCA and its Subsidiaries have conducted
their respective businesses in the ordinary and usual course consistent with
past practice (excluding the incurrence of expenses related to this Agreement
and the transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of this ARTICLE V or
otherwise), is reasonably likely to have a Material Adverse Effect with respect
to DCA.
5.8. LEGAL PROCEEDINGS. No litigation, claim or other proceeding before
any court or Governmental Authority is pending against DCA or any of its
Subsidiaries and, to DCA's knowledge, no such litigation, claim or other
proceeding has been threatened.
5.9. REGULATORY MATTERS.
(a) Neither DCA nor any of its Subsidiaries or any of their properties is a
party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with or a commitment letter or similar
submission to, or extraordinary supervisory letter from any Governmental
Authority.
(b) Neither DCA nor any of its Subsidiaries has been advised by any
Governmental Authority that such Governmental Authority is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, commitment
letter or similar action.
5.10. COMPLIANCE WITH LAWS.
(a) DCA and each of its Subsidiaries:
(i) is in material compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such
businesses;
(ii) has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses as presently
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to DCA's knowledge, no
suspension or cancellation of any of them is threatened; and
(iii) has not received, since December 31, 1997, any notification or
communication from any Governmental Authority (a) asserting that DCA or any
of its Subsidiaries is not in compliance with any of the statutes,
regulations or ordinances which such Governmental Authority enforces or (b)
threatening to revoke any license, franchise, permit or governmental
authorization (nor, to DCA's knowledge, do any grounds for any of the
foregoing exist).
(b) The terms and conditions set forth in the management agreements between
DCA or its Subsidiaries and the dental practices managed by such entities comply
in all material respects with
18
applicable laws, rules, regulations and other applicable authorities relating to
such agreements, including but not limited to laws, rules, regulations and other
applicable authorities relating to the corporate practice of dentistry,
fee-splitting, kickbacks and patient brokering and those relating to such
practices.
5.11. MATERIAL CONTRACTS; DEFAULTS. Neither DCA nor any of its
Subsidiaries is a party to, bound by or subject to any agreement, contract,
arrangement, commitment or understanding (whether written or oral) (i) that is a
"material contract" within the meaning of Item 601(b)(10) of SEC Regulation S-K,
or (ii) that materially restricts the conduct of business by it or any of its
Subsidiaries that has not been filed with or incorporated by reference in
reports filed under either the Securities Act or the Exchange Act. Neither DCA
nor any of its Subsidiaries is in material default under any material contract,
agreement, commitment, arrangement, lease, insurance policy or other material
instrument to which it is a party, by which its respective assets, business, or
operations may be bound or affected, or under which it or its respective assets,
business, or operations receives benefits, and there has not occurred any event
that, with the lapse of time or the giving of notice or both, would constitute
such a default.
5.12. NO BROKERS. Except for commissions, fees and other like payments due
to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc., no action has been taken by DCA that would
give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the transactions
contemplated by this Agreement.
5.13. EMPLOYEE BENEFIT PLANS.
(a) All benefit and compensation plans, contracts, policies or arrangements
covering current employees or former employees of DCA and its Subsidiaries
(collectively, the "DCA EMPLOYEES") and current or former directors of DCA,
including, but not limited to, "employee benefit plans" within the meaning of
Section 3(3) of ERISA, and deferred compensation, stock option, stock purchase,
stock appreciation rights, stock based, incentive and bonus plans (collectively,
the "DCA BENEFIT PLANS"), are Previously Disclosed. True and complete copies of
all DCA Benefit Plans, including, but not limited to, any trust instruments and
insurance contracts forming a part of any DCA Benefit Plans, and all amendments
thereto have been provided or made available to the other parties hereto.
(b) All employee benefit plans, other than "multiemployer plans" within the
meaning of Section 3(37) of ERISA, covering DCA Employees (the "DCA PLANS"),
have been administered in all material respects in compliance with their terms
and with all applicable laws, [to the extent subject to ERISA], including
without limitation, ERISA and the Code. DCA is not a party to any "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA ("DCA PENSION
PLAN") and which is a defined benefit plan as defined in Section 3(35) of ERISA.
With respect to the employee benefit plan intended to qualify under Section 401
of the Code, a request for a determination letter from the Internal Revenue
Service will be timely applied for to the effect that such plan is, and each
such plan in fact is, or may be timely amended to be, qualified and exempt from
federal income taxes. There is no pending or, to the knowledge of DCA,
threatened litigation relating to any DCA Plan. There are no audits, inquiries,
reviews, proceedings, claims or demands pending with any governmental or
regulatory agency, and there are no facts which could give rise to any material
liability in the event of any such investigation, claim, action, suit, audit,
review or proceeding. Neither DCA nor any of its Subsidiaries has engaged in a
transaction with respect to any DCA Plan that, assuming the taxable period of
such transaction expired as of the date hereof, could subject DCA or any of its
Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA.
(c) No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by DCA or any of its Subsidiaries with respect to any
ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any entity which is considered one employer with
DCA under Section 4001 of ERISA or Section 414 of the Code (a "DCA ERISA
AFFILIATE"). Neither DCA, any of its Subsidiaries nor an ERISA Affiliate has
contributed to a "multiemployer plan", within the meaning of Section 3(37) of
19
ERISA. No notice of a "reportable event", within the meaning of Section 4043 of
ERISA for which the 30-day reporting requirement has not been waived, has been
required to be filed for any DCA Pension Plan or by any DCA ERISA Affiliate
within the 12-month period ending on the date hereof or will be required to be
filed in connection with the transactions contemplated by this Agreement.
(d) All contributions required to be made under the terms of any DCA Plan
have been timely made or have been reflected on the consolidated financial
statements of DCA included in the Regulatory Documents. Neither any DCA Pension
Plan nor any single-employer plan of an ERISA Affiliate has an "accumulated
funding deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA and no ERISA Affiliate has an outstanding
funding waiver. Neither DCA nor any of its Subsidiaries has provided, or is
required to provide, security to any DCA Pension Plan or to any single-employer
plan of a DCA ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(e) Under each DCA Pension Plan which is a single-employer plan, as of the
last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the DCA Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such DCA
Plan, and there has been no material change in the financial condition of such
DCA Plan since the last day of the most recent plan year.
(f) Neither DCA nor any of its Subsidiaries has any obligations for retiree
health and life benefits under any DCA Benefit Plan. DCA or its Subsidiaries may
amend or terminate any such DCA Benefit Plan at any time without incurring any
liability thereunder.
(g) The consummation of the transactions contemplated by this Agreement will
not (x) entitle any employees of DCA or any of its Subsidiaries to severance
pay, (y) accelerate the time of payment or vesting or trigger any payment of
compensation or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the DCA Benefit Plans or (z) result in
any breach or violation of, or a default under, any of the DCA Benefit Plans.
Without limiting the foregoing, as a result of the consummation of the
transactions contemplated by this Agreement, neither DCA nor any of its
Subsidiaries will be obligated to make a payment to an individual that would be
a "parachute payment" to a "disqualified individual" as those terms are defined
in Section 280G of the Code, without regard to whether such payment is
reasonable compensation for personal services performed or to be performed in
the future.
5.14. LABOR MATTERS. Neither DCA nor any of its Subsidiaries is a party to
or is bound by any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization, nor is DCA or any of
its Subsidiaries the subject of a proceeding asserting that it or any such
Subsidiary has committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel DCA or any such Subsidiary to
bargain with any labor organization as to wages or conditions of employment, nor
is there any strike or other labor dispute involving it or any of its
Subsidiaries pending or, to DCA's knowledge, threatened, nor is DCA aware of any
activity involving its or any of its Subsidiaries' employees seeking to certify
a collective bargaining unit or engaging in other organizational activity.
5.15. YEAR 2000 COMPLIANCE. Except as Previously Disclosed, (i) the
computer software and related hardware of DCA and its Subsidiaries (the "DCA
COMPUTER SYSTEM") used for the storage and processing of data are or will be
prior to the year 2000 Year 2000 Compliant; (ii) to the actual knowledge of DCA,
all of the suppliers, customers and third party providers of DCA are, or will be
prior to year 2000, Year 2000 Compliant; and (iii) DCA is taking or has taken,
all commercially reasonable and appropriate action to address and remedy any
deficiencies in the DCA Computer System which would keep it from becoming Year
2000 Compliant.
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5.16. ENVIRONMENTAL MATTERS.
(a) DCA and each of its Subsidiaries has complied at all times with
applicable Environmental Laws; (i) no real property (including buildings or
other structures) currently or formerly owned, leased or operated by DCA or any
of its Subsidiaries, has been contaminated with, or has had any release of, any
Hazardous Substance; (ii) neither DCA nor any of its Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (iii) neither DCA nor any of its Subsidiaries has received any
notice, demand letter, claim or request for information alleging any violation
of, or liability under, any Environmental Law; (iv) neither DCA nor any of its
Subsidiaries is subject to any order, decree, injunction or other agreement with
any Governmental Authority or any third party relating to any Environmental Law;
(v) to the best of DCA's knowledge, there are no circumstances or conditions
(including the presence of asbestos, underground storage tanks, lead products,
polychlorinated biphenyls, prior manufacturing operations, dry-cleaning, or
automotive services) involving DCA or any of its Subsidiaries, any currently or
formerly owned or operated property, that could reasonably be expected to result
in any claims, liability or investigations against DCA or any of its
Subsidiaries or result in any restrictions on the ownership, use, or transfer of
any property pursuant to any Environmental Law; and (vi) DCA has delivered to
GDSC copies of all environmental reports, studies, sampling data,
correspondence, filings and other environmental information in its possession or
reasonably available to it relating to DCA and any Subsidiary of DCA, any
currently or formerly owned, leased or operated property.
