AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ID RECAP, INC.,
A DELAWARE CORPORATION
AND
INTERDENT, INC.
A DELAWARE CORPORATION
DATED AS OF OCTOBER 22, 1999
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is entered into as of October 22, 1999 by
and between ID Recap, Inc., a Delaware corporation ('Recap') wholly owned by
Green Equity Investors III, L.P. ("GEI"), and InterDent, Inc., a Delaware
corporation (together with its Subsidiaries from time to time (except as the
context may otherwise require), the "Company"), with respect to the following
facts and circumstances:
A. The Special Committee of the Company, the Board of Directors of the
Company and the Board of Directors of Recap have each determined that it is
advisable and in the best interests of its respective stockholders to effect the
Merger of Recap with and into the Company upon the terms and subject to the
conditions set forth herein.
B. Pursuant to the Merger, all shares of capital stock of the Company
(other than Dissenting Shares and shares held by Recap or in the Company's
treasury) shall be cancelled and converted automatically into the right to
receive an amount in cash per share, without interest, as set forth in Section
2.2 of this Agreement.
C. Concurrently with the execution and delivery of this Agreement and in
order to induce Recap to enter into this Agreement, Recap and certain Rollover
Holders (defined below) are entering into Voting Agreements in the form attached
hereto as EXHIBIT A, pursuant to which, among other things, the Rollover Holders
will agree to vote their shares of the Company in favor of the Merger.
D. In connection with the transactions contemplated by the Merger, certain
members of management of and certain investors in the Company (the "Rollover
Holders") have entered into Exchange and Subscription Agreements in the form
attached hereto as EXHIBIT B (the "Exchange Agreement") with Recap, pursuant to
which the Rollover Holders will exchange a portion of their Existing Shares (the
"Rollover Shares") of the Company for shares of Recap prior to the closing of
the Merger (the "Recapitalization").
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants contained herein and intending to be
legally bound, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1. CERTAIN TERMS. For all purposes of this Agreement, except as
otherwise expressly provided:
(a) the terms defined in this Article I have the meanings assigned to
them in this Article I and include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the meanings
assigned under GAAP;
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of the body of this Agreement;
(d) pronouns of either gender or neuter shall include, as appropriate,
the other pronoun forms;
(e) the words "include," "includes" and "including" shall be deemed in
each case to be followed by the words "without limitation";
(f) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision; and
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(g) the term "party" or "parties" when used herein refer to Recap, on
the one hand, and the Company, on the other.
1.2. DEFINITIONS. As used in this Agreement and the Exhibits and Schedules
delivered pursuant to this Agreement, the following definitions shall apply:
(a) "Acquisition Proposal" has the meaning set forth in Section 7.5
hereof.
(b) "Action" means any action, complaint, petition, investigation,
suit, litigation or other proceeding, whether civil or criminal, in law or
in equity, or before any court, tribunal, arbitrator or Governmental Entity.
(c) "Affiliate" means, with respect to any person or entity, any person
or entity directly or indirectly controlling, controlled by or under common
control with such person or entity.
(d) "Agreement" means this Agreement, as amended or supplemented,
together with all Exhibits and Schedules attached or incorporated by
reference, in each case as amended or supplemented.
(e) "Approval" means any approval, authorization, consent,
qualification or registration, or any waiver of any of the foregoing,
required to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental
Entity or any other Person.
(f) "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.
(g) "Balance Sheet" has the meaning set forth in Section 5.12.
(h) "Business Day" means any day that is not a Saturday, Sunday or
legal holiday in the State of California.
(i) "Certificate" has the meaning set forth in Section 4.1 hereof.
(j) "Certificate of Merger" has the meaning set forth in Section 2.1(b)
hereof.
(k) "Closing" has the meaning set forth in Section 3.1 hereof.
(l) "Closing Date" means the date and time of the Closing.
(m) "Code" means the Internal Revenue Code of 1986, as amended.
(n) "Common Stock" means the Company's common stock, no par value.
(o) "Company" means InterDent, Inc., a Delaware corporation (together
with its Subsidiaries from time to time (except as the context may otherwise
require)).
(p) "Company Benefit Plans" has the meaning set forth in Section
5.14(a).
(q) "Company Board" means, as applicable, the Board of Directors and/or
the Special Committee of the Board of Directors of the Company.
(r) "Company Computer System" has the meaning set forth in Section
5.16.
(s) "Company Employees" has the meaning set forth in Section 5.14(a).
(t) "Company Pension Plan" has the meaning set forth in Section
5.14(b).
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(u) "Company Performance Shares" has the meaning set forth in Section
5.3.
(v) "Company Plans" has the meaning set forth in Section 5.14(b).
(w) "Company Proxy Statement" has the meaning set forth in Section 7.9
hereof.
(x) "Company SEC Reports" means all of the forms, statements,
schedules, reports and other documents filed or required to be filed by the
Company or any Subsidiary with the SEC since December 31, 1996.
(y) "Convertible Notes" means the Company's 7% convertible subordinated
notes issued on May 18, 1998 and June 3, 1998 pursuant to the Securities
Purchase Agreement dated May 12, 1998.
(z) "DGCL" means the Delaware General Corporation Law.
(aa) "Dissenting Shares" has the meaning set forth in Section 2.4.
(bb) "Earn Out Shares" means the shares of capital stock of the Company
that the Company is obligated to issue to a third party in connection with
or arising from any earn out payments, including but not limited to those
parties and obligations identified on Schedule 5.3.
(cc) "Effective Time" has the meaning set forth in Section 2.1(b)
hereof.
(dd) "Encumbrance" means any charge, encumbrance, security interest,
lien, option, equity, adverse claim or restriction, except for any
restrictions on transfer generally arising under any applicable Law.
(ee) "Environmental Law" has the meaning set forth in Section 5.17(b)
hereof.
(ff) "ERISA" means the Employee Retirement Income Security Act of 1934,
as amended.
(gg) "ERISA Affiliate" has the meaning set forth in Section 5.14(c)
hereof.
(hh) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(ii) "Exchange Agreement" means the exchange and subscription agreement
in the form attached hereto as EXHIBIT B.
(jj) "Exchange Ratio" has the meaning set forth in Section 2.2(h)
hereof.
(kk) "Existing Shares" means all of the Company's issued and
outstanding Common Stock, Series A Preferred Stock, Series B Preferred Stock
(if any), Series C Preferred Stock (if any) and Series D Preferred Stock.
(ll) "Expenses" has the meaning set forth in Section 9.3 hereof.
(mm) "Financing" has the meaning set forth in Section 6.5.
(nn) "Financing Letters" has the meaning set forth in Section 6.5.
(oo) "GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time, consistently applied.
(pp) "GEI" has the meaning set forth in the preamble.
(qq) "Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
(rr) "Hazardous Substance" has the meaning set forth in Section 5.17(b)
hereof.
(ss) "H-S-R Act" has the meaning set forth in Section 7.6(a) hereof.
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(tt) "Indebtedness" means all obligations for borrowed money and
accounts payable, however evidenced, including principal and interest.
(uu) "Indemnified Party" has the meaning set forth in Section 7.13.
(vv) "Insurance Policies" has the meaning set forth in Section 5.20.
(ww) "Knox-Keene Act" has the meaning set forth in Section 8.3.14.
(xx) "Law" means any statute, rule, regulation, administrative requirement,
code or ordinance of any Governmental Entity.
(yy) "Leased Real Estate" has the meaning set forth in Section 5.24(b).
(zz) "Liabilities" means all liabilities, obligations, debts and
expenses whatsoever of the business of the Company, whether matured or
unmatured, liquidated or unliquidated, fixed or contingent.
(aaa) "Material Adverse Effect" means a material adverse effect on (i)
the ability of the subject Person to perform its obligations under, and
consummate the transactions contemplated by this Agreement on a timely basis
or (ii) the condition (financial or otherwise), results of operations,
assets, liabilities, prospects or business of the subject Person and its
Subsidiaries taken as a whole.
(bbb) "Merger" has the meaning set forth in Section 2.1(a) of this
Agreement.
(ccc) "Merger Consideration" means all of the cash paid to the holders
of the Existing Shares and the holders of Convertible Notes, Options and
Warrants pursuant to Article II hereof.
(ddd) "New Financing Letters" has the meaning set forth in Section 6.5.
(eee) "Notice of Superior Proposal" has the meaning set forth in
Section 7.5(b).
(fff) "Options" means the options to purchase shares of capital stock
of the Company.
(ggg) "Order" means any decree, injunction, judgment, order, ruling,
arbitration award, assessment or writ issued by any Governmental Entity.
(hhh) "Owned Real Estate" has the meaning set forth in Section 5.24(a).
(iii) "Paying Agent" has the meaning set forth in Section 2.3(a)
hereof.
(jjj) "Permit" means any license, permit, franchise or authorization.
(kkk) "Permitted Acquisitions" has the meaning set forth in Section
7.1(d) hereof.
(lll) "Permitted Encumbrances" means (i) Encumbrances disclosed on
SCHEDULE 1.2(lll) hereto, (ii) liens for Taxes, assessments, governmental
charges or levies or mechanics' and other statutory liens which are not
material in amount relative to the property affected, and which are not yet
delinquent or can be paid without penalty or are being contested in good
faith and by appropriate proceedings in respect thereof, and (iii)
imperfections of title which are not substantial in amount relative to the
property affected and which do not materially interfere with the present use
of the property subject thereto or affected thereby.
(mmm) "Person" means an association, a corporation, an individual, a
partnership, a limited liability company or limited liability partnership, a
trust or any other entity or organization, including a Governmental Entity.
(nnn) "Preferred Stock" means the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred
Stock.
(ooo) "Preliminary Termination Fee" has the meaning set forth in
Section 9.3.
(ppp) "Recap" means ID Recap, Inc., a Delaware corporation.
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(qqq) "Recapitalization" has the meaning set forth in the recitals.
(rrr) "Representatives" means Persons acting on behalf of another
Person, including such Person's officers, directors, employees,
representatives, agents, independent accountants, investment bankers and
counsel.
(sss) "Rollover Holders" has the meaning set forth in the recitals.
(ttt) "Rollover Options" means the Options issued under the Stock
Options Plans set forth on SCHEDULE 1.2(ttt), that will continue in the
Surviving Corporation; provided, however, the excess of the aggregate cash
amount that would be paid with respect to the Existing Shares subject to
such Options, if the Options were exercised, over the aggregate exercise
price with respect to such Options shall not exceed $2,330,000.
(uuu) "Rollover Shares" has the meaning set forth in the recitals.
(vvv) "SEC" means the United States Securities and Exchange Commission.
(www) "SEC Reports" has the meaning set forth in Section 5.6(a).
(xxx) "Securities Act" means the Securities Act of 1933, as amended.
(yyy) "Series A Preferred Stock" means the Series A Preferred Stock, no
par value of the Company.
(zzz) "Series B Preferred Stock" means the Series B Preferred Stock, no
par value of the Company.
(aaaa) "Series C Preferred Stock" means the Series C Preferred Stock,
no par value of the Company.
(bbbb) "Series D Preferred Stock" means the Series D Preferred Stock,
no par value of the Company.
(cccc) "Service" means the Internal Revenue Service or any successor
entity.
(dddd) "Special Committee" means the special committee of the Board of
Directors of the Company established to consider the fairness of the
transaction as contemplated by this Agreement.
(eeee) "Special Meeting" has the meaning set forth in Section 7.10
hereof.
(ffff) "Stock Option Plans" means, collectively, the InterDent, Inc.