5.17. TAX MATTERS.
(a)(i)All Tax Returns that are required to be filed (taking into account any
extensions of time within which to file) by or with respect to DCA and its
Subsidiaries have been duly filed, (ii) all Taxes due have been paid in full,
(iii) all deficiencies asserted or assessments made as a result of such
examinations have been paid in full, (iv) no issues that have been raised by the
relevant taxing authority in connection with the examination of any of the Tax
Returns referred to in clause (i) are currently pending, and (v) no waivers of
statutes of limitation have been given by or requested with respect to any Taxes
of DCA or its Subsidiaries. DCA has made available to GDSC true and correct
copies of the United States federal income Tax Returns filed by DCA and its
Subsidiaries for each of the three most recent fiscal years ended on or before
December 31, 1997. Neither DCA nor any of its Subsidiaries has any liability
with respect to income, franchise or similar Taxes that accrued on or before the
end of the most recent period covered by DCA's Regulatory Documents filed prior
to the date hereof in excess of the amounts accrued with respect thereto that
are reflected in the financial statements included in DCA's Regulatory Documents
filed on or prior to the date hereof. Neither DCA nor any of its Subsidiaries is
a party to any Tax allocation or sharing agreement, is or has been a member of
an affiliated group filing consolidated or combined Tax returns (other than a
group the common parent of which is or was DCA) or otherwise has any liability
for the Taxes of any person (other than DCA and its Subsidiaries). As of the
date hereof, neither DCA nor any of its Subsidiaries has any reason to believe
that any conditions exist that might prevent or impede the Merger from
qualifying as reorganizations within the meaning of Section 368 of the Code or
Section 351 of the Code.
(b) No Tax is required to be withheld pursuant to Section 1445 of the Code
as a result of the transfer contemplated by this Agreement.
5.18. BOOKS AND RECORDS. The books and records of DCA and its Subsidiaries
have been fully, properly and accurately maintained in all material respects,
and there are no material inaccuracies or discrepancies of any kind contained or
reflected therein, and they fairly present the financial position of DCA and its
Subsidiaries.
5.19. INSURANCE. DCA has Previously Disclosed all of the insurance
policies, binders, or bonds maintained by DCA or its Subsidiaries ("INSURANCE
POLICIES"). DCA and its Subsidiaries are insured with reputable insurers against
such risks and in such amounts as the management of DCA reasonably has
determined to be prudent for its business, operations, properties and assets.
All the Insurance Policies are
21
in full force and effect; DCA and its Subsidiaries are not in material default
thereunder; and all claims thereunder have been filed in due and timely fashion.
5.20. ACCOUNTING TREATMENT. As of the date hereof, DCA is not aware of any
reason why the Merger will fail to qualify for "pooling-of-interests" accounting
treatment.
5.21. ASSETS. DCA and its Subsidiaries have good and marketable title,
free and clear of all Liens, to all of their respective Assets. All tangible
properties used in the businesses of DCA or its Subsidiaries are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with DCA's and its Subsidiaries' past practices.
All Assets which are material to DCA's business on a consolidated basis and held
under leases or subleases by DCA or any of its Subsidiaries are held under valid
contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
contract is in full force and effect. The Assets of DCA and its Subsidiaries
include all assets required to operate the business of DCA and its Subsidiaries
as presently conducted.
5.22. STATEMENTS TRUE AND CORRECT. None of the information supplied or to
be supplied by DCA or any of its Subsidiaries for inclusion in the Registration
Statement to be filed by ParentCo with the SEC will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
DCA or any of its Subsidiaries for inclusion in the Proxy Statement to be mailed
to DCA's or GDSC's stockholders in connection with the DCA Meeting or the GDSC
Meeting and any other Governmental Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to GDSC's or DCA's
stockholders, be false or misleading with respect to any material fact, or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement or any amendment thereof or supplement thereto, at the time
of the DCA Meeting or the GDSC Meeting, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the DCA Meeting or the GDSC Meeting. All documents that DCA or any
Subsidiary thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable law.
5.23. ACCOUNTING, TAX AND REGULATORY. Neither DCA nor any of its
Subsidiaries has taken any action or has any knowledge of any fact or
circumstance that is reasonably likely to (a) prevent the transactions
contemplated (i) hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as reorganizations within the
meaning of Section 368(a) of the Code (in which ParentCo, GDSC Merger Sub, DCA
Merger Sub, GDSC and DCA is each a party to the reorganization within the
meaning of Section 368(b) of the Code) or (ii) a transfer to a controlled
corporation qualifying under Section 351 of the Code, or (b) materially impede
or delay receipt of any consents of Governmental Authority referred to in
SECTION 5.6(a) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such Section.
5.24. NO UNDISCLOSED LIABILITIES. Except as set forth in the financial
statements filed in connection with the DCA SEC Reports or Previously Disclosed,
DCA does not have any material liability or obligation accrued, contingent or
otherwise.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENTCO,
GDSC MERGER SUB AND DCA MERGER SUB
ParentCo, GDSC Merger Sub and DCA Merger Sub hereby represent and warrant to
GDSC and DCA as follows:
6.1. ORGANIZATION, STANDING AND AUTHORITY OF PARENTCO. ParentCo is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. ParentCo is duly qualified to do business and is in
good standing in the states of the United States and any foreign jurisdictions
where its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified.
6.2. PARENTCO CAPITAL STOCK. As of the date hereof, the authorized capital
stock of ParentCo consists solely of 50,000,000 shares of ParentCo Common Stock
and 30,000,000 of ParentCo Preferred Stock, of which none are issued and
outstanding, respectively. As of the date hereof, no shares of ParentCo common
stock were held in treasury by ParentCo or otherwise beneficially owned by
ParentCo.
6.3. PARENTCO CORPORATE POWER. ParentCo has the corporate power and
authority to carry on its business as is now being conducted and to own all its
properties and assets; and ParentCo has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby.
6.4. PARENTCO CORPORATE AUTHORITY. This Agreement and the transactions
contemplated hereby and thereby have been authorized by all necessary corporate
action of ParentCo and the ParentCo Board on or prior to the date hereof. This
Agreement is a valid and legally binding obligation of ParentCo, enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles).
6.5. ORGANIZATION, STANDING AND AUTHORITY OF GDSC MERGER SUB. GDSC Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. GDSC Merger Sub is duly qualified to do
business and is in good standing in the states of the United States and any
foreign jurisdictions where its ownership or leasing of property or assets or
the conduct of its business requires it to be so qualified.
6.6. GDSC MERGER SUB CAPITAL STOCK. As of the date hereof, the authorized
capital stock of GSDC Sub consists solely of 100 shares of GDSC Merger Sub
Common Stock, 100 of which are issued and outstanding. As of the date hereof, no
shares of GSDC Sub Common Stock were held in treasury by GDSC Merger Sub or
otherwise beneficially owned by GDSC Merger Sub.
6.7. GDSC MERGER SUB CORPORATE POWER. GDSC Merger Sub has the corporate
power and authority to carry on its business as is now being conducted and to
own all its properties and assets; and GDSC Merger Sub has the corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby.
6.8. GDSC MERGER SUB CORPORATE AUTHORITY. This Agreement and the
transactions contemplated hereby and thereby have been authorized by all
necessary corporate action of GDSC Merger Sub and the GDSC Merger Sub Board of
Directors on or prior to the date hereof. This Agreement is a valid and legally
binding obligation of ParentCo, enforceable in accordance with its terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles).
6.9. ORGANIZATION, STANDING AND AUTHORITY OF DCA MERGER SUB. DCA Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. DCA Merger Sub is duly qualified to do
business and is in good standing in the states of the United States and any
23
foreign jurisdictions where its ownership or leasing of property or assets or
the conduct of its business requires it to be so qualified.
6.10. DCA MERGER SUB COMMON STOCK. As of the date hereof, the authorized
capital stock of DCA Merger Sub consists solely of 100 shares of DCA Merger Sub
Common Stock, 100 of which are issued and outstanding. As of the date hereof, no
shares of DCA Merger Sub Common Stock were held in treasury by DCA Merger Sub or
otherwise beneficially owned by DCA Merger Sub.
6.11. DCA MERGER SUB CORPORATE POWER. DCA Merger Sub has the corporate
power and authority to carry on its business as is now being conducted and to
own all its properties and assets; and DCA Merger Sub has the corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby.
6.12. DCA MERGER SUB CORPORATE AUTHORITY. This Agreement and the
transactions contemplated hereby and thereby have been authorized by all
necessary corporate action of DCA Merger Sub and the DCA Merger Sub Board of
Directors on or prior to the date hereof. This Agreement is a valid and legally
binding obligation of ParentCo, enforceable in accordance with its terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles).