1999 Stock Incentive Plan, the InterDent, Inc. Employee Stock Purchase Plan
of 1999, the InterDent, Inc. Dental Professional Stock Purchase Plan of
1999, Gentle Dental Service Corporation 1993 Stock Incentive Plan, as
amended on June 4, 1998, Dental Care Alliance, Inc. 1997 Executive Incentive
Compensation Plan, Dental Care Alliance, Inc. 1997 Non-Qualified Stock
Option Plan, GMS Dental Group, Inc. 1996 Stock Option Plan and GMS Dental
Group, Inc. 1996 Performance Stock Option Plan.
(gggg) "Subsidiary" of a company means any Person in which such company
has a direct or indirect equity or ownership interest by vote or value of in
excess of 50%. Subsidiaries of the Company shall include, but not be limited
to, Gentle Dental Service Corporation, a Delaware corporation, and Dental
Care Alliance, Inc., a Delaware corporation, for all purposes except where
the context otherwise requires; provided, however, that dental practices
managed (but not owned) by InterDent, Inc. or any of its Subsidiaries shall
not be included within the definition of a "Subsidiary" for purposes of the
Agreement.
(hhhh) "Superior Proposal" has the meaning set forth in Section 7.5(d)
hereof.
(iiii) "Surviving Corporation" has the meaning set forth in Section
2.1(a) hereof.
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(jjjj) "Takeover Statute" has the meaning set forth in Section 7.15
hereof.
(kkkk) "Tax" or "Taxes", as the context may require, include: (i) any
income, alternative or add-on minimum tax, gross income, gross receipts,
franchise, profits, sales, use, ad valorem, business license, withholding,
payroll, employment, excise, stamp, transfer, recording, occupation,
premium, property, value added, custom duty, severance, windfall profit or
license tax, governmental fee, including estimated taxes relating to any of
the foregoing, or other similar tax or other like assessment or charge of
similar kind whatsoever together with any interest and any penalty, addition
to tax or additional amount imposed by any Governmental Entity responsible
for the imposition of any such Tax; or (ii) any liability of a Person for
the payment of any taxes, interest, penalty, addition to tax or like
additional amount resulting from the application of Treas. Reg. Section
1.1502-6 or comparable provisions of any Governmental Entity in respect of a
consolidated or combined return.
(llll) "Tax Return" means any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Entity in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Law
relating to any Tax.
(mmmm) "Termination Fee" shall have the meaning set forth in Section
9.3 hereof.
(nnnn) "Update Statements" has the meaning set forth in Section 7.7
hereof.
(oooo) "Voting Agreement" means the voting agreement in the form
attached hereto as EXHIBIT A.
(pppp) "Warrants" means the warrants to purchase shares of capital
stock of the Company.
(qqqq) "Year 2000 Compliant" has the meaning set forth in Section 5.16.
ARTICLE II.
THE MERGER
2.1. THE MERGER.
(a) At the Effective Time, Recap shall be merged with and into the
Company in accordance with DGCL and the terms and conditions hereof (the
"Merger"). Upon consummation of the Merger, the separate existence of Recap
shall cease and the Company shall be the surviving corporation (the "Surviving
Corporation").
(b) As soon as practicable after the Closing, the Company will file a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware in accordance with DGCL and make all other filings or
recordings required by Law in connection with the Merger. The Merger shall
become effective at such time as the Certificate of Merger is filed with the
Secretary of State of the State of Delaware or at such later time as is
specified in the Certificate of Merger (the "Effective Time").
(c) The Merger shall have the effects set forth in Sections 251, 259
and 261 of DGCL.
2.2. MERGER CONSIDERATION AND CANCELLATION OF EXISTING SHARES AND
CONVERTIBLE NOTES. At the Effective Time, pursuant to this Agreement and by
virtue of the Merger and without any action on the part of Recap, the Company,
or the holders of any of the following securities:
(a) Each share of Common Stock issued and outstanding immediately prior
to the Effective Time (including shares of Common Stock issued upon exercise of
options, warrants and other convertible securities of the Company, including the
Company's convertible securities pursuant to that certain Securities Purchase
Agreement dated May 12, 1998, by and among Gentle Dental Service Corporation and
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the Purchasers set forth on SCHEDULE 1 to that agreement), other than any
Dissenting Shares and shares to be cancelled pursuant to Section 2.2(g), shall
be cancelled and shall be converted automatically into the right to receive an
amount equal to $9.50 in cash, without interest, payable to the holder thereof
upon surrender of the certificate formerly representing such share of Common
Stock in the manner provided in Section 2.3;
(b) Each share of Series A Preferred Stock issued and outstanding
immediately prior to the Effective Time, other than any Dissenting Shares and
shares to be cancelled pursuant to Section 2.2(g), shall be cancelled and shall
be converted automatically into the right to receive $1 in cash, without
interest, payable to the holder thereof upon surrender of the certificate
formerly representing such share of Series A Preferred Stock in the manner
provided in Section 2.3;
(c) Each share of Series B Preferred Stock issued and outstanding
immediately prior to the Effective Time (if any such shares are issued and
outstanding), other than any Dissenting Shares and shares to be cancelled
pursuant to Section 2.2(g), shall be cancelled and shall be converted
automatically into the right to receive an amount equal $1,031.49 in cash,
without interest, payable to the holder thereof upon surrender of the
certificate formerly representing such share of Series B Preferred Stock in the
manner provided in Section 2.3, and the right to receive certain Warrants
pursuant to the terms of such Series B Preferred Stock shall be cancelled;
(d) Each share of Series C Preferred Stock issued and outstanding
immediately prior to the Effective Time (if any such shares are issued and
outstanding), other than any Dissenting Shares and shares to be cancelled
pursuant to Section 2.2(g), shall be cancelled and shall be converted
automatically into the right to receive $1 in cash, without interest, payable to
the holder thereof upon surrender of the certificate formerly representing such
share of Series C Preferred Stock in the manner provided in Section 2.3;
(e) Each share of Series D Preferred Stock issued and outstanding
immediately prior to the Effective Time, other than any Dissenting Shares and
shares to be cancelled pursuant to Section 2.2(g), shall be cancelled and shall
be converted automatically into the right to receive an amount equal to $9.50 in
cash, without interest, payable to the holder thereof upon surrender of the
certificate formerly representing such share of Series D Preferred Stock in the
manner provided in Section 2.3, and the right to receive certain Warrants
pursuant to the terms of such Series D Preferred Stock shall be cancelled;
(f) The Company's Convertible Notes issued and outstanding immediately
prior to the Effective Time, other than any Convertible Notes to be cancelled
pursuant to Section 2.2(g), shall be cancelled and shall be converted
automatically into the right to receive prepayment equal to 101% of the
outstanding principal amount (which includes any amounts payable in a change of
control) and any accrued but unpaid interest thereon, and the right to receive a
cash payment equal to $0.29 for each share of Common Stock that would be issued
following exercise of the Warrants that would be issued in a redemption of the
Convertible Notes, in lieu of the right to receive such Warrants pursuant to the
terms of the Convertible Notes, which right to receive such Warrant shall be
cancelled;
(g) Each Existing Share and/or the Convertible Notes owned by Recap or
held in the treasury of the Company, if any, immediately prior to the Effective
Time shall be cancelled without any conversion thereof and no payment or
distribution shall be made with respect thereto.