6.13. CONTINUITY OF BUSINESS ENTERPRISE. ParentCo will cause each of GDSC
and DCA to continue at least one significant historic business line, or to use
at least a significant portion of its historic business assets in a business, in
each case within the meaning of Treasury regulation section 1.368-1(d).
ARTICLE VII
CONDUCT OF BUSINESS
7.1. FORBEARANCES OF GDSC AND DCA. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of GDSC or DCA, as the case may be, each of GDSC and DCA
will not, and will cause each of its Subsidiaries not to:
(a) ORDINARY COURSE. Conduct its business and the business of its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable best efforts to preserve intact their business organizations and
assets and maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates, take any action
that would adversely affect or delay the ability of it or any of its
Subsidiaries to perform any of their obligations on a timely basis under
this Agreement, or take any action that is reasonably likely to have a
Material Adverse Effect on it or its Subsidiaries, taken as a whole.
(b) CAPITAL STOCK. Except for Previously Disclosed contractual
obligations, issue, sell or otherwise permit to become outstanding, or
authorize the creation of, any additional shares of GDSC Common Stock or
GDSC Preferred Stock or DCA Common Stock or any Rights or enter into any
agreement with respect to the foregoing.
(c) DIVIDENDS, ETC. Make, declare, pay or set aside for payment any
dividend on or in respect of, or declare or make any distribution on any
shares of GDSC Common Stock or GDSC Preferred Stock or DCA Common Stock,
directly or indirectly, adjust, split, combine, redeem, reclassify, purchase
or otherwise acquire, any shares of its capital stock.
(d) COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of it or its
Subsidiaries, or grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments), except (i) for normal
individual increases in compensation to employees in the ordinary course of
business consistent with past practice, (ii) for other changes that are
required by applicable law, (iii) to satisfy Previously Disclosed
contractual obligations
24
existing as of the date hereof or (iv) for grants of awards to newly hired
employees consistent with past practice.
(e) BENEFIT PLANS. Enter into, establish, adopt or amend (except (i)
as may be required by applicable law or (ii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof) any pension,
retirement, stock purchase, savings, profit sharing, deferred compensation,
consulting, bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement (or similar
arrangement) related thereto, in respect of any director, officer or
employee of it or its Subsidiaries, or take any action to accelerate the
vesting or exercisability of any compensation or benefits payable
thereunder.
(f) DISPOSITIONS. Except as Previously Disclosed, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any of its assets,
deposits, business or properties, except in the ordinary course of business
and in a transaction that is not material to it and its Subsidiaries taken
as a whole.
(g) ACQUISITIONS. Except as Previously Disclosed, acquire (other than
by way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good faith, in
each case in the ordinary and usual course of business consistent with past
practice) all or any portion of, the assets, business, deposits or
properties of any other entity.
(h) CAPITAL EXPENDITURES. Except as Previously Disclosed, make any
capital expenditures other than capital expenditures in the ordinary course
of business consistent with past practice in amounts not exceeding $50,000
individually or $100,000 in the aggregate.
(i) GOVERNING DOCUMENTS. Amend its articles or certificate of
incorporation, its by-laws or the articles of incorporation or by-laws (or
similar governing documents) of any of its Subsidiaries.
(j) ACCOUNTING METHODS. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required
by generally accepted accounting principles.
(k) CONTRACTS. Except in the ordinary course of business consistent
with past practice, enter into or terminate any material contract (as
defined in SECTION 4.11) or amend or modify in any material respect any of
its existing material contracts.
(l) CLAIMS. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any claim,
action or proceeding involving solely money damages in an amount,
individually or in the aggregate for all such settlements, that is not
material to it and its Subsidiaries, taken as a whole.
(m) ADVERSE ACTIONS. (i) Take any action while knowing that such
action would, or is reasonably likely to, prevent or impede the Merger from
qualifying (A) for "pooling-of-interests" accounting treatment or (B) either
as (I) reorganizations within the meaning of Section 368 of the Code (in
which ParentCo, GDSC Merger Sub, DCA Merger Sub, GDSC and DCA is each a
party to the reorganization within the meaning of Section 368(b) of the
Code) or (II) as a transfer to a controlled corporation qualifying under
Section 351 of the Code; or (ii) knowingly take any action that is intended
or is reasonably likely to result in (A) any of its representations and
warranties set forth in this Agreement being or becoming untrue in any
material respect at any time at or prior to the Effective Time, (B) any of
the conditions to the Merger set forth in ARTICLE VII not being satisfied
including, but not limited to, any action which would reasonably be expected
to adversely affect or delay the ability of ParentCo, GDSC Merger Sub, DCA
Merger Sub, GDSC or DCA to obtain any necessary approvals, consents or
waivers of any Regulatory Agencies required for the transactions
contemplated by this Agreement or (C) a material violation of any provision
of this Agreement, except, in each case, as may be required by applicable
law or regulation.
(n) INDEBTEDNESS. Except as Previously Disclosed, incur any
indebtedness for borrowed money other than in the ordinary course of
business consistent with past practice.
25
(o) COMMITMENTS. Agree or commit to do any of the foregoing.
ARTICLE VIII
ADDITIONAL COVENANTS
8.1. REASONABLE BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each of ParentCo, GDSC Merger Sub, DCA Merger Sub, GDSC and DCA
agrees to cooperate with the other parties hereto and to use its reasonable best
efforts in good faith to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end.
8.2. STOCKHOLDER APPROVAL. Each of GDSC and DCA agrees to take, in
accordance with applicable law and its respective articles or certificate of
incorporation and its bylaws, all action necessary to convene an appropriate
meeting of its stockholders to consider and vote upon the approval and adoption
of this Agreement and any other matters required to be approved by GDSC's and
DCA's stockholders for consummation of the Merger (including any adjournment or
postponement, the "GDSC MEETING" and the "DCA MEETING", respectively), in each
case as promptly as practicable after the Registration Statement is declared
effective. Except to the extent legally required for the discharge by the GDSC
Board and the DCA Board of its fiduciary duties as advised by counsel to the
GDSC Board and the DCA Board, the GDSC Board and the DCA Board shall recommend
such approval, and GDSC and DCA, respectively, shall take all reasonable, lawful
action to solicit such approval by its stockholders.
8.3. REGISTRATION STATEMENT.
(a) ParentCo agrees to prepare a registration statement on Form S-4 or other
applicable form (the "REGISTRATION STATEMENT") to be filed by ParentCo with the
SEC in connection with the issuance of ParentCo Common Stock in the Merger,
including the prospectus and other proxy solicitation materials of GDSC and DCA
constituting a part thereof (the "PROXY STATEMENT") and all related documents.
Each of GDSC and DCA shall have the right to review such Registration Statement
and agrees to cooperate, and to cause its Subsidiaries to cooperate in
preparation of the Registration Statement and the Proxy Statement. Each of GDSC
and DCA agrees to file the Proxy Statement in preliminary form with such of the
Regulatory Authorities as may be required as soon as reasonably practicable, and
ParentCo agrees to file the Registration Statement with the SEC as soon as
reasonably practicable. Each of ParentCo, GDSC and DCA agrees to use all
reasonable efforts to cause the Registration Statement and any required
amendments or supplements thereto to be declared effective under the Securities
Act and distributed to GDSC's and DCA's stockholders as promptly as reasonably
practicable after filing thereof. Each of GDSC and DCA agrees to furnish to
ParentCo all information concerning GDSC, DCA and their respective Subsidiaries,
officers, directors and stockholders as may be reasonably requested in
connection with the foregoing.
(b) Each of GDSC and DCA agrees, as to itself and its Subsidiaries, that the
information supplied or to be supplied by then for inclusion or incorporation by
reference in (i) the Registration Statement will, at the time the Registration
Statement and each amendment or supplement thereto, if any, becomes effective
under the Securities Act, not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; and (ii) the Proxy Statement and any
amendment or supplement thereto will, at the date of mailing to stockholders and
at the time of the GDSC Meeting or the DCA Meeting, not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, in
the light of the circumstances under which such statement is made, necessary to
correct any statement in any earlier statement in the Proxy Statement or any
amendment or supplement thereto. Each of GDSC and DCA further agrees, that if it
shall become aware prior to the Effective Date
26
of any information furnished by it that would cause any of the statements in the
Registration Statement or the Proxy Statement to be false or misleading with
respect to any material fact, or to omit to state any material fact necessary to
make the statements therein not false or misleading, in light of the
circumstances under which such statement is made, promptly to inform the other
party thereof and to take the necessary steps to correct the Registration
Statement or the Proxy Statement.
(c) ParentCo agrees to advise both GDSC and DCA, promptly after ParentCo
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order or the suspension of the qualification of ParentCo Common Stock for
offering or sale in any jurisdiction, of the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information.
8.4. PRESS RELEASES. Each of ParentCo, GDSC and DCA agrees that it will
not, without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or Nasdaq rules (provided that the issuing party shall nevertheless
provide the other party with notice of, and the opportunity to review, any such
press release or written statement).