(h) Each share of capital stock of Recap that is issued and outstanding
immediately prior to the Effective Time shall be converted into one newly
issued, fully paid and nonassessable share of capital stock, with identical
rights, preferences and privileges, of the Surviving Corporation (the 'Exchange
Ratio').
(i) If between the date of this Agreement and the Effective Time the
number of outstanding shares of capital stock of the Company shall have been
changed into a different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split-up,
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combination, exchange of shares or the like other than pursuant to the Merger,
the amount of the pro rata portion of the Merger Consideration and the Exchange
Ratio shall be correspondingly adjusted; provided, however, the aggregate amount
of the Merger Consideration shall remain unchanged.
2.3. PAYMENT OF CASH FOR EXISTING SHARES; CONVERTIBLE NOTES, OPTIONS AND
WARRANTS.
(a) At the Effective Time, the Surviving Corporation shall irrevocably
deposit or cause to be deposited with a paying agent appointed by Recap with the
Company's prior approval (the "Paying Agent"), as agent for the holders of
Existing Shares, Convertible Notes, Options and Warrants to be cancelled in
accordance with Sections 2.2, 2.5 and 2.6, cash in the aggregate amount required
to pay the Merger Consideration in respect of such securities outstanding
immediately prior to the Effective Time. Pending distribution pursuant to
Section 2.3(b) hereof of the cash deposited with the Paying Agent, such cash
shall be held in trust for the benefit of the holders of Existing Shares,
Convertible Notes, Options and Warrants cancelled in the Merger and such cash
shall not be used for any other purposes. Each holder of a certificate or
certificates representing Existing Shares cancelled and extinguished at the
Effective Time pursuant to Section 2.2 hereof may thereafter surrender such
certificate or certificates to the Paying Agent, as agent for such holder of
Existing Shares, in exchange for payment of the pro rata portion of the Merger
Consideration as set forth in Section 2.2 for a period ending six months after
the Effective Time. Each holder of Convertible Notes cancelled and extinguished
at the Effective Time pursuant to Sections 2.2 hereof may thereafter surrender
and deliver such notes to the Paying Agent, as agent for such holder of
Convertible Notes, in exchange for payment of the pro rata portion of the Merger
Consideration as set forth in Section 2.2 for a period ending six months after
the Effective Time. Each holder of Warrants cancelled and extinguished at the
Effective Time pursuant to Sections 2.2 and 2.6 hereof may thereafter surrender
and deliver such warrants to the Paying Agent, as agent for such holder of
Warrants, in exchange for payment of the pro rata portion of the Merger
Consideration as set forth in Section 2.6 for a period ending six months after
the Effective Time. Each holder of Options cancelled and extinguished at the
Effective Time pursuant to Section 2.5 hereof shall be entitled to receive from
the Paying Agent its pro rata portion of the Merger Consideration as set forth
in Section 2.5 following the Effective Time.
(b) After surrender to the Paying Agent of any certificate, note,
warrant or other instrument which prior to the Effective Time shall have
represented any Existing Shares, Convertible Notes or Warrants (as applicable),
the Paying Agent shall promptly distribute to the person in whose name such
certificate, note, warrant or other instrument shall have been registered, a
check in the amount into which such Existing Shares, Convertible Notes or
Warrants shall have been converted at the Effective Time pursuant to Sections
2.2 and 2.6 hereof. Until so surrendered and cancelled, each such certificate,
note, warrant or other instrument shall, after the Effective Time, be deemed to
represent only the right to receive its pro rata portion of the Merger
Consideration, and until such surrender and cancellation, no cash shall be paid
to the holder of such outstanding certificate, note, warrant or other instrument
in respect thereof. From and after the Effective Time, the holders of Existing
Shares, Convertible Notes and Warrants outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Existing
Shares, Convertible Notes or Warrants other than the right to receive the
portion of the Merger Consideration as provided in this Agreement. The Surviving
Corporation shall promptly after the Effective Time cause to be distributed to
such holders appropriate materials to facilitate such surrender.
(c) If payment is to be made to a Person other than the registered
holder of the Existing Shares, Convertible Notes or Warrants represented by the
certificate, note, warrant or other instrument so surrendered in exchange
therefor, it shall be a condition to such payment that the certificate, note,
warrant or other instrument so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
payment shall pay to the Paying Agent any transfer or other taxes required as a
result of such payment to a Person other than the registered holder of such
Existing Shares, Convertible Notes or Warrants or establish to the satisfaction
of the Paying Agent that such tax has been paid or is not payable.