8.5. ACCESS; INFORMATION.
(a) Each of ParentCo, GDSC and DCA agrees that upon reasonable notice and
subject to applicable laws relating to the exchange of information, each party
shall afford the other party and the other party's officers, employees, counsel,
accountants and other authorized representatives, such access during normal
business hours throughout the period prior to the Effective Time to the books,
records (including, without limitation, tax returns and work papers of
independent auditors), properties, personnel and to such other information as
the requesting party may reasonably request and, during such period, the
providing party shall furnish promptly to the requesting party (i) a copy of
each material report, schedule and other document filed by it pursuant to the
requirements of federal or state securities laws, and (ii) all other information
concerning the business, properties and personnel of it as the requesting party
may reasonably request.
(b) Each party agrees that it will not, and will cause its representatives
not to, use any information obtained pursuant to this SECTION 8.5 (as well as
any other information obtained prior to the date hereof in connection with the
entering into of this Agreement) for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of law, each party will keep confidential, and will cause its representatives to
keep confidential, all information and documents obtained pursuant to this
SECTION 8.5 (as well as any other information obtained prior to the date hereof
in connection with the entering into of this Agreement) unless such information
(i) was already known to such party, (ii) becomes available to such party from
other sources not known by such party to be bound by a confidentiality
obligation, (iii) is disclosed with the prior written approval of the providing
party, or (iv) is or becomes readily ascertainable from published information or
trade sources. In the event that this Agreement is terminated or the
transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents or extracts
thereof containing information and data as to the other party to be returned to
the other party. No investigation by either party of the business and affairs of
the other party shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Agreement, or the conditions to either
party's obligation to consummate the transactions contemplated by this
Agreement.
8.6. ACQUISITION PROPOSALS. Each of GDSC and DCA agrees that it shall not,
and shall cause its Subsidiaries and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any person
relating to, any Acquisition Proposal, except to the extent legally required for
the discharge by either the GDSC Board or the DCA Board, as the
27
case may be, of its fiduciary duties as advised by counsel to either the GDSC
Board or the DCA Board. Each of GDSC and DCA shall immediately cease and cause
to be terminated any activities, discussions or negotiations conducted prior to
the date of this Agreement with any parties other than ParentCo with respect to
any of the foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to an Acquisition Proposal. Each
of GDSC and DCA shall promptly (within 24 hours) advise one another following
the receipt by either GDSC or DCA of any Acquisition Proposal and the substance
thereof (including the identity of the person making such Acquisition Proposal),
and advise one another of any developments with respect to such Acquisition
Proposal immediately upon the occurrence thereof.
8.7. AFFILIATE AGREEMENTS.
(a) Not later than the 30th day following the date of this Agreement, each
of GDSC and DCA shall deliver to ParentCo a schedule of each person that, to the
best of its knowledge, is or is reasonably likely to be, as of the date of the
GDSC Meeting or the DCA Meeting, deemed to be an "affiliate" of GDSC or DCA
(each, a "GDSC AFFILIATE" or "DCA AFFILIATE") as that term is used in Rule 145
under the Securities Act or SEC Accounting Series Releases 130 and 135.
(b) Each of GDSC and DCA shall use its reasonable best efforts to cause each
person who may be deemed to be either a GDSC Affiliate or a DCA Affiliate to
execute and deliver to ParentCo on or before the date of mailing of the Proxy
Statement an Affiliate Representation Letter in the form attached hereto as
EXHIBIT B.
8.8. NASDAQ LISTING. ParentCo agrees to use its reasonable best efforts to
list, prior to the Effective Date, on the Nasdaq, subject to official notice of
issuance, the shares of ParentCo Common Stock to be issued to the holders of
GDSC Common Stock and DCA Common Stock in the Merger.
8.9. REGULATORY APPLICATIONS.
(a) Each of GDSC and DCA and their respective Subsidiaries shall cooperate
and use their respective reasonable best efforts to prepare all documentation,
to effect all filings and to obtain all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities necessary to
consummate the transactions contemplated by this Agreement. Each of GDSC and DCA
shall use their reasonable best efforts to make all appropriate filings with the
Regulatory Authorities. Each of GDSC and DCA shall have the right to review in
advance, and to the extent practicable each will consult with the other, in each
case subject to applicable laws relating to the exchange of information, with
respect to all material written information submitted to any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as practicable. Each party hereto agrees that
it will consult with the other party hereto with respect to the obtaining of all
material permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party appraised of the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
8.10. BENEFIT PLAN. ParentCo shall, from and after the Effective Time, (i)
provide former employees of both GDSC and DCA who remain as employees of
ParentCo or any of its Subsidiaries with employee benefit plans no less
favorable in the aggregate than those provided to similarly situated employees
of ParentCo or its Subsidiaries, including, but not limited to, allowing such
employees to participate in ParentCo's stock option plan in accordance with the
policies of ParentCo with respect to such stock option plan, and (ii) with
respect to former employees of GDSC or DCA who remain as employees of ParentCo
28
or any of its Subsidiaries, cause each employee benefit plan of ParentCo or its
Subsidiaries in which such employees are eligible to participate to take into
account for purposes of eligibility and vesting thereunder the service of such
employees with GDSC or DCA (as applicable) as if such service were with ParentCo
or its Subsidiaries, to the same extent such service was credited under a
comparable plan of GDSC or DCA (as applicable). ParentCo agrees that all accrued
bonuses for 1998 will be paid to former employees of GDSC or DCA (as applicable)
in accordance with GDSC's or DCA's past practices. Notwithstanding the
foregoing, both GDSC and DCA consent and covenant that from and after the
Effective Date, GDSC's and DCA's Benefit Plans (as applicable) will be governed,
managed and/or terminated by ParentCo, all within ParentCo's sole discretion.
8.11. ACCOUNTANTS' LETTERS. Each of GDSC and DCA shall use its reasonable
best efforts to cause to be delivered to the other party, and to ParentCo's
directors and officers who sign the Registration Statement, a letter of their
respective independent auditors, dated (i) the date on which the Registration
Statement shall become effective and (ii) a date shortly prior to the Effective
Date, and addressed to such other party, and such directors and officers, in
form and substance customary for "comfort" letters delivered by independent
accountants in accordance with Statement of Accounting Standards No. 72.
8.12. NOTIFICATION OF CERTAIN MATTERS. Each of GDSC and DCA shall give
prompt notice to the other of any fact, event or circumstance known to it that
(i) is reasonably likely, individually or taken together with all other facts,
events and circumstances known to it, to result in any Material Adverse Effect
with respect to it or (ii) would cause or constitute a material breach of any of
its representations, warranties, covenants or agreements contained herein.
8.13. STOCKHOLDER AGREEMENTS. At least fifty percent (50%) of certain
directors and certain officers who are stockholders of GDSC and DCA,
respectively, in their capacities as stockholders, have executed and delivered
to ParentCo the Stockholder Agreements, committing such persons, among other
things, (i) to vote their shares of GDSC Common Stock and DCA Common Stock in
favor of the Agreement at the GDSC Meeting or the DCA Meeting and (ii) to
certain representations concerning the ownership of GDSC Common Stock, GDSC
Preferred Stock or DCA Common Stock.
8.14. PARENTCO CAPITALIZATION; RESERVATION OF SHARES. The certificate of
incorporation of ParentCo shall be amended and restated prior to the Effective
Time in order to state the rights, preferences and privileges of ParentCo
Preferred Stock which will be substantially similar to the rights, preferences
and privileges of the GDSC Preferred Stock. ParentCo shall at all times from and
after the date of this Agreement maintain a sufficient number of duly
authorized, unissued and reserved shares of ParentCo Common Stock necessary to
permit ParentCo to satisfy its obligations under this Agreement.
8.15. STOCK PLANS.
(a) As soon as practicable after the Effective Time, ParentCo shall deliver
to the participants in the GDSC Stock Plan and the DCA Stock Plan an appropriate
notice setting forth such participant's rights pursuant thereto and the grants
pursuant to the GDSC Stock Plan and the DCA Stock Plan shall continue in effect
on the same terms and conditions (subject to the adjustments required by SECTION
2.6 after giving effect to the Merger), and ParentCo shall comply with the terms
of the GDSC Stock Plan and the DCA Stock Plan to ensure, to the extent required
by, and subject to the provisions of, the GDSC Stock Plan and the DCA Stock
Plan, that GDSC Stock Options and DCA Stock Options which qualified as incentive
stock options prior to the Effective Time continue to qualify as incentive stock
options after the Effective Date.
(b) ParentCo shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of ParentCo Common Stock for delivery
under each GDSC Stock Plan and the DCA Stock Plan assumed in accordance with
SECTION 2.6. As soon as practicable after the Effective Time, ParentCo shall
file a registration statement on Form S-3 or Form S-8, as the case may be (or
any successor or other appropriate forms), or another appropriate form with
respect to the shares of GDSC Common Stock or DCA Common Stock subject to such
options (if any) and shall use its best efforts to maintain the
29
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, where applicable, ParentCo
shall administer the GDSC Stock Plan and the DCA Stock Plan assumed pursuant to
SECTION 2.6 in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act to the extent the GDSC Stock Plan and the DCA Stock Plan complied
with such rule prior to the Merger.
8.16. OFFICE LOCATIONS. Upon consummation of the Merger, the main
corporate office of ParentCo shall be the current corporate offices of GDSC
located in El Segundo, California. The east coast regional office shall be the
current corporate offices of DCA located in Sarasota, Florida. The west coast
regional office shall be located in Vancouver, Washington.