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(d) After the Effective Time, there shall be no further transfers on
the stock transfer books of the Surviving Corporation of the Existing Shares
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing Existing Shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the cash amount
provided for, and in accordance with the procedures set forth, in this Article
II.
(e) If any cash deposited with the Paying Agent for purposes of payment
in exchange for Existing Shares, Convertible Notes, Warrants or Options remains
unclaimed six months after the Effective Time, such cash shall be returned to
the Surviving Corporation, upon demand, and any such holder who has not
converted his Existing Shares, Convertible Notes, Warrant or Options into the
cash amount or otherwise received the cash amount pursuant to this Agreement
prior to that time shall thereafter look only to the Surviving Corporation for
payment of the cash amount. Notwithstanding the foregoing, the Surviving
Corporation shall not be liable to any holder of Existing Shares, Convertible
Notes, Warrants or Options for any amount paid to a public official pursuant to
applicable unclaimed property laws. Any amounts remaining unclaimed by holders
of Existing Shares, Convertible Notes, Warrants or Options, seven (7) years
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any Governmental
Authority) shall, to the extent permitted by applicable Law, become the property
of the Surviving Corporation free and clear of any claims or interest of any
Person previously entitled thereto.
(f) Any portion of the Merger Consideration made available to the
Paying Agent pursuant to Section 2.4 to pay for Existing Shares for which
dissenter's rights have been perfected shall be returned to the Surviving
Corporation, upon demand.
(g) No dividends or other distributions with respect to capital stock
of the Surviving Corporation with a record date after the Effective Time shall
be paid to the holder of any unsurrendered certificate for Existing Shares.
(h) In the event that any certificate, note, warrant or other
instrument representing the Existing Shares, Convertible Notes, or Warrants
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such certificate, note, warrant or other
instrument to be lost, stolen or destroyed and, if required by the Company, the
posting by such holder of a bond in such reasonable amount as the Company may
direct as indemnity against any claim that may be made against it with respect
to such certificate, note, warrant or other instrument, the Paying Agent will
issue in exchange for and in lieu of such lost, stolen or destroyed Existing
Share certificate the cash amount, and unpaid dividends and distributions on
Existing Shares deliverable in respect thereof pursuant to this Agreement and
the Merger.
2.4. DISSENTING SHARES. Notwithstanding Section 2.2, Existing Shares which
are issued and outstanding immediately prior to the Effective Time and which are
held by a holder who has not voted such shares of capital stock of the Company
in favor of the Merger and who has delivered a written demand for relief as a
dissenting stockholder in the manner provided by DGCL and who, as of the
Effective Time, shall not have effectively withdrawn or lost such right to
relief as a dissenting stockholder ("Dissenting Shares") shall not be converted
into a right to receive the pro rata portion of the Merger Consideration. The
holders thereof shall be entitled only to such rights as are granted by Section
262 of DGCL. Each holder of Dissenting Shares who becomes entitled to payment
for such Dissenting Shares pursuant to Section 262 of DGCL shall receive payment
therefor from the Surviving Corporation in accordance with DGCL; PROVIDED,
HOWEVER, that if any such holder of Dissenting Shares (i) shall have failed to
establish his entitlement to relief as a dissenting stockholder as provided in
Section 262 of DGCL, (ii) shall have effectively withdrawn his demand for relief
as a dissenting stockholder with respect to such Dissenting Shares or lost his
right to relief as a dissenting stockholder and payment for his Dissenting
Shares under Section 262 of DGCL or (iii) shall have failed to file a complaint
with the appropriate court seeking relief as to determination of the value of
all Dissenting Shares within the time
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provided in Section 262 of DGCL, such holder shall forfeit the right to relief
as a dissenting stockholder with respect to such Dissenting Shares and each such
Dissenting Share shall be converted into the right to receive the appropriate
cash amount, without interest thereon, from the Surviving Corporation as
provided in Section 2.2. The Company shall give Recap prompt notice of any
demands received by the Company prior to the Effective Time for relief as a
dissenting stockholder, and Recap shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Recap, make any payment with
respect to, or settle or offer to settle, any such demands.
2.5. STOCK OPTIONS.
(a) Except as may be otherwise agreed to in writing between Recap and
the holder of any Rollover Options, each Option that has an exercise price of
equal to or greater than the cash amount payable in the Merger per share of
Common Stock shall be cancelled at the Effective Time without any payment or
other consideration therefor.
(b) At the Effective Time, all other Options (other than the Rollover
Options) shall be cancelled and, in lieu thereof, as soon as reasonably
practicable after the Effective Time, each holder of such Options shall receive
a cash payment from the Paying Agent equal to the excess of the aggregate cash
amount that would be paid with respect to the shares of Common Stock subject to
such Options, if the Options were exercised, over the aggregate exercise price
with respect to such Options, as reduced by any required withholding of taxes.
The Rollover Options at the Effective Time shall survive the Closing and the
Surviving Corporation shall assume all the rights, liabilities and obligations
of such Rollover Options in accordance with the respective Stock Option Plan or
any successor or replacement stock option plan of the Surviving Corporation.
(c) Prior to the Effective Time, the Company shall (i) take all
reasonable steps necessary to make any amendments to the terms of such Stock
Option Plans, individual Option agreement or Option that are necessary to give
effect to the transactions contemplated by this Agreement, and (ii) use all
reasonable and necessary efforts to obtain at the earliest practicable date all
written consents (if necessary) from holders of Options to effect the
cancellation of such holder's Options to take effect at the Effective Time.
(d) At or prior to the Effective Time, the Company shall take all
reasonable and necessary action to fully advise the holders of Options of their
respective rights under this Agreement, the Options and the respective Stock
Option Plan, to facilitate the timely exercise of such rights and obligations to
effectuate the provisions of this Section 2.5. From and after the Effective
Time, other than as expressly set forth in this Section 2.5 or any written
agreement between Recap and the holder of the Rollover Options, no holder of
Options shall have any rights in respect of such Options, other than to receive
the pro rata portion of the Merger Consideration for such Options in the manner
described in this Section 2.5. The surrender of any Option or the receipt of the
pro rata portion of the Merger Consideration by such holder of an Option shall
be deemed a release of any and all rights the holder of such Option had or may
have had in respect of such Option.
2.6. WARRANTS.
(a) Each Warrant that has an exercise price of equal to or greater than
the cash amount payable per share of Common Stock shall be cancelled at the
Effective Time without payment or other consideration.
(b) Any right to receive a Warrant pursuant to the Series B Preferred
Stock, the Series D Preferred Stock or Convertible Notes shall be cancelled at
the Effective Time.
(c) Immediately prior to the Effective Time, all other outstanding
Warrants (other than any Warrants (or right to receive a Warrant) that are
governed by Sections 2.6 (a) and (b) above), shall be
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cancelled and, in lieu thereof, as soon as reasonably practicable as of or after
the Effective Time, the holders of such Warrants shall receive a cash payment
from the Paying Agent equal to the excess of the aggregate cash amount that
would be paid with respect to the Existing Shares subject to such Warrants, if
the Warrants were exercised, over the aggregate exercise price with respect to
such Warrants, as reduced by any required withholding of taxes.
(d) Prior to the Effective Time, the Company shall (i) take all
reasonable steps necessary to cause the Warrants, if any, to be terminated on or
prior to the Effective Time and to otherwise make any amendments to the terms of
such Warrants that are necessary to give effect to the transactions contemplated
by this Agreement, and (ii) use all reasonable and necessary efforts to obtain
at the earliest practicable date all written consents from holders of Warrants
to effect the cancellation of such holder's Warrants to take effect at the
Effective Time.
(e) Notwithstanding any provision in this Section 2.6 to the contrary,
Warrants held by two members of management of the Company that do not exceed an
aggregate value of $155,000 may not be cancelled in the Merger and may remain
outstanding as continuing obligations of the Surviving Corporation.
ARTICLE III.
CLOSING
3.1. CLOSING. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Irell & Manella LLP, 333 South Hope Street, Los Angeles,
California at 9:00 A.M. (Los Angeles time) on the Business Day on which the
parties hereto designate as the closing date following the fulfillment or waiver
of the conditions set forth in Article IX hereof in accordance with this
Agreement or (ii) at such other place and time and/or on such other date as the
Company and Recap may agree.
ARTICLE IV.
CERTIFICATE OF INCORPORATION AND BYLAWS;
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
4.1. THE CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
the Company (the "Certificate") in effect at the Effective Time shall be amended
and restated as of the Effective Time and shall be the Certificate of
Incorporation of the Surviving Corporation, until duly amended in accordance
with the terms thereof and the DGCL.
4.2. THE BYLAWS. The Bylaws of Recap in effect at the Effective Time shall
be the Bylaws of the Surviving Corporation, until duly amended in accordance
with the terms thereof and the DGCL.
4.3. OFFICERS AND DIRECTORS. From and after the Effective Time, the
directors of the Surviving Corporation shall be as set forth on SCHEDULE 4.3
attached hereto, and the officers of the Company at the Effective Time, shall be
the officers of the Surviving Corporation, until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections of the Disclosure
Schedules, the Company hereby represents and warrants to Recap as follows:
5.1. ORGANIZATION, STANDING AND AUTHORITY. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective state of incorporation. Each of the
Company and its Subsidiaries is duly qualified to do business and is in
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good standing in the states of the United States and any foreign jurisdictions
where its respective ownership or leasing of property or assets or the conduct
of its business requires it to be so qualified, except as set forth on SCHEDULE
5.1. The Company has made available to Recap a complete and correct copy of the
certificate of incorporation, bylaws or other organizational documents, each as
amended to date, of each of the Company and its Subsidiaries. Each of the
certificates of incorporation, bylaws or other organizational documents so made
available is in full force and effect. The corporate records and minute books of
the Company and its Subsidiaries reflect all material action taken and
authorizations made at meetings of such companies' boards of directors or any
committees thereof and at any stockholders' meetings thereof.
5.2. SUBSIDIARIES.
(a) (i) The Company has provided in SCHEDULE 5.2 a list of the true,
accurate and complete legal names, jurisdiction of incorporation or organization
and foreign qualification of each of the Company and its Subsidiaries, (ii) 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
options, warrants, or otherwise, (iii) except as set forth on SCHEDULE 5.2,
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), and (iv) except as set forth on SCHEDULE 5.2, there are no
contracts, commitments, understandings, or arrangements relating to the
Subsidiary's rights to vote or to dispose of such securities.
(b) Except as provided in SCHEDULE 5.2, the Company does not own
beneficially, directly or indirectly, any equity securities or similar interests
of any Person, or any interest in a partnership, limited liability company,
joint venture or other entity or organization, other than its Subsidiaries.
5.3. COMPANY CAPITAL STOCK. As of October 19, 1999, the authorized capital
stock of the Company consists solely of 50,000,000 shares of Common Stock, of
which 21,095,087 are issued and outstanding and 30,000,000 shares of Preferred
Stock of which the following series are authorized, issued and outstanding:
SHARES SHARES ISSUED
SERIES AUTHORIZED AND OUTSTANDING
- --------------------- ---------- ---------------
A.................... 100 100
B.................... 70,000 -0-
C.................... 100 -0-
D.................... 2,000,000 1,628,663
As of the date hereof, except for such shares as may be repurchased by the
Company as contemplated by Section 7.18 of this Agreement, no shares of Common
Stock or Preferred Stock were held in treasury by the Company or otherwise
beneficially owned by the Company or its Subsidiaries. The outstanding shares of
Common Stock and Preferred Stock have been duly authorized and validly issued,
are fully paid and nonassessable, subject to no preemptive rights, and were not
issued in violation of any preemptive rights. Except as set forth in SCHEDULE
5.3, each of the outstanding shares of capital stock of each of the Company's
Subsidiaries have been duly authorized, and validly issued and are fully paid
and non-assessable and not subject to any preemptive right and owned, either
directly or indirectly, by the Company free and clear of all Encumbrances.