8.17. TRANSFER OF GDSC SUBORDINATED NOTES. The parties agree that GDSC
shall transfer the 7% Convertible Subordinated Notes issued by GDSC (and the
related covenants contained in the Securities Purchase Agreement) and such notes
and related covenants shall be assumed by ParentCo as of the Effective Time.
ARTICLE IX
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each of GDSC and DCA to consummate the Merger is
subject to the fulfillment or written waiver by GDSC and DCA prior to the
Effective Time of each of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
been duly adopted by the requisite vote of the stockholders of GDSC and DCA.
(b) REGULATORY APPROVALS. All regulatory approvals or waivers required
to consummate the transactions contemplated hereby shall have been obtained
and shall remain in full force and effect and all statutory waiting periods
in respect thereof shall have expired and no such approvals or waivers shall
contain any conditions, restrictions or requirements which either the GDSC
Board or DCA Board, respectively, reasonably determines would (i) following
the Effective Time, have a Material Adverse Effect on the Surviving
Corporations and its Subsidiaries taken as a whole or (ii) reduce the
benefits of the transactions contemplated hereby to such a degree that
either GDSC or DCA, respectively, would not have entered into this Agreement
had such conditions, restrictions or requirements been known at the date
hereof.
(c) NO INJUNCTION. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Agreement.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) BLUE SKY APPROVALS. All permits and other authorizations under
state securities laws necessary to consummate the transactions contemplated
hereby and to issue the shares of ParentCo Common Stock to be issued in the
Merger shall have been received and be in full force and effect.
(f) LISTING. The shares of ParentCo Common Stock to be issued in the
Merger shall have been approved for listing on the Nasdaq, subject to
official notice of issuance.
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(g) EMPLOYMENT AND OTHER AGREEMENTS. As of the Effective Time, the
employment agreements of those certain officers of GDSC and DCA as set forth
on SCHEDULE 9.1(g) shall have been terminated and new employment agreements
shall be entered into between ParentCo and such officers in a form mutually
agreed to by GDSC and DCA; provided, however, the employment agreement for
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and certain other agreements shall contain provisions
substantially similar to the applicable provisions of the Memorandum of
Terms dated October 15, 1998, attached hereto and incorporated herein by
this reference as EXHIBIT C.
(h) POOLING-OF-INTERESTS. GDSC and DCA shall each have received a
letter from their respective independent accountants (KPMG Peat Marwick LLP
and PricewaterhouseCoopers LLP, respectively) addressed to GDSC and DCA, as
the case may be, to the effect that the Merger will qualify for
"pooling-of-interest" accounting treatments.
(i) THIRD PARTY CONSENTS. GDSC shall have received all requisite
consents to the transactions contemplated by the Merger and/or waivers to
certain redemption or conversion rights, or conversion price or redemption
price adjustments or change in control rights or acceleration rights,
reasonably satisfactory to GDSC and DCA, of (i) The Chase Manhattan Bank, as
syndication agent pursuant to the GDSC Credit Facility and (ii) the
Purchasers (as that term is defined in the Securities Purchase Agreement)
pursuant to the Securities Purchase Agreement and the Convertible
Subordinated Note. With respect to DCA's credit facility with NationsBank,
either (I) NationsBank shall consent to the transactions contemplated by the
Merger or (II) ParentCo or any of its Subsidiaries shall pay down the
outstanding balance of such credit facility as of the Effective Time.
9.2. CONDITIONS TO OBLIGATION OF GDSC. The obligation of GDSC to
consummate the Merger is also subject to the fulfillment or written waiver by
GDSC prior to the Effective Time of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of ParentCo, GDSC Merger Sub, DCA Merger Sub and DCA set forth in this
Agreement shall be true and correct as of the date of this Agreement and as
of the Effective Date as though made on and as of the Effective Date (except
that representations and warranties that by their terms speak only as of the
date of this Agreement or some other date shall be true and correct as of
such date), and GDSC shall have received a certificate, dated the Effective
Date, signed on behalf of each such party's Chief Executive Officer and the
Chief Financial Officer to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENTCO, GDSC MERGER SUB, DCA MERGER
SUB AND DCA. ParentCo, GDSC Merger Sub, DCA Merger Sub and DCA shall have
performed in all material respects all obligations required to be performed
by each of them under this Agreement at or prior to the Effective Time, and
GDSC shall have received a certificate, dated the Effective Date, signed on
behalf of each such party's Chief Executive Officer and the Chief Financial
Officer to such effect.
(c) TAX OPINION. GDSC shall have received an opinion of ▇▇▇▇▇▇▇▇▇,
Will & ▇▇▇▇▇, dated the Effective Date, in a form mutually acceptable to the
parties and their counsel, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, (i) the Merger
constitutes (A) a "reorganization" within the meaning of Section 368 of the
Code and ParentCo, GDSC Merger Sub and GDSC will each be a party to the
reorganization within the meaning of Section 368(b) of the Code or (B) a
transfer to a controlled corporation qualifying under Section 351 of the
Code and (ii) no gain or loss will be recognized by stockholders of GDSC who
receive shares of ParentCo Common Stock in exchange for shares of GDSC
Common Stock, except with respect to cash received in lieu of fractional
share interests. In rendering its opinion, ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇ may
require and rely upon representations contained in letters from GDSC, DCA
and ParentCo, and stockholders of GDSC and DCA in a form mutually acceptable
to the parties and their counsel.
31
(d) LEGAL OPINION. Counsel to DCA shall have delivered to GDSC their
opinion, dated as of the Effective Date, in a form mutually acceptable to
the parties and their counsel.
(e) ACCOUNTANTS' LETTERS. GDSC shall have received the letters
referred to in SECTION 8.11 from ParentCo's independent auditors.
(f) DIRECTORS. ParentCo, GDSC Merger Sub and DCA Merger Sub shall have
adopted all resolutions necessary and sufficient to effectuate the
appointment of directors set forth in SECTION 1.1(c) attached hereto
effective as of the Effective Time.
(g) POOLING LETTERS. GDSC shall have received (i) letters, dated as of
the date of the filing of the Registration Statement with the SEC and as of
the Effective Time, in form and substance reasonably acceptable to GDSC,
from KPMG Peat Marwick, LLP, to the effect that the Merger will qualify for
pooling-of-interests accounting treatment, and (ii) letters, dated as of a
date not later than ten days after the date of this Agreement, as of the
date of the filing of the Registration Statement with the SEC and as of the
Effective Time, in form and substance reasonably acceptable to GDSC, from
KPMG Peat Marwick to the effect that such firm is not aware of any matters
relating to GDSC, DCA or any of their respective Subsidiaries which would
preclude the Merger from qualifying for pooling-of-interests accounting
treatment.
(h) NO MATERIAL ADVERSE EFFECT. No fact, event or circumstance shall
have occurred or become known to GDSC after the date hereof that alone, or
together with all other facts, events or circumstances has had or is
reasonably likely to have a Material Adverse Effect on DCA.
(i) ANALYST EXPECTATIONS. DCA shall have achieved the analyst
financial expectations for the quarter ended September 30, 1998 set forth on
SCHEDULE 9.2(i).
(j) CLOSING DELIVERIES. GDSC shall have received the DCA Disclosure
Schedules, documents, certificates and other agreements, duly executed and
delivered in a form reasonably satisfactory to GDSC as set forth in SECTION
10.2.
9.3. CONDITIONS TO OBLIGATION OF DCA. The obligation of DCA to consummate
the Merger is also subject to the fulfillment or written waiver by DCA prior to
the Effective Time of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of ParentCo, GDSC Merger Sub, DCA Merger Sub and GDSC set forth in this
Agreement shall be true and correct as of the date of this Agreement and as
of the Effective Date as though made on and as of the Effective Date (except
that representations and warranties that by their terms speak only as of the
date of this Agreement or some other date shall be true and correct as of
such date), and DCA shall have received a certificate, dated the Effective
Date, signed on behalf of each such party's Chief Executive Officer and the
Chief Financial Officer to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENTCO, GDSC MERGER SUB, DCA MERGER
SUB AND GDSC. ParentCo, GDSC Merger Sub, DCA Merger Sub and GDSC shall have
performed in all material respects all obligations required to be performed
by each of them under this Agreement at or prior to the Effective Time, and
DCA shall have received a certificate, dated the Effective Date, signed on
behalf of each such party's Chief Executive Officer and the Chief Financial
Officer to such effect.
(c) TAX OPINION. DCA shall have received an opinion of ▇▇▇▇▇▇▇▇▇, Will
& ▇▇▇▇▇, dated the Effective Date, in a form mutually acceptable to the
parties and their counsel, to the effect that, (A) on the basis of facts,
representations and assumptions set forth in such opinion, (i) the Merger
constitutes a "reorganization" within the meaning of Section 368 of the Code
and ParentCo, GDSC Merger Sub and GDSC will each be a party to the
reorganization within the meaning of Section 368(b) of the Code or (B) a
transfer to a controlled corporation qualifying under Section 351 of the
Code and (ii) no gain or loss will be recognized by stockholders of DCA who
receive shares of
32
ParentCo Common Stock in exchange for shares of DCA Common Stock, except
with respect to cash received in lieu of fractional share interests. In
rendering its opinion, ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇ may require and rely upon
representations contained in letters from GDSC, DCA and ParentCo, and
stockholders of GDSC and DCA in a form mutually acceptable to the parties
and their counsel.