Except as set forth in SCHEDULE 5.3, there are no pre-emptive rights or
outstanding subscriptions, options, warrants, rights, convertible securities or
other agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of the Company or any of its
Subsidiaries. Except as disclosed in SCHEDULE 5.3, the Company does not have
shares subject to repurchase in the event certain performance targets have not
been met (the 'Company Performance Shares'). SCHEDULE 5.3 also sets forth the
number and type of the equity securities of the Company or its Subsidiaries that
will be issued, in accordance with and subject to any and all earn-out payment
or other obligations of the Company.
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5.4. CORPORATE POWER. The Company and its Subsidiaries each 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. Except as set forth in
SCHEDULE 5.4, subject to receipt of the requisite approval of the Merger by the
holders of its capital stock and the holders of the Convertible Notes entitled
to vote thereon, this Agreement and the transactions contemplated hereby and
thereby have been authorized by all necessary corporate action of the Company
and the Company Board on or prior to the date hereof. This Agreement has been
duly executed and delivered by the Company and is a valid and legally binding
obligation of the Company, enforceable against the Company 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).
5.5. CONSENTS AND APPROVALS; NO DEFAULTS.
(a) No consents or approvals of, or filings or registrations with, any
Governmental Entity or with any third party are required to be made or obtained
by the Company or any of its Subsidiaries in connection with the execution,
delivery or performance by the Company 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, (ii) the requisite approval of this Agreement
by the holders of the capital stock of the Company and the holders of the
Convertible Notes entitled to vote thereon, (iii) the filing of the Certificate
of Merger with the Delaware Secretary pursuant to the DGCL and (iv) consents,
approvals, filings, or registrations listed on SCHEDULE 5.5(a) or which would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
(b) Subject to receipt of the approvals referred to in the preceding
paragraph, and the expiration of related waiting periods, except as set forth in
SCHEDULE 5.5(b), the execution, delivery and performance of this Agreement, the
consummation of the transactions contemplated hereby, and compliance with the
provisions hereof do not and will not (i) violate, or conflict with, or result
in any breach of the terms, conditions, or provisions of the respective charter,
bylaws or other organizational documents of the Company and each of its
Subsidiaries; (ii) violate, or conflict with, or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or give rise to a right of
termination, cancellation, modification or acceleration of the performance
required by or a loss of a material benefit under, or result in the creation or
imposition of (or the obligation to create or impose) any Encumbrance (other
than Permitted Encumbrances) upon any of the properties or assets of the Company
under, any of the terms, conditions or provisions of any material agreement,
indenture, note, bond, mortgage, deed of trust, undertaking, permit, lease,
franchise, license or other instrument to which the Company is a party or by
which it or any of its properties or assets may be bound or affected; or (iii)
to the knowledge of the Company, violate any Law or Order applicable to the
Company, except for any such violation, conflict, breach, default, event, right
or Encumbrance which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(c) SCHEDULE 5.5(c) contains a list of all Approvals of Governmental
Entities that, to the knowledge of the Company, are required to be given or
obtained by the Company from any and all Governmental Entities in connection
with the consummation of the transactions contemplated by this Agreement, except
where the failure to be given or obtain such Approvals, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(d) SCHEDULE 5.5(d) contains a list of all non-governmental Approvals
that, to the knowledge of the Company, are required to be given or obtained by
the Company from any and all third parties in connection with the consummation
of the transactions contemplated by this Agreement, except where the failure to
give or obtain such Approvals, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
5.6. FINANCIAL REPORTS AND REGULATORY DOCUMENTS.
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(a) The Company has heretofore delivered or made available to Recap a
complete and correct copy of each registration statement, offering circular
relating to the offering of securities, report, proxy statement, schedule or
information statement prepared by it or any of its Subsidiaries since December
31, 1996, including, without limitation, (A) any Annual Reports on Form 10-K,
and (B) any Quarterly Reports on Form 10-Q, each in the form (including exhibits
and any amendments thereto) filed with the SEC (collectively, the "SEC
Reports"). As of their respective dates or, if amended, as of the date of the
last such amendment prior to the date of this Agreement, the Company's SEC
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. None of the Subsidiaries is required to file any forms,
reports or other documents with the SEC. Except as set forth on SCHEDULE 5.6,
each of the Company's consolidated balance sheets included in or incorporated by
reference into its SEC Reports (including the related notes and schedules)
fairly presents the consolidated financial position of the Company as of its
date and each of the consolidated statements of income, cash flows and
stockholders' equity included in or incorporated by reference into its SEC
Reports (including any related notes and schedules) fairly presents the
consolidated results of operations, retained earnings and cash flows, as the
case may be, of the Company for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments), in each
case in accordance with GAAP (except, in the case of unaudited statements, as
permitted by applicable instructions or regulations of the SEC relating to the
preparation of quarterly reports on Form 10-Q) consistently applied through the
periods indicated.
(b) Each of the Company and its Subsidiaries has timely filed all
notices, reports, registrations, schedules and statements, together with any
amendments required to be made with respect thereto, that they were required to
file with the United States Department of Justice, the Federal Trade Commission,
NASD, the SEC and state securities authorities and all other material reports
and statements required to be filed by it with any Governmental Entity,
including, without limitation, any report or statement required to be filed
pursuant to the laws of the United States, and has paid all fees and assessments
due and payable in connection therewith, except where the failure to file or pay
such fees or expenses would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company.
(c) Since June 30, 1999, the Company and its Subsidiaries have not
incurred any material liability other than in the ordinary course of business
consistent with past practice.
(d) Except as disclosed in the Company SEC Reports, in SCHEDULE 5.6, or
as contemplated by this Agreement, since June 30, 1999 to the date hereof, the
Company's business has been conducted in the ordinary course, and there has not
been any:
(i) adverse and material change in the condition (financial or
otherwise), results of operations, assets, liabilities, prospects or
business of the Company;
(ii) amendment to the Company's or any of the Company's Subsidiaries'
charter, bylaws or other organizational documents;
(iii) sale, assignment, disposition, transfer, pledge, mortgage or
lease of any material assets primarily used or held for use in the Company's
business;
(iv) incurrence of any Indebtedness, other than accounts payable
arising in the ordinary course of business, consistent with past practice,
and other than under the existing revolving credit facility in the ordinary
course of business;
(v) material reduction in any cash or short-term investments or their
equivalent, other than to meet cash needs arising in the ordinary course of
business, consistent with past practices;
A-14
(vi) sale, assignment, disposition, transfer, pledge, mortgage or lease
of any material Owned Real Estate or Leased Real Estate;
(vii) increase in the compensation or fringe benefits payable or to
become payable to any officers or salaried employees of the Company, other
than routine increases made in the ordinary course of business and
consistent with past practice or as required by law or under any existing
agreements heretofore disclosed to Recap;
(viii) issuance, sale or disposition of any capital stock or other
equity interest in the Company or options, warrants or other rights to
purchase any such capital stock or equity interest or any securities
convertible into or exchangeable for such capital stock or equity interest
or any other change in the issued and outstanding capitalization of the
Company;
(ix) any amendment, alteration or modification in the terms of any
currently outstanding options, warrants or other rights to purchase any
capital stock or equity interest in the Company or any securities
convertible into or exchangeable for such capital stock or equity interest,
including without limitation any reduction in the exercise or conversion
price of any such rights or securities, any change to the vesting or
acceleration terms of any such rights or securities, or any change to terms
relating to the grant of any such rights or securities;
(x) declaration or payment of any dividend or other distribution, or
the transfer of any assets, by the Company to any stockholders of the
Company, or any redemption, repurchase or other acquisition by the Company
of its capital stock, except in the ordinary course of business;
(xi) change by the Company in any of its accounting principles, methods
or practices, including any change in its policies with respect to reserves
(whether for bad debts, contingent liabilities or otherwise), any change in
depreciation or amortization policies or rates or any change in the policies
pertaining to the recognition of accounts receivable or the discharge of
accounts payable;
(xii) changes in the business policies (including advertising,
investment, marketing, pricing, purchasing, production, personnel, sales or
budgeting) or organization of the Company, or the Company's relationships
with dentists, hygienists, technicians, employees, suppliers, agents,
servicers or customers that are material to the Company, except for changes
that would not, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect on the Company;
(xiii) closure, shut down or other elimination of any of the Company's
offices, franchises or any other change in the character of its business,
properties or assets, except, for closures, shut downs, or other
eliminations that would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company;
(xiv) loan or advance to or other such agreement with any of its
stockholders, officers, directors, employees, agents, consultants or other
Representatives, except in the ordinary course of business, consistent with
past practice;
(xv) damage, destruction or loss with respect to any of the properties
or assets of the Company that would have a Material Adverse Effect; or
(xvi) agreement to do, cause or suffer any of the foregoing.
5.7. DISCLOSURE DOCUMENTS. The proxy statement on Schedule 14A in respect
of the Special Meeting of the Company's stockholders to vote upon the Merger
(the "Company Proxy Statement") to be filed with the SEC in connection with the
Merger will not, at the date it is first mailed to stockholders of the Company
or at the time of the Special Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Company Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act. No
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representation is made by the Company with respect to statements made in the
Company Proxy Statement based on information supplied by Recap for inclusion
therein.
5.8. LITIGATION. Except as set forth in SCHEDULE 5.8, there are no Actions
pending or, to the knowledge of the Company, claims threatened against the
Company, at law or in equity, and there is no investigation or proceeding
pending or, to the knowledge of the Company, threatened before or by any
Governmental Entity nor is there any currently effective Order against the
Company, except for any such Actions, claims, investigations, proceedings or
Orders that would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. SCHEDULE 5.8 identifies those pending or, to
the knowledge of the Company, threatened claims listed therein which (i) may not
be covered by third party insurance or (ii) with respect to which the insurance
carrier has denied coverage or has advised the Company that it is defending such
claim under reservation of rights or (iii) for which the Company is self-
insured.
5.9. REGULATORY MATTERS.
(a) Except as set forth on SCHEDULE 5.9, neither the Company 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 Entity.
(b) Except as set forth on SCHEDULE 5.9, neither the Company nor any of
its Subsidiaries has been advised by any Governmental Entity that such
Governmental Entity 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) Except as set forth in SCHEDULE 5.10, the Company 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 business of the Company and its
Subsidiaries 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 Entities 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 the Company's knowledge, no suspension or cancellation of any of them is
threatened; and (iii) has not received any notification or communication from
any Governmental Entity (a) asserting that the Company or any of its
Subsidiaries is not in compliance with any of the statutes, regulations or
ordinances which such Governmental Entity enforces or (b) threatening to revoke
any license, franchise, permit or governmental authorization (nor, to the
Company's knowledge, do any grounds for any of the foregoing exist).
(b) The terms and conditions set forth in the management agreements
between the Company 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, referral fees, and patient brokering and those relating to such
practices.
5.11. MATERIAL CONTRACTS; DEFAULTS.
(a) SCHEDULE 5.11 lists (a) all contracts or commitments that provide
for the aggregate payments to or from the Company in excess of Five Hundred
Thousand Dollars ($500,000) per contract per annum which cannot or in reasonable
probability will not be completed within ninety (90) days from the Closing Date
or cannot be terminated within ninety (90) days from the Closing Da