(d) LEGAL OPINION. Counsel to GDSC shall have delivered to DCA their
opinion, dated as of the Effective Date, in a form mutually acceptable to
the parties and their counsel.
(e) ACCOUNTANTS' LETTERS. DCA shall have received the letters referred
to in SECTION 8.11 from ParentCo's independent auditors.
(f) DIRECTORS. ParentCo, GDSC Merger Sub and DCA Merger Sub shall have
adopted all resolutions necessary and sufficient to effectuate the
appointment of directors set forth in SECTION 1.1(c) attached hereto
effective as of the Effective Time.
(g) POOLING LETTERS. DCA shall have received (i) letters, dated as of
the date of the filing of the Registration Statement with the SEC and as of
the Effective Time, in form and substance reasonably acceptable to DCA, from
PricewaterhouseCoopers LLP to the effect that the Merger will qualify for
pooling-of-interests accounting treatment, and (ii) letters, dated as of a
date not later than ten days after the date of this Agreement, as of the
date of the filing of the Registration Statement with the SEC and as of the
Effective Time, in form and substance reasonably acceptable to DCA, from
PricewaterhouseCoopers LLP to the effect that such firm is not aware of any
matters relating to GDSC, DCA or any of their respective Subsidiaries which
would preclude the Merger from qualifying for pooling-of-interests
accounting treatment.
(h) NO MATERIAL ADVERSE EFFECT. No fact, event or circumstance shall
have occurred or become known to DCA after the date hereof that alone, or
together with all other facts, events or circumstances has had or is
reasonably likely to have a Material Adverse Effect on GDSC.
(i) ANALYST EXPECTATIONS. GDSC shall have achieved the analyst
financial expectations for the quarter ended September 30, 1998 set forth on
SCHEDULE 9.3(i).
(j) CLOSING DELIVERIES. DCA shall have received the GDSC Disclosure
Schedules, documents, certificates and other agreements, duly executed and
delivered in a form reasonably satisfactory to DCA as set forth in SECTION
10.1.
ARTICLE X
CLOSING DELIVERIES
10.1. DELIVERIES OF GDSC. At or prior to the Effective Time, GDSC shall
deliver to DCA the following, all of which shall be in a form reasonably
satisfactory to DCA:
(a) a copy of the resolutions of the Board of Directors of GDSC
authorizing the execution, delivery and performance of this Agreement and
all related documents and agreements and consummation of the Merger, each
certified by the Secretary of GDSC as being true and correct copies of the
originals thereof subject to no modifications or amendments;
(b) a certificate of the President of GDSC dated the Closing Date, as to
the truth and correctness of the representations and warranties of GDSC
contained herein on and as of the Effective Date;
(c) a certificate of the President of GDSC dated the Closing Date, (i)
as to the performance of and compliance in all material respects by GDSC
with all covenants contained herein on and as of the Effective Time and (ii)
certifying that all conditions precedent required by GDSC to be satisfied
shall have been satisfied;
33
(d) a certificate of the Secretary of GDSC certifying as to the
incumbency of the directors and officers of such corporation and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of that corporation;
(e) certificates, dated within ten (10) days prior to the Effective
Time, of the Secretary of State of Washington for GDSC establishing that
each such corporation is in existence, has paid all franchise or similar
taxes, if any, and, if applicable, otherwise is in good standing to transact
business in the state of Washington;
(f) certificates, dated within ten (10) days prior to the Effective Date
of the states in which GDSC is qualified to do business, to the effect that
each such corporation is qualified to do business and, if applicable, is in
good standing as a foreign corporation in each of such states;
(g) all authorizations, consents, approvals, permits and licenses
required under the Agreement;
(h) the Agreement executed by GDSC and the final GDSC Disclosure
Schedules;
(i) the Certificates of Merger executed by GDSC necessary to effect the
Merger referred to in SECTION 1.1;
(j) Stockholders' Agreement executed by GDSC stockholders as set forth
in SECTION 8.13;
(k) Affiliate Representation Letters executed by certain GDSC
affiliates;
(l) Employment Agreements executed by each of the individuals set forth
on SCHEDULE 9.1(g); and
(m) such other instrument or instruments of transfer as shall be
necessary or appropriate, as DCA or its counsel shall reasonably request, to
carry out and effect the purpose and intent of this Agreement.
10.2. DELIVERIES OF DCA. At or prior to the Effective Time, DCA shall
deliver to GDSC the following, all of which shall be in a form reasonably
satisfactory to GDSC:
(a) a copy of the resolutions of the Board of Directors of DCA
authorizing the execution, delivery and performance of this Agreement and
all related documents and agreements and consummation of the Merger, each
certified by the Secretary of DCA as being true and correct copies of the
originals thereof subject to no modifications or amendments;
(b) a certificate of the President of DCA dated the Closing Date, as to
the truth and correctness of the representations and warranties of DCA
contained herein on and as of the Effective Date;
(c) a certificate of the President of DCA dated the Closing Date, (i) as
to the performance of and compliance in all material respects by DCA with
all covenants contained herein on and as of the Effective Time and (ii)
certifying that all conditions precedent required by DCA to be satisfied
shall have been satisfied;
(d) a certificate of the Secretary of DCA certifying as to the
incumbency of the directors and officers of such corporation and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of that corporation;
(e) certificates, dated within ten (10) days prior to the Effective
Time, of the Secretary of State of Delaware for DCA establishing that each
such corporation is in existence, has paid all franchise or similar taxes,
if any, and, if applicable, otherwise is in good standing to transact
business in the state of Delaware;
(f) certificates, dated within ten (10) days prior to the Effective Date
of the states in which DCA is qualified to do business, to the effect that
each such corporation is qualified to do business and, if applicable, is in
good standing as a foreign corporation in each of such states;
34
(g) all authorizations, consents, approvals, permits and licenses
required under the Agreement;
(h) the Agreement and the final DCA Disclosure Schedules executed by
DCA;
(i) the Certificates of Merger executed by DCA necessary to effect the
Merger referred to in SECTION 1.1;
(j) Stockholders' Agreement executed by DCA stockholders as set forth in
SECTION 8.13;
(k) Affiliate Representation Letters executed by certain DCA affiliates;
(l) Employment Agreements executed by each of the individuals set forth
on SCHEDULE 9.1(g); and
(m) such other instrument or instruments of transfer as shall be
necessary or appropriate, as GDSC or its counsel shall reasonably request,
to carry out and effect the purpose and intent of this Agreement.
10.3. DELIVERIES OF PARENTCO, GDSC MERGER SUB AND DCA MERGER SUB. At or
prior to the Effective Time, ParentCo, GDSC Merger Sub and DCA Merger Sub shall
deliver to each of GDSC and DCA the following, all of which shall be in a form
reasonably satisfactory to each of GDSC and DCA:
(a) a copy of the resolutions of the Board of Directors of ParentCo,
GDSC Merger Sub and DCA Merger Sub authorizing the execution, delivery and
performance of this Agreement and all related documents and agreements and
consummation of the Merger, each certified by the Secretary of ParentCo,
GDSC Merger Sub and DCA Merger Sub as being true and correct copies of the
originals thereof subject to no modifications or amendments;
(b) a certificate of the President of ParentCo, GDSC Merger Sub and DCA
Merger Sub dated the Closing Date, as to the truth and correctness of the
representations and warranties of ParentCo, GDSC Merger Sub and DCA Merger
Sub contained herein on and as of the Effective Date;
(c) a certificate of the President of ParentCo, GDSC Merger Sub and DCA
Merger Sub dated the Closing Date, (i) as to the performance of and
compliance in all material respects by ParentCo, GDSC Merger Sub and DCA
Merger Sub with all covenants contained herein on and as of the Effective
Time and (ii) certifying that all conditions precedent required by ParentCo,
GDSC Merger Sub and DCA Merger Sub to be satisfied shall have been
satisfied;
(d) a certificate of the Secretary of ParentCo, GDSC Merger Sub and DCA
Merger Sub certifying as to the incumbency of the directors and officers of
such corporation and as to the signatures of such directors and officers who
have executed documents delivered at the Closing on behalf of that
corporation;
(e) certificates, dated within ten (10) days prior to the Effective
Time, of the Secretary of State of Delaware for ParentCo, GDSC Merger Sub
and DCA Merger Sub establishing that each such corporation is in existence,
has paid all franchise or similar taxes, if any, and, if applicable,
otherwise is in good standing to transact business in the state of Delaware;
(f) certificates, dated within ten (10) days prior to the Effective Date
of the states in which each of ParentCo, GDSC Merger Sub and DCA Merger Sub
is qualified to do business, to the effect that each such corporation is
qualified to do business and, if applicable, is in good standing as a
foreign corporation in each of such states; and
(g) such other instrument or instruments of transfer as shall be
necessary or appropriate, as GDSC and DCA or its counsel shall reasonably
request, to carry out and effect the purpose and intent of this Agreement.
35
ARTICLE XI
TERMINATION
11.1. TERMINATION. Notwithstanding any other provisions of this Agreement,
this Agreement may be terminated, and the Merger may be abandoned:
(a) MUTUAL CONSENT. At any time prior to the Effective Time, by the
mutual consent of GDSC and DCA, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
(b) BREACH. At any time prior to the Effective Time, by GDSC or DCA,
if its Board of Directors so determines by vote of a majority of the members
of its entire Board, in the event of either: (i) a breach by the other party
of any representation or warranty contained herein (subject to the standard
set forth herein), which breach cannot be or has not been cured within 30
days after the giving of written notice to the breaching party of such
breach; or (ii) a breach by the other party of any of the covenants or
agreements contained herein, which breach cannot be or has not been cured
within 30 days after the giving of written notice to the breaching party of
such breach, provided that such breach (whether under (i) or (ii)) would be
reasonably likely, individually or in the aggregate with other breaches, to
result in a Material Adverse Effect.
(c) DELAY. At any time prior to the Effective Time, by either GDSC or
DCA, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Merger is not consummated
by March 31, 1999, except to the extent that the failure of the Merger then
to be consummated arises out of or results from the knowing action or
inaction of GDSC to the detriment of DCA or DCA to the detriment of GDSC,
except as permitted hereunder.
(d) NO APPROVAL. By GDSC or DCA, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in
the event (i) the approval of any Governmental Authority required for
consummation of the Merger and the other transactions contemplated by this
Agreement shall have been denied by final nonappealable action of such
Governmental Authority or any Governmental Authority issues a final
nonappealable order blocking the Merger or (ii) the stockholder approval
required by SECTION 11.1(a) herein is not obtained at the GDSC Meeting or
the DCA Meeting, respectively.
(e) FAILURE TO RECOMMEND, ETC. At any time prior to the GDSC Meeting
or the DCA Meeting, by either GDSC or DCA if the Board of Directors of the
other shall have failed to make its recommendation referred to in SECTION
8.2, withdrawn such recommendation or modified or changed such
recommendation in a manner adverse in any respect to the interests of either
GDSC or DCA for any reason other than as a result of a termination of the
Agreement allowed pursuant to SECTIONS 11.1(a)-(d) and 11.1(g).
(f) ACQUISITION PROPOSAL. This Agreement may be terminated by either
GDSC or DCA by written notice to the other if either GDSC or DCA (i)
receives an Acquisition Proposal, (ii) receives the advice of its outside
counsel that to proceed with the Merger will violate the fiduciary duties of
its Board of Directors to its stockholders in light of such Acquisition
Proposal, and (iii) after receiving such advice, determines to accept such
proposal; provided, however, that neither party shall be entitled to
terminate this Agreement pursuant to this SECTION 11.1(f) unless it shall
have provided the other with written notice of such a possible determination
(which written notice will inform the other of the material terms and
conditions of the proposal, including the identity of the proponent) not
less than two business days prior to such determination.
(g) DISCLOSURE SCHEDULE AMENDMENT OR SUPPLEMENT. At any time prior to
the Effective Time by either GDSC or DCA if its board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event the other party amends their Disclosure Schedule pursuant to the
36
introductory paragraphs of Articles IV and V, respectively and discloses
events that would be reasonably likely to result in a Material Adverse
Effect on the other party or ParentCo.
11.2. EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination
of this Agreement and the abandonment of the Merger pursuant to this ARTICLE XI,
no party to this Agreement shall have any liability or further obligation to any
other party hereunder except (i) as set forth in SECTIONS 11.3and 12.1, and (ii)
that termination under SECTION 11.1(b) will not relieve a breaching party from
liability for any breach of this Agreement giving rise to such termination;
provided, however, in no event shall the breaching party pay to the
non-breaching party for such a breach an amount greater than the actual out-of-
pocket costs and expenses of the non-breaching party in connection with this
Agreement.
11.3. TERMINATION FEE. The parties agree and acknowledge that it is
impractical to ascertain the precise amount of damage to either GDSC or DCA as a
result of a failure to consummate the Merger and the other transactions
contemplated hereby due to a termination of this Agreement by either party
pursuant to SECTION 11.1(e) or SECTION 11.1(f) hereof. Accordingly, in the event
of such termination pursuant to SECTION 11.1(e) or SECTION 11.1(f) by either
GDSC or DCA, such non-terminating party (pursuant to SECTION 11.1(e) hereof) or
such terminating party (pursuant to SECTION 11.1(f) hereof) shall pay to such
other party the sum of One Million Five Hundred Thousand Dollars ($1,500,000)
("TERMINATION FEE") which amount shall be payable in same date funds no later
than five business days after the date of either GDSC's or DCA's request. The
Termination Fee shall be the sole and exclusive remedy of GDSC or DCA, as the
case may be, for events of termination pursuant to SECTIONS 11.1(e) and (f).
Notwithstanding the foregoing, nothing contained in this SECTION 11.3 shall
affect either GDSC's or DCA's ability to recover for damages which result from a
termination of this Agreement pursuant to SECTION 11.1(b) and SECTION 11.2.
ARTICLE XII
MISCELLANEOUS
12.1. SURVIVAL. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
SECTIONS 1.2, 1.6, 8.10, 8.15, 8.16 and this ARTICLE XII which shall survive the
Effective Time) or the termination of this Agreement if this Agreement is
terminated prior to the Effective Time (other than SECTIONS 11.2, 11.3 and this
ARTICLE XII which shall survive such termination).
12.2. WAIVER; AMENDMENT. Prior to the Effective Time, any provision of
this Agreement may be (i) waived by the party benefited by the provision, or
(ii) amended or modified at any time, by an agreement in writing between the
parties hereto executed in the same manner as this Agreement, except that after
the GDSC Meeting and the DCA Meeting, this Agreement may not be amended if it
would violate either the WBCA or DGCL or reduce the consideration to
be received by GDSC or DCA stockholders in the Merger.
12.3. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
12.4. GOVERNING LAW; WAIVER OF JURY TRIAL. This Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of
Delaware applicable to contracts made and to be performed entirely within such
State (except to the extent that mandatory provisions of Federal law are
applicable). Each of the parties hereto hereby irrevocably waives any and all
right to trial by jury in any legal proceeding arising out of or related to this
Agreement or the transactions contemplated hereby.
12.5. EXPENSES. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby.
37
12.6. NOTICES. All notices, requests and other communications hereunder to
a party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to such party at its address set forth below or such other
address as such party may specify by notice to the parties hereto.
If to GDSC, to: Gentle Dental Service Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇
One Newport Place
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▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to DCA, to: Dental Care Alliance, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇,
P.A.
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▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
12.7. ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Agreement
represents the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and this Agreement supersedes any and all other
oral or written agreements heretofore made. Nothing in this Agreement expressed
or implied, is intended to confer upon any person, other than the parties hereto
or their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
12.8. INTERPRETATION; EFFECT. When a reference is made in this Agreement
to Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." No provision of this Agreement shall
be construed to require GDSC, DCA or any of their respective Subsidiaries,
affiliates or directors to take any action which would violate applicable law
(whether statutory or common law), rule or regulation.
38
ARTICLE XIII
CERTAIN DEFINITIONS
13.1. CERTAIN DEFINITIONS. The following terms are used in this Agreement
with the meanings set forth below:
"ACQUISITION PROPOSAL" means any tender or exchange offer, proposal for
a merger, consolidation or other business combination involving GDSC or DCA
or any of their Subsidiaries or any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion of the
assets or deposits of, GDSC or DCA or any of their Subsidiaries, other than
the transactions contemplated by this Agreement.
"AGREEMENT" means this Agreement, as amended or modified from time to
time in accordance with SECTION 11.2 and the exhibits and schedules attached
thereto.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such Person's
business, directly or indirectly, in whole or in part, whether or not
carried on the books and records of such Person, and whether or not owned in
the name of such Person or any Affiliate of such Person and wherever
located.
"CODE" has the meaning set forth in the recitals.
"CONVERTIBLE SUBORDINATED NOTES" shall mean the 7% Convertible
Subordinated Notes issued by GDSC dated May 15, 1998.
"DCA" shall have the meaning set forth in the preamble to this
Agreement.
"DCA AFFILIATE" has the meaning set forth in SECTION 8.7(a).
"DCA ARTICLES" means the Articles of Incorporation of DCA, as amended.
"DCA BENEFIT PLANS" has the meaning set forth in SECTION 5.13(a).
"DCA COMMON STOCK" shall mean the $.01 par value common stock of DCA.
"DCA COMPUTER SYSTEM" has the meaning set forth in SECTION 5.15.
"DCA DISCLOSURE SCHEDULES" have the meaning set forth in the
introductory paragraph of ARTICLE V.
"DCA EMPLOYEES" has the meaning set forth in SECTION 5.13.
"DCA ERISA AFFILIATE" has the meaning set forth in SECTION 5.13.
"DCA EXCHANGE RATIO" has the meaning set forth in SECTION 2.6.
"DCA INSURANCE POLICIES" has the meaning set forth in SECTION 5.19.
"DCA MEETING" has the meaning set forth in SECTION 8.2.
"DCA MERGER SUB COMMON STOCK" shall mean the $.01 par value common stock
of DCA.
"DCA MULTIEMPLOYER PLANS" has the meaning set forth in SECTION 5.13.
"DCA OPTIONS" has the meaning set forth in SECTION 2.6.
"DCA PENSION PLAN" has the meaning set forth in SECTION 5.13.
"DCA PLANS" has the meaning set forth in SECTION 5.13.
"DCA RIGHTS" has the meaning set forth in SECTION 2.6.
39
"DCA SEC REPORTS" shall mean all the forms, reports and documents
required to be filed by DCA with the SEC since November 4, 1997.
"DCA STOCK PLAN" means the Omnibus Executive Incentive Plan and the 1997
Non-Qualified Stock Option Plan of Dental Care Alliance, Inc.
"DELAWARE SECRETARY" means the Delaware Secretary of State.
"DGCL" means the Delaware General Corporation Law.
"DISSENTERS' SHARES" means shares of GDSC Common Stock with respect to
which the holder or holders thereof perfect their rights to dissent under
Chapter 23B.13 of the WBCA.
"DISSENTING STOCKHOLDERS" means holders of shares of GDSC Common Stock
who perfect their rights to dissent under Chapter 23B.13 of the WBCA.
"EFFECTIVE DATE" means the date on which the Effective Time occurs.
"EFFECTIVE TIME" means the effective time of the Merger, as provided for
in SECTION 1.3.
"ENVIRONMENTAL LAW" has the meaning set forth in SECTION 4.16(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"EXCHANGE AGENT" has the meaning set forth in SECTION 3.1.
"EXCHANGE FUND" has the meaning set forth in SECTION 3.1.
"GAAP" has the meaning set forth in SECTION 4.7(a).
"GDSC" has the meaning set forth in the preamble to this Agreement.
"GDSC AFFILIATE" has the meaning set forth in SECTION 8.7(a).
"GDSC ARTICLES" means the Articles of Incorporation of GDSC, as amended.
"GDSC BENEFIT PLANS" has the meaning set forth in SECTION 4.13(a).
"GDSC BOARD" means the Board of Directors of GDSC.
"GDSC BYLAWS" means the Bylaws of GDSC, as amended.
"GDSC COMMON STOCK" shall mean the no par value common stock of GDSC.
"GDSC COMPUTER SYSTEM" has the meaning set forth in SECTION 4.15.
"GDSC CREDIT FACILITY" means that certain credit facility provided under
that certain Credit Agreement dated as of September 30, 1998, by and among
GDSC and the Guarantors and Lenders named therein.
"GDSC DISCLOSURE SCHEDULES" have the meaning set forth in the
introductory paragraph of ARTICLE IV.
"GDSC EMPLOYEES" has the meaning set forth in SECTION 4.13.
"GDSC ERISA AFFILIATE" has the meaning set forth in SECTION 4.13.
"GDSC EXCHANGE RATIO" has the meaning set forth in SECTION 2.6.
"GDSC INSURANCE POLICIES" has the meaning set forth in SECTION 4.19.
"GDSC MEETING" has the meaning set forth in SECTION 8.2.
40
"GDSC MERGER SUB COMMON STOCK" shall mean the $.01 par value common
stock of GDSC Merger Sub.
"GDSC MULTIEMPLOYER PLANS" has the meaning set forth in SECTION 4.13.
"GDSC OPTIONS" has the meaning set forth in SECTION 2.6.
"GDSC PENSION PLAN" has the meaning set forth in SECTION 4.13.
"GDSC PERFORMANCE SHARES" shall have the meaning set forth in SECTION
4.3.
"GDSC PLANS" has the meaning set forth in SECTION 4.13.
"GDSC PREFERRED STOCK" collectively means the GDSC Series A, Series B,
Series C and Series D Preferred Stock.
"GDSC RIGHTS" has the meaning set forth in SECTION 2.6.
"GDSC SEC REPORTS" means all of the forms, reports and documents
required to be filed by GDSC with the SEC since February 13, 1997.
"GDSC STOCK PLAN" means the 1993 Stock Incentive Plan, as amended; the
1996 Stock Option Plan of GMS Dental Group, Inc. (assumed by GDSC); and the
1996 Performance Stock Option Plan of GMS Dental Group, Inc. (assumed by
GDSC).
"GOVERNMENTAL AUTHORITY" means any court, administrative agency,
department or commission or other federal, state or local governmental
authority or instrumentality, and shall include, without limitation,
Regulatory Agencies.
"HAZARDOUS SUBSTANCE" has the meaning set forth in SECTION 4.16(b).
"LIENS" means any charge, mortgage, pledge, security interest,
restriction, claim, lien or encumbrance.
"MATERIAL ADVERSE EFFECT" means, with respect to DCA or GDSC, any effect
that (i) is material and adverse to the financial position, results of
operations or business of DCA and its Subsidiaries taken as a whole or GDSC
and its Subsidiaries taken as a whole, respectively, or (ii) would
materially impair the ability of either DCA or GDSC, respectively, to
perform its obligations under this Agreement or otherwise materially
threaten or materially impede the consummation of the Merger and the other
transactions contemplated by this Agreement.
"MERGER" has the meaning set forth in SECTION 1.1.
"MERGER CONSIDERATION" has the meaning set forth in SECTION 2.1.
"NASD" means the National Association of Securities Dealers.
"NASDAQ" means The Nasdaq Stock Market, Inc.'s National Market.
"NEW CERTIFICATES" has the meaning set forth in SECTION 3.1.
"OLD DCA CERTIFICATES" has the meaning set forth in SECTION 3.1.
"OLD GDSC CERTIFICATES" has the meaning set forth in SECTION 3.1.
"PARENTCO" has the meaning set forth in the preamble to the Agreement.
"PARENTCO BOARD" means the Board of Directors of ParentCo.
"PARENTCO CAPITAL STOCK" means and includes the ParentCo Common Stock
and ParentCo Preferred Stock.
"PARENTCO COMMON STOCK" means the common stock, no par value per share,
of ParentCo.
41
"PARENTCO MERGER COMMITTEE" shall have the meaning set forth in SECTION
1.2.
"PARENTCO PREFERRED STOCK" means and includes the ParentCo Series A
Preferred Stock, ParentCo Series B Preferred Stock, ParentCo Series C
Preferred Stock and ParentCo Series D Preferred Stock.
"PARENTCO SERIES A PREFERRED STOCK" means the Series A Preferred Stock,
no par value per share of ParentCo.
"PARENTCO SERIES B PREFERRED STOCK" means the Series B Preferred Stock,
no par value per share of ParentCo.
"PARENTCO SERIES C PREFERRED STOCK" means the Series C Preferred Stock,
no par value per share of ParentCo.
"PARENTCO SERIES D PREFERRED STOCK" means the Series D Preferred Stock,
no par value per share of ParentCo.
"PERSON" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated
organization.
"PREVIOUSLY DISCLOSED" by a party shall mean information set forth in
either the GDSC Disclosure Schedules or the DCA Disclosure Schedules, as the
case may be.
"PROXY STATEMENT" has the meaning set forth in SECTION 8.3.
"REGISTRATION STATEMENT" has the meaning set forth in SECTION 8.3.
"REGULATORY AGENCIES" has the meaning set forth in SECTION 4.6.
"REPRESENTATIVES" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"RIGHTS" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value
of which is determined in whole or in part by reference to the market price
or value of, shares of capital stock of such Person.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and rules
and regulations thereunder.
"SECURITIES PURCHASE AGREEMENT" means that certain Securities Purchase
Agreement dated May 12, 1998, by and among GDSC and the purchasers set forth
on SCHEDULE 1 to that agreement.
"STOCKHOLDERS' AGREEMENTS" has the meaning set forth in SECTION 1.5.
"SUBSIDIARY" has the meaning ascribed to it in Rule 1-02 of Regulation
S-X of the SEC; provided, however, each dental practice managed by either
GDSC or DCA shall not be a Subsidiary for purposes of this Agreement.
"SURVIVING CORPORATIONS" has the meaning set forth in SECTION 1.1.
"TAX" and "TAXES" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts,
sales, use, ad valorem, goods and services, capital, production, transfer,
franchise, windfall profits, license, withholding, payroll, employment,
disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes, custom
duties, fees, assessments or charges of any kind whatsoever, together with
any interest and any
42
penalties, additions to tax or additional amounts imposed by any taxing
authority whether arising before, on or after the Effective Date.
"TAX RETURNS" means any return, amended return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with respect to any Tax.
"TREASURY STOCK" shall mean shares of GDSC Common Stock held by GDSC or
any of its Subsidiaries or by DCA or any of its Subsidiaries, in each case
other than in a fiduciary (including custodial or agency) capacity or as a
result of debts previously contracted in good faith.
"WBCA" means the Washington Business Corporation Act.
"WASHINGTON SECRETARY" means the Washington Secretary of State.
"YEAR 2000 COMPLIANT" has the meaning set forth in SECTION 4.15.
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
GENTLE DENTAL SERVICE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive
Officer
DENTAL CARE ALLIANCE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
Title: President and Chief Executive
Officer
WISDOM HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
Title: President
WISDOM HOLDINGS ACQUISITION CORP. I
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
Title: President
WISDOM HOLDINGS ACQUISITION CORP. II
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
Title: President
